N.J. creates new office to fight employee misclassification

Murphy says series of bills will protect workers — and businesses that play it straight

Gov. Phil Murphy is angry with congressional Republicans who are challenging the results of the presidential election. (File photo)

Saying it’s a win for workers and employers, Gov. Phil Murphy signed a four-bill legislative package that will create a new Office of Strategic Enforcement and Compliance within the Department of Labor & Workforce Development that is intended to further strengthen the state’s efforts to stop employee misclassification.

Misclassification — long one of the biggest problems in labor — is the practice of improperly classifying employees as independent contractors. The practice not only deprives workers of wages, workers’ compensation, unemployment, earned sick leave and other benefits, it hurts employers who are paying by the rules and thus have to absorb higher costs.

The Office of Strategic Enforcement and Compliance will create a database to track payroll projects, critical steps to tracking and eliminating misclassification. The other bills in the package will simplify the process for identifying misclassified workers and implement stop-work orders at worksites where misclassification is identified.

“These business practices are unfair, abusive and illegal, and they cannot be tolerated,” Murphy said. “Today’s action will give the state more tools to root out and prevent misclassification.”

Murphy has taken on this issue from the start of his administration.

In 2018, a Department of Labor audit found more than 12,300 cases of workers being misclassified, resulting in more than $460 million in underreported gross wages and $14 million in lost state unemployment and temporary disability contributions. The audit covered just 1% of businesses, suggesting that the real cost of misclassification is much, much higher, state officials said.

Labor Commissioner Robert Asaro-Angelo said these bills are another way to fight this.

“We should all be proud that New Jersey is the best state in which to be a worker in the entire country,” he said “Because of the wages, rights and benefits New Jersey guarantees, we’re also the state whose workforce delivers the biggest value to employers.

“The action taken by the governor here today will only bolster New Jersey’s workforce — the employees who deserve the protections put in place for them — and the employers who play by the rules and properly classify their workers.”

Assemblyman Anthony Verrelli (D-Trenton), a sponsor of one of the bills, said enforcement is key.

“It is necessary to increase the Department of Labor’s enforcement powers,” he said. “We have seen far too many violations of state wage, benefit and tax laws.

“This law will further the department’s responsibility to mitigate bad actors from misclassifying employees and lessen violations against laws previously enacted.”

Greg Lalevee, the business manager of the International Union of Operating Engineers Local 825, said he appreciates the thoughts behind the package of bills.

“It certainly has some value,” he said. “It closes up some holes.”

And not just for union workers. Lalavee said the bills are as much pro-worker as they are pro-union. That’s a good thing, he said.

“You’ve got good, legitimate people out there doing business, following all the rules, paying all the right taxes, paying all the correct workers’ compensation — and then you have other businesses that don’t,” he said.

“Whether they pay cash off the books, and beat the tax till that way, whether they understate or they don’t classify themselves properly about what kind of work they do and then beat the workers’ comp rate, it’s all the same. In competitive bidding, that just gives them an unfair advantage while they flout the law.”

Lalavee said all unions want is a fair chance.

“It’s more about keeping people on a level playing field,” he said. “Nobody minds the competition as long as the fields are not tilted.”