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New Wage Theft Prevention Act Increases Potential Liabilities for NJ Employers

Article

New Jersey Law Journal

November 18, 2019

This summer, the State of New Jersey enacted a wage act that increases the potential liabilities for businesses in the state. The new law, most of which took effect immediately, amends the New Jersey Wage Collection Law (WCL), New Jersey Wage and Hour Law (WHL), and Wage Payment Law (WPL), as well as the New Jersey criminal code. Among other things, the new wage act:

  • Enhances the WHL’s and WPL’s anti-retaliation provisions;
  • Increases the statute of limitations for bringing claims under the WCL and WHL to six years;
  • Subjects employers to increased damages, including liquidated damages of up to 200% of wages owed;
  • Increases criminal liability for employers who commit wage violations;
  • Increases the power of the administrative agency tasked with enforcing New Jersey’s wage laws, including that agency’s ability to subject employers to joint, several and successor liabilities; and
  • Requires employers to distribute a notice to employees about their wage rights.

Anti-Retaliation Provisions

The new wage act makes it a “disorderly persons offense” for an employer to retaliate against an employee in violation of the WHL or WPL. Additionally, the new law increases the list of protected activities so that it now includes all of the following:

  • Complaints to the employer, the New Jersey Department of Labor and Workforce Development (DLWD), or the employee’s representative about the employer’s failure to pay wages;
  • The initiation of a proceeding related to the WHL and WPL;
  • Testimony in a proceeding related to the WHL and WPL;
  • Informing any of the employer’s employees about rights under New Jersey wage laws; and
  • In the case of the WHL, serving on a wage board.

The new law also creates a presumption that an employer knowingly retaliated against an employee if the adverse employment action is taken within 90 days of the employee filing a WHL or WPL complaint. An employer can rebut this presumption only with clear and convincing evidence that the adverse employment action was taken for other permissible reasons.

Statute of Limitations

The new wage law creates a six-year statute of limitations under the WCL and WHL. This is a significant development because this amendment alone effectively triples an employer’s potential liability for back wages under the WHL, which previously had a two-year statute of limitations. A six-year statute of limitations previously has been applied to WPL claims.

Monetary Damages and Jail Time

The new wage act increases the potential monetary damages facing an employer under the WHL and WPL. Most significantly, the new law provides for liquidated damages of up to 200% of wages owed. There is an exception to such damages for an initial violation if the employer can demonstrate:

  • The violation was an inadvertent error made in good faith;
  • The employer had reasonable grounds for believing that the act/omission constituting the violation was not actually a violation;
  • The employer acknowledges it violated the law;
  • The employer pays the amount owed within 30 days of notice of the violation; and
  • In the case of retaliation, the employer offers to reinstate the employee’s employment.

Other potential damages for violations of the WHL and WPL include not only an administrative penalty of up to $250 for a first violation and $500 for a subsequent violation, but also an enhanced fine of $500 to $1,000 for a first offense, $1,000 to $2,000 for a subsequent violation, imprisonment of 10 to 90 days for a first offense, and imprisonment of ten to 100 days for a subsequent violation, as well as reasonable attorney fees and costs. Each week in any day of which any violation continues is a separate and distinct offense. Plus, there is now a rebuttable presumption that an employer owes wages as alleged if the employer is unable to present sufficient employment records required by the WHL and WPL.

Criminal Liability

The new wage act subjects an employer who fails to pay benefits, compensation and/or wages under a number of laws to a disorderly persons offense. The statutes subject to this provision include not only the WHL and WPL, but also the New Jersey gross income tax law, temporary disability benefits laws, unemployment compensation law, and workers’ compensation law. In this regard, the new law creates an inference that an employer is guilty of a disorderly persons offense if it fails to present employment records required by the covered statutes. An employer who fails to pay the requisite benefits, compensation and/or wages now is subject to monetary liability for wages owed, liquidated damages of 200% of wages owed, reasonable costs of a legal action to the employee, a fine of $500 and penalty in the amount of 20% of wages owed for a first offense, and a fine of $1,000 and penalty in the amount of 20% of wages owed for a subsequent offense.

In addition, the new wage act subjects to a disorderly persons offense any employer who retaliates against an employee who complains about such matters as a failure to pay benefits, compensation and/or wages. Employers who retaliate against employees now are subject to lost wages, liquidated damages of 200% of lost wages, reasonable cost of a legal action to the employee, and a fine of $100 to $1,000. The employer must offer reinstatement to a discharged employee as well. Specifically excluded from this aspect of the new wage law are employees and employers in the construction industry who are subject to collective-bargaining agreements.

The new law also creates the third degree crime of pattern of wage nonpayment if a person knowingly violates select portions of the criminal code concerning wages and has, on two or more prior occasions, been convicted of such a violation. Employers who commit this crime are subject to monetary liability for wages owed, additional fines, and longer prison sentences. While most of the new wage act took effect immediately, this provision took effect Nov. 1, 2019.

Administrative Power

The new wage act increases the DLWD’s powers. More specifically, the new wage law:

  • Increases the amount in controversy pursuant to which the agency can investigate wage claims from $30,000 to $50,000;
  • Allows the DLWD to hear claims for retaliation;
  • Empowers the agency to audit an employer (and any successor) within 12 months of notification by the attorney general or a court of an employer’s failure to pay benefits, compensation and/or wages;
  • Requires the DLWD to initiate a wage claim if the agency discovers a failure to pay compensation by an employer (or any successor); and
  • Authorizes the DLWD to suspend licenses held by an employer (and any successor) and/or issue stop work orders against the employer if there are violations after an audit.

In addition, the new wage act increases an employer’s exposure for joint, several and successor liability before the DLWD. According to the new law, a client employer is jointly and severally liable and shares civil legal liability with a “labor contractor” for any violation of the WHL and WPL (as well as select portions of the criminal code concerning wages). The law defines a “client employer” as “a business entity, regardless of its form, that obtains or is provided workers, directly from a labor contractor or indirectly from a subcontractor, to perform labor or services within its usual course of business.” A “labor contractor” is defined as

[A]ny individual or entity that supplies, either with or without a contract, directly or indirectly, a client employer with workers to perform labor or services within the client employer’s usual course of business, except that “labor contractor” does not include a bona fide labor organization or apprenticeship program, or a hiring hall operated pursuant to a collective bargaining agreement.

The new wage law expressly states that any agreement between an employer and labor contractor attempting to waive joint and several liability is unenforceable and void.

As far as successor liability, the new wage act creates a presumption that an employer is a successor in proceedings before the DLWD if only two statutorily enumerated factors are met. These factors are whether the entities: perform similar work within the same geographical area; occupy the same premises; have the same telephone or fax number; have the same email address or internet website; employ substantially the same work force, administrative employees or both; utilize the same tools, facilities or equipment; employ or engage the services of any person or persons involved in the direction or control of the other; or list substantially the same work experience.

The new wage act also promotes information sharing among government entities. If the DLWD issues a decision finding that an employee is owed wages equal to or greater than $5,000, the DLWD now must notify the New Jersey Division of Taxation. In its communications with the State’s Division of Taxation, the DLWD may recommend that the division conduct an audit to ensure the proper withholding and payment of payroll and other taxes by the employer. Additionally, a court or prosecutor must notify the DLWD if an employer is convicted of certain wage violations.

Statement of Wage Rights

The new wage law requires the DLWD to produce a statement about rights under the WCL, WHL, WPL and select portions of the criminal code, which employers must distribute to current employees and new hires.

Conclusion

In light of the increased liability facing New Jersey employers, those conducting business in the state should consider reviewing their pay and record-keeping practices now more than ever.


Reprinted with permission from the November 18, 2019 issue of the New Jersey Law Journal. © 2019 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved. For information, contact 877-257-3382 or reprints@alm.com or visit www.almreprints.com.