As a business owner, your greatest asset is your employees—but they are also your highest cost. While you are willing to pay to attract and retain quality workers, you also need to be profitable. If you decided that the solution to these high costs is to hire independent contractors rather than bringing on more full-time regular employees, you had better make sure you are complying with New Jersey state law. The consequences of violating the New Jersey Wage Theft Act of 2019 could run you out of business. Our New Jersey business attorney explains how to make sure you are in compliance.
What Is an Independent Contractor Under New Jersey Law?
You might think that if someone who does work for you never comes into the workplace, and you pay them by the hour or by the project, they are an independent contractor. However, New Jersey does not assess status by those standards at all. Working part-time or only part of the year, earning an hourly wage, working remotely, and not signing an employment contract do not automatically make someone a contractor. In order to prove that a worker is an independent contractor, you must be able to prove all three of the following:
- The worker is free from any direction or control from you in how they perform the service.
- The worker provides a service that is outside your usual course of business or at a location separate from any of your workplaces.
- The worker is engaged in an independently established trade, occupation, profession, or business.
This is known as the “ABC” test, and it makes it very difficult for employers to establish independent contractor status. These provisions are purposefully broad and vague, so you will have to ask yourself some questions about the kind of work your contractors do. Do you assign specific tasks, provide requirements for how they should be completed, and give a deadline? If so, you probably won’t meet provision A. Does the worker do the same tasks as your regular employees or have a workstation in your place of business? If they do, you will not meet provision B. Does the worker have special skills that they also offer to other businesses? If not, you won’t meet provision C. You only need to fail one of these tests to be found guilty of misclassifying a worker.
What Are the Penalties for Misclassifying a Worker?
Misclassifying a worker is considered a violation of wage and hour laws, and you are subject to the same penalties as you would be for underpaying or overworking a non-exempt employee. These include:
- Fines of up to $1,000 plus a penalty of 20 percent of wages owed
- Criminal charges against the person responsible for the misclassification with penalties including fines of up to $10,000 and up to 18 months in jail
- Repayment of wages owed, plus liquidated damages of 200 percent of the unpaid wages and attorney and legal fees
New Jersey is serious about wage and hour violations, and these are stiff penalties. How can you be sure you are in compliance with New Jersey wage and hour laws? Ask a lawyer.
We Can Help You Make Sure You Are Not Breaking the Law
Most employee misclassifications are not intentional. Many employers mistakenly believe that if the employee is in agreement with the terms of their employment, they’re off the hook for paying minimum wage and overtime, providing workers’ comp and FMLA leave, and offering unemployment and other benefits. It doesn’t matter what the worker is willing to do; it only matters that you are in compliance with New Jersey state law.
As an experienced business law firm, we can provide the guidance you need when classifying workers to ensure that you are in compliance with the law. Assuming you understand the law or believing you are too small for the state to come after could be costly mistakes. Contact our office in Somerville at 908-685-0600 to schedule a consultation. Trust us—taking this risk could jeopardize your entire business.
|
Related Links: |