New Jersey’s new Wage Theft Act will likely make the state a destination for wage and hour class actions as the new law includes critical employee protections and harsher penalties for employers, and extends the statute of limitations for minimum wage and overtime claims significantly.
Following on the heels of our recent LawFlashes describing New Jersey’s increasingly employee-protective employment laws (see New Jersey Legislature Passes Paid Sick Time Law; New Jersey Bans Some Nondisclosure and Waiver Provisions; and New Jersey Update: Expanded Medical Marijuana Law and Past Pay Inquiries), on August 6, New Jersey Acting Governor Sheila Oliver signed into law the New Jersey Wage Theft Act (WTA). While the new legislation somewhat flew under the radar, it will likely have seismic repercussions for employers operating in New Jersey, and will make New Jersey a destination venue for wage and hour class action litigation. The WTA includes critical employee protections and harsher employer penalties than those previously in place. It also significantly extends the statute of limitations for minimum wage and overtime claims from two years to six years—substantially increasing the exposure for noncompliant employers. Employers should review this new law—which took effect immediately upon enactment—with all employee payroll, benefits, and accounting departments to ensure their compliance and to avoid the enhanced fines, penalties, and damages now in place.
Under the WTA, violating employers are subject to enhanced civil penalties. Of particular note is that the WTA now provides for treble damages: A violator must pay wages owed plus liquidated damages equal to 200% of the wages owed. In addition, the WTA imposes fines of $500 and 20% of the owed wages for a first offense (which increase to $1,000 and 20% of the owed wages for each subsequent offense), and administrative penalties ranging from $250 for a first violation to $500 for every subsequent violation. A first-time offender can avoid paying liquidated damages if it can be established that (1) it acted in good faith; (2) it had reasonable grounds for believing that the act was not a violation, and (3) it acknowledges the violation and pays the wages owed within 30 days of the notice of violation.
Employers found to have violated New Jersey’s wage laws are also subject to criminal penalties under the WTA. A violating employer commits a disorderly person’s offense, and, based on the number of violations, must pay fines ranging from $500 to $2,000 and/or serve jail time of 10 to 100 days.
Presumption of Retaliation
Under the WTA, any employer that takes an adverse action against an employee within 90 days of the employee’s filing a wage complaint will automatically face a presumption that the employer’s action was retaliatory for having filed the complaint. This presumption “may be rebutted only by clear and convincing evidence that the action was taken for other, permissible, reasons.” An employer who is found to have retaliated against an employee for filing a complaint commits a disorderly persons offense and, upon conviction, will be subject to a disorderly persons offense, fines in the range of $100 to $1,000, payment of the employee’s lost wages, damages equal to 200% of the lost wages, and reasonable costs of the action to the employee. If the employee was discharged, the employer will be required to offer reinstatement unless prohibited by law.
Liability for Violations by Contractors
Reminiscent of California’s “labor contractor” liability law, New Jersey employers and labor contractors are now subject to joint and several liability for violations of the state wage and hour laws, including retaliatory actions against employees for exercising their rights under any of those laws. The WTA defines a “labor contractor” as “any 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.” S. 1790, 116th Cong. (2019) (emphasis added). The WTA goes on to define “usual course of business” as the “regular and customary work of a business, performed within or upon the premises or worksite of the client employer, or any other place of business of the client employer for which services or labor are performed.” Id. Any waiver of the joint and several liability provision is contrary to public policy and unenforceable. Id. Since employers cannot contract out of this expanded liability, the likely result will be increased litigation regarding whether an individual is performing services in the employer’s “usual course of business.”
Additional Changes: Records Inference and Public Disclosure
Under the new law, a factfinder may now infer that an employer that fails to present sufficient records in response to a wage claim has employed the complainant for the period of time alleged and for the claimed amount of wages. Without proper records, it is up to the employer to demonstrate “good cause” for the failure to provide such records—which still leaves open the defense of the underlying claim. The WTA is noticeably silent on what “good cause” entails in this context, but does state that this rebuttable presumption shall not apply to any employer that can demonstrate it does not have sufficient employee records as a result of “a natural disaster.”
The WTA provides that a public website maintained by the New Jersey Department of Labor and Workforce Development will list each wage claim in which an employer is found to be in violation of one or more state wage and hour laws in a final determination by the commissioner of Labor and Workforce Development or a court judgment. These listings will contain information including, but not limited to, the name and address of the employer, the nature of the claim, the number of affected employees, the amount of wages owed, and any penalties resulting from the wage claim.
The WTA requires employers to provide all new employees with a written statement of their rights under New Jersey’s wage and hour laws and an explanation of how to file a claim in the event of a violation. As of the date of this LawFlash, no model template is in existence, but the Department of Labor and Workforce Development is expected to develop a model notice.
Recommended Next Steps
The law creates significant challenges for New Jersey employers and will likely lead to increased litigation. At a minimum, employers should ensure they are in compliance with all state wage and hour laws; confirm that all relevant personnel have been made aware of this new law and the penalties it imposes; provide the required statement of rights under New Jersey’s wage and hour laws and an explanation of how to file a corresponding claim with all new-hire paperwork; implement policies to quickly correct any inadvertent wage and hour violations; and consider conducting a self-audit for compliance with New Jersey’s wage laws. In addition, because businesses now may be responsible for the noncompliance of their labor contractors, those businesses should take measures to ensure the contractors are paying the employees who perform services for the businesses in order to comply with New Jersey law.