ATLANTIC CITY — Gov. Phil Murphy said Tuesday that his administration will crack down on employee misclassification, a business practice that is cheating thousands of private-sector workers in the state.

During a speech Tuesday at the New Jersey State Building and Construction Trades Council Convention, he said taking on the practice of misclassifying workers as independent contractors is a top priority because it cheats those workers out of benefits and wages.

“If you are a contractor engaging in these practices, we are either, A — going to bring you into compliance, or B — we are going to put you out of business," he said. “Cracking down on misclassification is a promise I made to you when I sought this office, and it is a promise I am proud to keep.”

Misclassification tends to be prevalent in the construction industry as well as in janitorial services, home care, transportation, trucking and delivery services, and other lower-wage sectors.

Murphy said that misclassification hurts law-abiding business owners and costs New Jersey millions of dollars a year in lost employment-related tax revenue.

An audit conducted by the Department of Labor and Workforce Development last year found more than 12,300 workers were misclassified, which totaled more than $460 million in under-reported gross wages, and $14 million in state unemployment and temporary disability tax contributions.

“But I should note that audit covered only 1% of employers,” Murphy said Tuesday. “The Department estimates that misclassification cost workers more than $46 billion in wages and benefits in 2018 alone.”

A comprehensive report from the Task Force on Employee Misclassification, makes 16 recommendations.

Murphy said his administration is already implementing some of these recommended actions, including “heightened and targeted education and public outreach, greater interagency cooperation, and coordinated enforcement, criminal referrals, and using the Labor Department’s power to revoke or suspend licenses.”

Murphy also said he would sign a bill (A-108/S-2557) giving the state Department of Labor the power to issue stop-work orders whenever an initial work site investigation finds serious misclassification violations.

He pointed out an assistant commissioner in the Department of Labor has been hired to work exclusively in the Wage and Hour Division, and eight investigators have been hired to review prevailing wage and misclassification cases.

Murphy added the state Attorney General’s Office is now pursuing civil actions.

The Governor established the Task Force on Employee Misclassification by executive order in May 2018.

The Task Force recommendations include:

• Create a hotline, webpage, and email address to report misclassification; require employers to post notices alerting workers to the issue (through legislation discussed below); raise public awareness through press strategy.

• Require entities that contract with the state or receive state funding to confirm that they are aware of the legal standard for proper classification of workers based on the ABC test, with potential loss of funding or contract termination if misclassification is found.

• Conduct on-the-ground investigations and joint enforcement sweeps with multiple agencies, working together to elicit facts and obtain information using each agency’s jurisdictional knowledge and expertise.

• Share information between agencies subject to any applicable confidentiality requirements.

• Work with neighboring states to share information to assist in investigations.

• Provide cross-training for field investigators from various state and local agencies.

• Refer cases to the Office of the Attorney General for criminal prosecutions as appropriate.

• Use existing workers' compensation laws to bolster misclassification enforcement.

• The Commissioner should use his power to revoke or suspend licenses to deter employees from not complying with labor laws.

 

You can contact reporter David Matthau at David.Matthau@townsquaremedia.com

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