On Wednesday, June 16, 2021, both the Senate Labor Committee and the Assembly Appropriations Committee considered a package of proposed legislation that expands the New Jersey Department of Labor and Workforce Development’s (“NJDOL”) enforcement power to address worker misclassification. Notably, these bills were first introduced the prior Friday, June 11, 2021, which gave little time to conduct substantive analysis or confer with the sponsors.
Among other things, the bills enhance NJDOL’s investigatory capacity, broaden NJDOL’s authority to pursue civil actions on behalf of workers in court, expand NJDOL’s ability to impose stop-work orders (i.e., at all business locations across the state) and to suspend business licenses, and codify worker misclassification as insurance fraud. Notably, one of the bills expressly extends the attorney-client privilege of confidentiality to communications between workers and the Attorney General’s Office in such matters, which suggests NJDOL is functioning as an advocate. The bills also create a new department called “Office of Strategic Enforcement and Compliance,” which is intended to facilitate an interdepartmental enforcement initiative to address violations of state wage and benefit laws in the context of worker misclassification.
NJCJI’s President, Anthony Anastasio, testified against all of these bills in the Senate Labor Committee. Anthony highlighted the fact that the NJDOL’s interpretation of the “ABC Test”, which governs worker classification, is at odds with the courts’ interpretation. Notably, the agency’s interpretation of prongs B and C of the test, dealing with the location and nature of an independent business, effectively makes it impossible for many businesses to use independent contractors. Anthony further noted that the NJDOL’s divergent interpretation was recently repudiated by the Appellate Division in the case of E. Bay Drywall, LLC v. Dep’t of Labor & Workforce Dev., 2021 N.J. Super. LEXIS 47, 2021 WL 1537473 (App. Div. 2021). In that case, the NJDOL advanced tenuous arguments in support of employee classification that better resembled worker advocacy than even-handed regulatory enforcement.
Anthony also highlighted the fact that there is ample ambiguity and resulting confusion in this area of the law, as highlighted by the Third Circuit’s recent request for clarification from the New Jersey Supreme Court in Walfish v. Northwestern Mut. Life Ins. Co., 2020 U.S. App. LEXIS 42191, 2020 WL 9433211 (3d Cir. 2020). NJCJI has a pending application to appear as amicus curiae in that matter. To further increase NJDOL’s enforcement powers against this backdrop is practically inviting regulatory overreach. Facing statewide stop-work orders and/or “bet-the-company” civil litigation brought by NJDOL on behalf of workers, small and medium-sized business that lack the resources to litigate to assert their rights will be forced to acquiesce to employee classification, to the detriment of independent workers who rely on otherwise lawful work arrangements.
Based on the quick progression of these bills through the legislative process, it is clear that their quick passage into law is a priority for both the legislative and executive branches. While the political landscape on this issue is challenging for the business community, NJCJI will continue to advocate on behalf of both businesses and independent workers who seek clarity in the law and neutral regulatory enforcement. NJCJI’s written comments to the Senate Labor Committee can be found here, and Anthony’s testimony can be heard here at the 17:00 minute mark (34:20 left in the audio). Please contact Anthony with any questions about this bill or NJCJI’s broader efforts regarding worker classification.