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Tag Archives: Employment Law

New Jersey’s War on Independent Contractors: Criminal and Civil Penalties for Independent Contractor Misclassification Signed into Law

September 12, 2019Issues, News, Recent News, Top StoriesEmployment LawNJCJI

Legislation targeting independent contractors has been signed into law by Governor Phil Murphy. 

Although sold as legislation addressing “wage theft”- simplefailure to pay agreed-upon lawful wages – the legislation was designed to deter the use of independent contractors.  This legislation criminalizes misclassification and other wage and hour violations – 3-5 years in jail – including good faith violations.  Businesses also face 6 years’ treble damages and joint and several liability, with the same treble damages, for contractors’ violations – liability for behavior they do not control.

Other states like California are looking to deter the use of independent contractors by adopting a more stringent version of the ABC test – making it more difficult for businesses to prevail in court.  New Jersey takes a different approach.  The risk of massive financial penalties and even significant jail time mean the ABC analysis is whatever the Department of Labor says it is. 

NJCJI continues to work with an array of businesses and other trade associations to address the significant overreach of this legislation.  The Wage and Hour Fairness Coalition includes 40 trade associations and other business organizations in the state.  

Please contact Alida Kass if you would like to discuss this effort.


The Governor’s Misclassification Task Force Report spells out the administration’s agenda in detail.  Notably absent is any recognition of the flexibility that the independent contractor model provides for workers and businesses alike, and the critical role in plays in the economy.  Similarly, no concern that the extraordinary penalties contemplated in the report might risk over-deterring a valuable business model. 


Wage and Hour Fairness Coalition Letter

Wage Hour Fairness Coalition LetterDownload

Workers Comp Bill Would Line the Pockets of Attorneys at the Expense of Injured Workers

April 13, 2018News, Top StoriesAttorney Fees, Employment Law, New Jersey LegislatureNJCJI

Should attorneys get paid for work they didn’t do? If so, should that money come out of the pockets of injured workers? Those are the questions policy makers who voted yes on S2145 need to be able to answer.

 

On April 12, the New Jersey Senate voted to modify our state’s workers compensation system to increase the amount of money attorneys assisting injured workers can get. Unfortunately, this additional compensation will come directly out of the pockets of the victims themselves.

 

Under existing law, employers and their workers compensation insurance carriers are encouraged to act promptly to settle workers comp complaints. When payments are promptly made, the injured workers get the entire payment, and thanks to the system we have in New Jersey, often do not need to hire an attorney to assist them with their claims.

 

If a worker does decide to hire an attorney and seek additional compensation, state law limits the fee the attorney can charge his or her client to funds he or she is able to secure above and beyond what was originally offered.

 

While ensuring attorneys are fairly compensated is an admirable goal, taking money out of the pockets of injured workers is not a good way to accomplish it.

 

The existing formula fosters good public policy in several ways. It encourages prompt, good faith payments to injured employees. It also ensures that the incentives for litigating claims are aligned with the incremental benefit of the potential litigation. And by discouraging unnecessary litigation, it ensures maximum compensation for employees at a minimum cost to employers.

 

The proposed legislation, by contrast, would amend existing law to undo all of those beneficial incentives.

 

By eliminating the window of opportunity for carriers to make payments that go entirely to the injured party, this bill would weaken the carrier’s incentive to make maximum payments as quickly as possible. And it would encourage attorney involvement at an earlier stage of the process without regard to their incremental value. Tying the fees to the signing of an attorney client agreement simply incentivizes such agreements. And basing fees on total compensation means attorneys would be taking a share of money that carriers would have made absent any attorney involvement – diverting that money to attorneys instead of compensating victims.

 

We understand the desire to ensure that attorneys receive adequate compensation for their efforts – but should not come at the expense of injured workers. This legislation would undo each element of the existing, beneficial, incentive structure, to the detriment of injured employees.

 

Employment Bills Scheduled for Vote on Monday

March 23, 2018News, Top StoriesArbitration, Employment Law, New Jersey LegislatureNJCJI

NJ State HouseSeveral employment bills will be heading for floor votes on Monday, including two of particular concern to NJCJI. The “Diane B. Allen Equal Pay Act” continues to regulate much more than “equal” pay and would present a significant danger to employers who do, in fact, compensate all employees equally for equal work. S121/A1242, legislation “Concerning Discrimination” would also interfere with the enforceability of widespread employment contract provisions and run afoul of the Federal Arbitration Act.

 

Pay Equity

 

NJCJI members value all employees and do not discriminate in compensation of employees based on gender or any other protected classification. But we continue to oppose this “Equal Pay Act” as currently drafted, as it would impose a new standard that would equate different jobs according to a set of vague factors, with a risk of significant retroactive liability for employers who do not engage in discriminatory pay practices.

 

A1/S104 would change the standard for “equal pay” to a new and uncertain formulation of “substantially similar” work, as measured by similar “skill, effort, and responsibility.” This change alone will bring significant uncertainty, as it would equate entirely distinct jobs in an unpredictable way. Employers can no longer set compensation based on prevailing labor markets – paying the wages necessary to recruit suitable candidates.

 

Other states that have adopted a similar standard have recognized that common factors often account for wage disparities, such as local cost-of-living and working conditions, like risk of injury, night shift, and inclement weather. This bill as currently drafted does not permit accounting for such factors, and it is not clear how employers will fill jobs with more challenging and less-desirable working conditions without paying a wage premium.

 

But whatever the merits of such a standard going forward, the prospect of the retroactive application of that standard, with treble damages imposed on employers for failing to comply with a standard not in effect when compensation was set or paid, presents a risk of significant and inequitable liability.

 

Sponsors have indicated a willingness to mitigate the inequity of retroactive treble damages by capping the back-pay penalty at six years. However, we remain concerned that the amendment in its current form may not effectively cap the back-pay penalty at six years, given the open-ended language regarding the application of the continuing violation doctrine and discovery rule.

 

We also remain concerned that the retroactive application of treble damages does not meet standards of basic fairness, as it penalizes employers who had no reason to believe there was anything wrong with their employee compensation structure. Other states that have imposed treble damages in pay equity legislation have limited their application to “knowing or willful” violations of the law and thereby avoided the inequity of retroactive treble damages.

 

If amended to correct these particular flaws, the bill would still be the most aggressive pay equity legislation in the country. But as currently drafted, it presents a significant risk to employers who do not engage in discriminatory behavior in employment compensation.

 

Banning Nondisclosure Agreements… and Arbitration

 

Sparked by a desire to encourage greater transparency in settlement of sexual harassment claims, and concern that non-disclosure agreements (NDAs) can have the perverse effect of allowing such behavior to continue, legislation to restrict the enforceability of NDAs is also scheduled for a floor vote on Monday.

 

Unfortunately, the bill has also become a vehicle for the plaintiff’s bar, which desires a general prohibition on arbitration agreements in employment contracts. By barring waivers of “procedural rights” in employment contracts, which would include essential attributes of arbitration like waivers of jury trials, full discovery, and the like, the bill would prohibit prospective agreements to resolve employment disputes through arbitration.

 

When disputes arise in the employment context, there are two possible tracks: it can be resolved through litigation in court, or it can be resolved through arbitration. The substantive remedies are the same. But while proceeding in court will typically take years to resolve, with massive legal fees, arbitration is cheaper, faster, and more efficient.

 

By reducing legal fees and precluding class actions, arbitration also presents a challenge to the business model of the plaintiffs’ bar. As a result, we have seen an intensive anti-arbitration public relations campaign, coupled with efforts to undermine arbitration in state courts and legislatures.

 

Hostility to arbitration from those who benefit from the litigation business model is nothing new. Which is why federal law since 1925 has defended arbitration as a favored means of dispute resolution and expressly preempted efforts to undermine the enforceability of arbitration agreements.

 

This legislation would attempt to circumvent that preemption by defining state contracts to preclude arbitration agreements. But when a state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: the conflicting rule is displaced by the FAA. And the result is the same when state law prohibits essential attributes of arbitration.

 

As a practical matter, a prohibition on arbitration agreements does not benefit the average employee. Arbitration is a faster, more cost-effective way of resolving disputes, and the lower transaction costs inure to the benefit of all employees. Litigation costs, by contrast, function as a transfer of wealth from lower and middle-class employees, to more highly-compensated attorneys.

 

The New Jersey legislature’s attempt to interfere with the protections of the Federal Arbitration Act will result in protracted litigation, culminating in the legislation eventually being invalidated in federal court. And in the interim, it would impose massive litigation costs on employers and employees alike.

 

Crafting More Workable Sick Leave Legislation

March 16, 2018News, Top StoriesEmployment Law, New Jersey Legislature, Paid Sick LeaveNJCJI

Governor Phil Murphy campaigned on a promise to sign sick leave legislation. He mentioned the issue again in his budget address, urging the legislature to get a bill to his desk. And an Assembly version sponsored by Assemblywoman Lampitt was heard and voted out of the Assembly Labor Committee this week and is moving through the legislative process.

 

NJCJI has been engaged in the details of sick leave since early versions were introduced last legislative session. We have focused not on the mandate itself, but on the manner in which it is imposed and the enforcement mechanisms involved in ensuring employer compliance. By that measure, the most recent version of sick leave represents a significant improvement, though two critical flaws in the enforcement mechanism would continue to unduly infringe on workplace flexibility and expose employers to significant and unwarranted liability.

 

Steps in the Right Direction…

 

It is striking that although the vast majority of New Jersey employers already offer more generous paid sick leave to their employees than would be mandated under the bill, many such employers have nevertheless opposed this legislation since first introduced last session. Under earlier versions, the broad statutory entitlement to paid sick leave, compounded by incentivized-litigation enforcement mechanisms, would deprive those employers of the flexibility to administer their leave policies in a way that deters abuse and is consistent with the needs of their businesses.

 

The Committee Substitute of A1827, sponsored by Assemblywoman Lampitt, is a significant improvement. The bill would ensure greater clarity and predictability, by imposing an effective blanket preemption on all local ordinances to ensure one uniform statewide standard, with one standard of 40 hours of leave for all employers. It would also grant employers more flexibility in deterring abuse of sick leave policies. Employers could require pre-clearance for foreseeable sick leave on “blackout” dates, as well as documentation to confirm non-foreseeable sick leave on those dates.

 

…But More Work to be Done

 

Some flaws in the enforcement mechanism would still expose employers to a risk of unwarranted liability. But that risk, and the overall workability of the legislation, could be significantly improved with a few modest amendments.

 

First, employer flexibility in making adjustments to schedules and responsibilities must be protected. An employee’s right to use sick leave must be balanced with an employer’s need to make the necessary adjustments to ensure that the work is completed on time. But the existing definition of prohibited “retaliatory personnel action” includes not just constructive discharge, demotion, and the like – it would also bar “unfavorable reassignment.”

 

“Unfavorable” could include a less lucrative shift with worse tips, for service-industry jobs, or working on a lower-profile product for a pending product launch in the consumer-product industry. For employees who travel to client offices, it could mean the difference between working a stint in San Diego or Bismarck. For a business in trade work, it might mean the difference between a prevailing-wage project and a project that pays market wages. But employers need the freedom to make all of these adjustments – the flexibility to move employees around to ensure necessary work is completed in timely fashion is essential to a functional work place. And employers should not have to risk being dragged into court to defend such adjustments.

 

Our second concern is with the presumption for retaliation. The bill would create 90-day window during which any adverse employment action is presumed to be retaliatory, with the burden on the employer to prove that the adverse action was unrelated to the employees’ sick leave-related activity. But in addition to documented and verifiable actions like filing complaints with the Department of Labor or with the courts, the presumption would also triggered by merely speaking to another employee about their rights under the law.

 

The burden-shift to employers to essentially prove their innocence is a powerful tool that should not be granted lightly. It should not be so easily manufactured by an employee, and so prone to abuse, as a mere conversation with colleagues about sick leave. And if the presumption has been triggered, it is only fair that the employer be on notice of the risk they run in taking any action that might be considered “adverse.”

 

The critical challenge of a paid sick leave mandate is balance.

 

The shift from voluntary policies to statutory entitlement will necessarily entail some lost flexibility, even for employers who already offer sick leave. But the sponsors’ core objectives can be achieved while preserving significant employer discretion. The remaining challenge to a workable bill is ensuring that enforcement mechanisms in the bill accommodate the practical challenges of running a business, and don’t penalize employers for taking the necessary steps to ensure that work gets done.

 

NJ Senate Labor Committee Advances Ban on Arbitration Agreements in All Employment Contracts

March 9, 2018News, Top StoriesArbitration, Employment Law, New Jersey LegislatureNJCJI

This week the New Jersey Senate Labor Committee voted to release legislation that would make New Jersey the only state in the country to ban arbitration agreements in all employment contracts.

 

Much of the discussion on S121 focused on helping the victims of sexual harassment. And indeed, one element of the bill would specifically address non-disclosure agreements for discrimination or sexual harassment settlements. But the prohibition on waivers of “procedural rights” would apply to all employment contracts and would prohibit all prospective agreements to resolve any type of employment dispute through arbitration.

 

When disputes arise in the employment context, there are two possible tracks: it can be resolved through litigation in state or federal court, or it can be resolved through arbitration. The substantive remedies are the same, regardless of which mechanism is selected. But while proceeding in court will typically take years to resolve, with massive legal fees, arbitration is cheaper, faster, and more efficient. And money not spent on the legal fees associated with exhaustive court proceedings and discovery is instead available for employee compensation and business development.

 

But by reducing legal fees and precluding class actions, arbitration also presents a challenge to the business model of the plaintiffs’ bar. And as a result, we have seen an intensive anti-arbitration public relations campaign, coupled with efforts to undermine arbitration in state courts and legislatures.

 

Hostility to arbitration from those who benefit from the litigation business model is nothing new. Which is why federal law since 1925 has defended arbitration as a favored means of dispute resolution and expressly preempted efforts to undermine the enforceability of arbitration agreements. The Federal Arbitration Act mandates the enforceability of arbitration agreements, providing that they are “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.”

 

S121 would attempt to circumvent that preemption, essentially by defining state contracts to preclude arbitration agreements. But when a state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: the conflicting rule is displaced by the FAA. And the result is the same when state law prohibits essential attributes of arbitration.

 

In its landmark decision of AT&T Mobility v. Concepcion, the U.S. Supreme Court cited several “obvious illustrations” of unenforceable state restrictions: agreements that fail to provide for judicially monitored discovery; that fail to abide by the Federal Rules of Evidence; or that waive a right to a jury trial. The Court explained that all such state restrictions would be invalid, as they would interfere with “fundamental attributes of arbitration” and would create a scheme “inconsistent with the FAA.”

 

S121 would attempt to impose all of these “obvious illustrations” of invalid state restrictions on all New Jersey employment contracts.

 

These state restrictions are preempted even when not limited to arbitration agreements. As Justice Kagan recently wrote for a 7-1 majority in Kindred Nursing Centers v. Clark, the FAA not only preempts state efforts to directly bar arbitration, it “also displaces any rule that covertly accomplishes the same objective by disfavoring contracts that (oh so coincidentally) have the defining features of arbitration agreements.”

 

As a practical matter, a prohibition on arbitration agreements does not benefit the average employee. Arbitration is a faster, more cost-effective way of resolving disputes, and the lower transaction costs inure to the benefit of all employees. Litigation costs, by contrast, function as a transfer of wealth from lower and middle-class employees, to more highly-compensated attorneys.

 

The New Jersey legislature’s attempt to interfere with the contractual protections afforded by the Federal Arbitration Act will result in protracted litigation, culminating in the legislation eventually being invalidated in federal court. And in the interim, it would impose massive litigation costs on employers and employees alike.

 

Top News Clips for January 20-26

January 26, 2018News, Recent NewsCFA, Class Actions, Employment LawNJCJI

A selection of the need-to-know civil justice news for January 20-26. Continue reading →

Employment Issues Dominating the Agenda

January 19, 2018News, Top StoriesEmployment Law, Governor MurphyNJCJI

Both equal pay and wage theft are hot topics in the new legislative session, and top priorities of Gov. Murphy’s administration. We are pleased to see initial efforts being framed in a thoughtful way that advances core objectives without generating unnecessary litigation. Continue reading →

Top News Clips for December 9-15

December 15, 2017News, Recent NewsEmployment Law, Expert Evidence, Medical Liability, New Jersey Courts, New Jersey Supreme CourtNJCJI

A selection of the need-to-know civil justice news for December 9-15.

 

Murphy Picks Bergen County Prosecutor Gurbir Grewal for Attorney General

Nicholas Pugliese | NorthJersey.com

Gov.-elect Phil Murphy on Tuesday announced the Bergen County prosecutor as his nominee for state attorney general and vowed that his pick will lead the fight against the Trump administration on issues ranging from health care to voting rights and the environment.

Read more.

 

 

NJ Justices Say Conference Needed Over Med Mal Testimony

Jeannie O’Sullivan | Law360

The New Jersey Supreme Court reinstated a medical malpractice lawsuit against Newark Beth Israel Medical Center that had been tossed over the late submission of an expert witness’ statement, ruling on Thursday that the parties had been entitled by law to a conference to discuss any concerns about the testimony.

Read more.

 

 

NJ Justices Nix Worker’s Contract Barring 3rd-Party Suits

Jeannie O’Sullivan | Law360

The New Jersey Supreme Court on Monday ruled that an employment contract barring third-party lawsuits wasn’t enforceable under the state’s workers’ compensation law because it contravenes public policy, but a trial court must still determine if the suing employee was partially liable for the injury that prompted his suit.

Read more.

 

 

NJ High Court OKs Roche’s Bids To Review Accutane Rulings

Bill Wichert | Law360

Hoffmann-La Roche Ltd. has convinced the New Jersey Supreme Court to review two state appellate decisions related to the company’s acne medication Accutane, with the justices agreeing to consider rulings over the adequacy of the drug’s label and the admissibility of expert testimony.

Read more.

 

 

Follow @NJCivilJustice on Twitter for even more news. 

 

Top News Clips for October 21-27

October 27, 2017News, Recent NewsArbitration, Employment Law, Food Law, New Jersey Supreme Court, TCCWNANJCJI

A selection of the need-to-know civil justice news for October 21-27. Continue reading →

New Jersey High Court Ponders Liability in the New Economy

October 27, 2017News, Top StoriesEmployment Law, New Jersey Courts, New Jersey Supreme CourtNJCJI

Amicus brief in Vitale v. Schering-PloughContract work blurs the traditional definitions and roles of employee and employer, and this evolution of the labor market has created tension between contract law and employment law. The New Jersey Supreme Court has taken up a case that arises out of that evolution. It is deciding whether contract employees can be required to waive tort claims they might bring against a contract employer when Workers Compensation is available from their direct employer. We filed an amicus brief in this case arguing that making the Workers’ Comp model compatible with the modern economy requires that such arrangements be upheld. Continue reading →

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