Worker misclassification has been a growing problem in New Jersey in recent years – especially since the influx of gig economy jobs. More and more members of the workforce are labeled as contractors, even when such workers meet the legal definition of employees.
When an employer wrongly labels their workers as contractors, it saves the employer considerable costs. It also steals income and benefits from both workers and the state. Workers lose their employee entitlements, including:
- Paid time off
- Overtime pay
- Workers’ compensation benefits
- Job-protected family leave
- Employer-subsidized health insurance
- Employer contributions to Social Security
Governor Murphy estimates that in 2018 alone, misclassification denied New Jersey employees $46 billion in wages and benefits. It also denied the state millions of dollars in employer-owed income tax as well as disability and unemployment contributions.
What’s being done about it
In response to these appalling numbers, Governor Murphy has created a task force to identify employee misclassification across the state. Last year, this task force audited 1% of businesses in the state and found that over 12,000 of them were misclassifying their workers.
According to the Department of Labor, workers in certain industries are especially vulnerable to misclassification. These include:
- Janitorial services
- Transportation services
- Home care
Federal enforcement of legal worker classification has been historically low – thus limiting employers’ incentive to classify appropriately. In response, this past July, Governor Murphy signed a new bill into law. This law increases the New Jersey Department of Labor’s power to penalize employers who misclassify their employees. The department may penalize employers by doing one of the following:
- Shut down their worksite altogether
- Fine the employer $5,000 per day
Misclassification of workers is illegal. Knowing your legal classification is an important step to claiming workers’ compensation and other benefits that you deserve.