S2248

An Act concerning the classification of certain employees as independent contractors and supplementing Title 34 of the Revised Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. For purposes of this act:

“Employer” means a person, partnership, association, joint stock company, trust, corporation, or other legal business entity or successor thereof who is engaged in the business of, or enters into a contract for, making improvements to real property and includes any subcontractor or lower tier contractor.

“Public body” means the State of New Jersey, any of its political subdivisions, any authority created by the Legislature of the State of New Jersey and any instrumentality or agency of the State of New Jersey or of any of its political subdivisions.

"Public work" means construction, reconstruction, demolition, alteration, custom fabrication, or repair work, or maintenance work, including painting and decorating, done under contract and paid for in whole or in part out of the funds of a public body, except work performed under a rehabilitation program. "Public work" shall also mean construction, reconstruction, demolition, alteration, custom fabrication, or repair work, done on any property or premises, whether or not the work is paid for from public funds, if, at the time of the entering into of the contract:

(a) Not less than 55% of the property or premises is leased by a public body, or is subject to an agreement to be subsequently leased by the public body; and

(b) The portion of the property or premises that is leased or subject to an agreement to be subsequently leased by the public body measures more than 20,000 square feet.

2. For purposes of the "New Jersey Prevailing Wage Act," P.L.1963, c.150 (C.34:11-56.25 et seq.), the "unemployment compensation law," R.S.43:21-1 et seq., the "Temporary Disability Benefits Law," P.L.1948, c.110 (C.43:21-25 et seq.), the “New Jersey Gross Income Tax Act,” N.J.S.54A:1-1 et seq., or other applicable State tax laws, P.L.1965, c.173 (C.34:11-4.1 et seq.), the “workers’ compensation law,” R.S.34:15-1 et seq., and the “New Jersey State Wage and Hour Law,” P.L.1966, c.113 (C.34:11-56a et seq.), services performed in the making of improvements to real property by an individual for remuneration paid by an employer, directly or indirectly through any staffing agency, temporary help services firm, employee leasing company, employment agency or similar entity, shall be deemed to be employment unless and until it is shown to the satisfaction of the Department of Labor and Workforce Development that:

a. the individual has been and will continue to be free from control or direction over the performance of that service, both under his contract of service and in fact; and

b. the service is either outside the usual course of the business for which the service is performed, or the service is performed outside of all the places of business of the employer for which the service is performed; and

c. the individual is customarily engaged in an independently established trade, occupation, profession or business.

The failure to withhold federal or State income taxes or to pay unemployment compensation contributions or workers’ compensation premiums with respect to an individual’s wages shall not be considered in making a determination under this section.

3. An employer, or any officer, agent, superintendent, foreman, or employee of the employer, or staffing agency or temporary help services firm, employee leasing company, employment agency or similar entity used by the employer, who fails to properly classify an individual as an employee in accordance with section 2 of this act, for purposes of the "New Jersey Prevailing Wage Act," P.L.1963, c.150 (C.34:11-56.25 et seq.), the "unemployment compensation law," R.S.43:21-1 et seq., the "Temporary Disability Benefits Law," P.L.1948, c.110 (C.43:21-25 et seq.), the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., P.L.1965, c. 173 (C.34:11-4.1 et seq.) or other applicable State tax laws, P.L.1965, c.173 (C.34:11-4.1 et seq.), the “workers’ compensation law,” R.S.34:15-1 et seq., and the "New Jersey State Wage and Hour Law," P.L.1966, c.113 (C.34:11-56a et seq.), and fails to pay wages, benefits, taxes or other contributions required by any of those acts, shall be:

a. If the failure is done knowingly, guilty of a crime of the third degree and, notwithstanding the provisions of Title 2C of the New Jersey Statutes and subject to a fine of not more than $15,000 or imprisonment for not more than one year for a first offense, or both; and by a fine of not more than $30,000, or imprisonment for not more than two years, or both, for a subsequent offense.

b. If the failure is done recklessly, guilty of a crime of the fourth degree and, notwithstanding the provisions of Title 2C of the New Jersey Statutes and subject to a fine of not more than $10,000 or imprisonment for not more than six months for a first offense, or both; and by a fine of not more than $20,000, or imprisonment for not more than one year, or both, for a subsequent offense.

A complaint or indictment under the provisions of this section may be brought either in the county in which the work was performed or in the county in which the employer has a principal place of business. In the case of an employer whose principal place of business is outside the State, a complaint or indictment may be sought in the county in which the work was performed.

4. If the Commissioner of Labor and Workforce Development determines, after investigation, that an employer or any officer, agent, superintendent, foreman, or employee of the employer, or staffing agency or temporary help services firm, employee leasing company, employment agency or similar entity used by the employer, has failed to properly classify an individual as an employee in accordance with section 2 of this act and failed to pay required wages, benefits, taxes or other contributions, or if a final conviction and disposition of a violation of this act is made pursuant to section 3 of this act, then the commissioner shall place the employer on a list of employers who are prohibited from contracting, directly or indirectly, with any public body for the construction of any public building or other public work projects, or from performing any work on the same, for a period of two years if the failure is done recklessly and for a period of three years if the failure is done knowingly. The commissioner shall give notice by mail of that list to any public body who shall request the commissioner so to do.

In the case of a determination by the commissioner, if the person responsible denies that a failure to properly classify an employee has occurred, he shall have the right to apply to the commissioner for a hearing, which shall be afforded and a decision shall be rendered within 48 hours of the request for a hearing. If the commissioner rules against the petitioning party he shall have the right to apply for injunctive relief in the Superior Court against the listing by the commissioner.

5. A public body awarding any contract for public work, or otherwise undertaking any public work, or entering into a lease or agreement to lease pursuant to which public work is to be done, shall first ascertain from the commissioner the list of names of employers who have failed to pay prevailing wages as determined in section 4 of this act, and no contract shall be awarded to such employer, or to any firm, corporation or partnership in which such employer has an interest.

6. The commissioner, in consultation with the State Treasurer, shall make and promulgate rules and regulations necessary to implement the purposes of this act.

7. This act shall take effect immediately.

STATEMENT

This bill provides that employers who knowingly or recklessly improperly classify workers in the construction industry as independent contractors for purposes of avoiding relevant provisions of the law will be subject to criminal penalties and debarment from public works contracts. The debarment from public works contracts and the penalties may apply for a case of misclassification of construction workers whether or not the misclassification occurs in connection with public works projects.

With respect to the construction industry, the bill creates a presumption that a work arrangement is an employer-employee relationship, unless the party receiving the services can overcome the legal presumption of employment by establishing that three factors are present. An employer subject to the bill who fails to properly classify an individual as an employee and instead classifies them as an independent contractor will be subject to criminal penalties.

An employer violates the provisions of the bill if it classifies or treats a worker who does not meet each prong of the three pronged test as an independent contractor. Thus the bill penalizes any employer, or any officer, agent, superintendent, foreman, or employee of the employer, or staffing agency or temporary help services firm, employee leasing company, employment agency or similar entity used by the employer who fails to properly classify an individual as an employee and instead classifies them as an independent contractor.

The bill states that employers who misclassify individuals as independent contractors for purposes of avoiding relevant provisions of the "New Jersey Prevailing Wage Act," the "unemployment compensation law," the "Temporary Disability Benefits Law," the "New Jersey Gross Income Tax Act," the “workers’ compensation law,” or "New Jersey State Wage and Hour Law," will be, if the misclassification is done knowingly, guilty of a crime of the third degree and be punished by a fine of not more than $15,000 or imprisonment for not more than one year for a first offense, or both, and by a fine of not more than $30,000, or imprisonment for not more than two years, or both, for a subsequent willful offense, and if the misclassification is done recklessly, of a crime of the forth degree and punished by a fine of not more than $10,000, or imprisonment for not more than six months for a first offense, or both, and by a fine of not more than $20,000 or imprisonment for not more than one year, or both for a subsequent offense.

The bill requires the Commissioner of Labor and Workforce Development to prevent an employer who has been convicted of a violation from contracting, directly or indirectly, with the State or any of its agencies, authorities or political subdivisions for the construction of any public building or other public works, or from performing any work on the same, for a period of three years for a knowing violation or up to two years for a reckless violation.