Ask the BPHR Advisor: “1099” Misclassification Laws

Ask the BPHR Advisor: “1099” Misclassification Laws 2560 1707 Balance Point Team

BPHR’s Director Lisa Salcido, SPHR, SHRM-SCP provides answers to your pressing HR questions.

Question: I plan to hire 1099 contractors, what do I need to know about New Jersey’s new laws?

Answer: In May of 2018, New Jersey created a task force to investigate the misclassification of employees as Independent Contractors or “1099s” to recover state taxes, unemployment contributions, employee overtime and benefits and to implement fines and penalties on behalf of improperly classified employees.

In July of 2019, the task force released a report on their findings. Among them:

  • Misclassification is the practice of illegally and improperly classifying workers as independent contractors, rather than employees. This practice has increased by approximately 40% in the last ten years and is a growing problem in New Jersey.
  • Labor violations may be referred for criminal prosecutions. “Nothing sends a more powerful message to employers who break the law than the possibility of jail for mistreating workers.”
  • The Department of Labor will use their power to revoke or suspend licenses to deter employers from not complying with labor laws.

As a result of the task force’s report, Governor Murphy recently signed new laws designed to protect workers and penalize employers.

The New Jersey “1099” Misclassification Laws affects all size employers and are effective upon Murphy’s signing of the package on January 21, 2020. The independent contractor classification is determined by law, not preference. There is specific criteria about who can and cannot be classified as a contractor. It is unlawful for an employer to misclassify an employee as an independent contractor.

Some key points from the new laws:

  • The NJ Department of Labor and Workforce Development has been granted authority to investigate violations, subpoena payroll and tax records, interview employees and issue stop-work orders.
  • Employers are required to post a notification that explains how employees can file a possible misclassification charge.
  • Penalties for misclassifying workers have been raised to $250 for a first violation and up to $1,000 per misclassified employee.
  • The names of employers who have violated the laws will be posted on a public website.

Take a More Balanced Approach to HR

With BPHR, an HR Generalist will help you navigate employment law ensuring your compliance so you can focus on more strategic tasks. Schedule your free phone consultation today to learn how your organization can benefit from our services.

Have a question for Lisa? Email her directly.

DISCLAIMER: The material presented on this page is for informational purposes only and does not constitute legal advice or legal opinion. 

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