New Jersey Becomes Fifth Jurisdiction to Adopt $15 Minimum Wage

On February 4, 2019, Governor Phil Murphy signed landmark legislation, which will raise New Jersey’s minimum wage from $8.85 up to $15 an hour by 2024. New Jersey joins only a handful of other jurisdictions in raising its minimum wage over the next several years, including Washington, D.C., California, Massachusetts, and New York City. With the first increase in wages coming on July 1, 2019, here’s what you need to know.

Does the law apply to all employers? Which employees are covered?

The phase-in of the wage increase will apply to the majority of New Jersey workers, but not all. There are exemptions for seasonal employees, farm workers, tipped workers, and employees of small businesses.

The law defines small business as those employing five or fewer people.

The law defines seasonal workers as anyone whose employment does not fall outside May 1 to September 30. The law also defines seasonal employers as those that typically operate, take in most of the income, and pay most of their wages during June, July, August, and September. So as to include employers such as ski resorts, the law further defines seasonal employers to include those for which, during the previous calendar year, not less than 2/3 of their gross receipts were received in a continuous period of not more than sixteen weeks or for which at least 75% of the wages paid during the preceding year were paid during a single calendar quarter.

When is the first increase in wages? What are the wage increases thereafter?

Will there be future increases in wages?

Yes, once the minimum wage reaches $15, it will increase annually to reflect changes in the consumer price index.

Further increases for employers with less than six employees will be contingent upon future increases in the general minimum wage rate in future years.

Regarding farm workers, in 2024, the Commissioner of Labor and Workforce Development and the Secretary of Agriculture will decide, based on the impact of minimum wage increases and wages in other states, whether to keep increasing farm workers’ minimum wage to $15.

Additionally, future increases for seasonal workers will rise in accordance with the consumer price index.

What about teen workers?

There are no exemptions for teen workers. Teens shall be paid the minimum wage along with other workers.

What else does the law provide?

The law also creates a training wage. Where employees have no experience in the occupation, an employer may pay new employees a sub-minimum wage of no less than 90% of the minimum wage for their first 120 hours of work. Employers must make a good faith effort to employ that person after the training period ends.

The Bottom Line

The new legislation was signed, according to Governor Murphy, in the hopes of making “our economy both fairer and stronger.” While its full impact will not be known for several years, New Jersey employers should review and ensure compliance with current minimum wage requirements and those beginning July 1, 2019.

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Expansion of Family Leave Insurance Benefits Likely

On January 31, 2019, the New Jersey legislature passed Bill A3975 (the “Bill”) which would double the Family Leave Insurance (FLI) program in New Jersey from six (6) weeks to twelve (12) weeks of benefits. It would also increase the number of intermittent leave days from 42 to 56 days. The Bill is expected to be signed into law by Governor Murphy since it was part of his campaign.

Increased Benefits

The Bill would increase the amount of benefits from two thirds of an employee’s pay (capped at $633 weekly) to eighty-five percent of wages (capped at $859 weekly). The Bill would also eliminate a one-week waiting period for FLI benefits, but this portion of the Bill would take effect in July 2020.

Expansion of Family Members

FLI benefits are most commonly used in connection with a new mother’s maternity leave, for after she recovers from childbirth and her temporary disability benefits end. The benefits provide an additional six weeks of benefits during the first six weeks of unpaid leave taken under the New Jersey Family Leave Act to bond with her new baby. Currently, these six weeks of unpaid leave under the NJFLA are unpaid. If passed, an employee would be entitled to FLI benefits for the duration of his or her NJFLA unpaid leave of absence.

FLI benefits, however, can also be used by non-birthing parents to bond with a new baby or for children, parents, spouses, domestic and civil union partners to give necessary care for a family member. The Bill would expand the ability to use FLI to siblings, grandparents, grandchildren, and parents-in-law. Under the Bill, employees will also be permitted to use FLI benefits to assist a family member who is a victim of domestic or sexual violence.

More Employers to Be Covered

The Bill would also expand the number of employers covered under the FLI program by reducing the number of threshold employees from fifty (50) employees to thirty (30) employees. This portion of the Bill would take effect June 30, 2019.

Eliminates Ability to Require Use of Paid Time Off

The Bill, if signed, would also eliminate an employer’s ability to require an employee to use and/or exhaust paid time off during any unpaid waiting period for benefits. Use of paid time off will only be at the employee’s option.

Higher Tax Withholdings

The program is entirely funded by all employees in the State—whether they use the benefits or not—and would increase the amount of withholdings, although the amount of the increase is not yet clear. Currently, as of January 1, 2019, employees contribute up to their first $34,400 in wages or a maximum of $27.52 a year. The Bill would increase this formula to tax the first $131,000 in wages.

The Bottom Line

If passed, employers should review their Family Leave Insurance policies to ensure compliance with the new requirements and expansion of the law. Employers should also confirm with their payroll companies as to the higher withholding amounts as they are determined. Employers should also be sure to download a revised Family Leave Insurance notice when it becomes available from the State and distribute it to all current and new employees. A current copy of the notice can be found here.