New Jersey employers face heightened risks and consequences for non-payment of wages, or wage theft, with the new Wage Theft Law (WTL). Signed on August 6, 2019, the new law adds protections for retaliation claims, increases wage theft penalties and expands state authority over investigations of retaliation complaints.
This law signals another advance in the Murphy Administration’s emphasis on worker-protection issues. Indeed, some of the provisions are in line with recommendations contained in the Governor’s Task Force on Misclassification, such as increased authority of the Commissioner of the Department of Labor and Workforce Development (DOL) to share investigation information with other state agencies, which we previously wrote about.
Employers should prepare with a self-audit of their pay practices and compliance protocols and ensure proper recordkeeping standards to avoid costly penalties.
Continuing the trend of enhanced anti-retaliation measures in the recent amendments to the Family Leave Insurance program and the NJ SAFE Act, the WTL makes it a disorderly persons offense to discharge or otherwise discriminate against an employee in retaliation for a complaint about a failure to pay the full amount of wages. This protection extends to a wide range of activity – complaints to the employer, to a union representative or to the DOL; instituting or testifying in an action commenced under state wage and hour laws; and informing any employee about his or her rights under such laws. Importantly, no “magic words” are necessary for an employee to fall within the protection of the anti-retaliation provisions. That is, an employee need not articulate a violation of any specific state wage and hour law.
Employees, or the DOL on their behalf, may file a civil suit – individually or collectively – for the full amount of any wages due or lost because of alleged retaliation. Further, when adverse action is taken (or alleged to have been taken) within 90 days of an employee filing a complaint with the DOL or commencing a court action, a presumption is established that the action was knowing retaliation by the employer.
Enhanced Penalties and Damages
The WTL greatly expands the time in which an employee may bring a claim for unpaid wages – and now for unlawful discharge or other retaliatory acts – to six years, up from two.
Remedies for employees now include reinstatement, corrective action by the employer and, most significantly, payment of lost wages plus 200% of such amount as liquidated damages. This essentially establishes treble damages for wage theft violations.
An employer may avoid the liquidated damages only if it is a first offense and the employer meets its burden to show: the failure was inadvertent; there were reasonable grounds to believe that no violation was committed; admission of violating the law; and payment of the amount owed within 30 days.
The WTL also increases the penalties for a first offense from up to $100 to between $500 and $1,000, 10 to 90 days’ imprisonment or both. For second and subsequent offenses, the penalties increase to between $1,000 and $2,000, 10 to 100 days’ imprisonment or both. Further, the law makes it a separate offense each week that a violation occurs on any day within such week.
Expanded DOL Jurisdiction and Powers
In addition to the ability to impose enhanced penalties, the WTL expands the DOL Commissioner’s jurisdiction to include investigation of retaliation complaints, rather than just wage theft. The DOL’s amount in controversy for its jurisdiction was also increased from $30,000 to $50,000 in alleged unpaid wages.
Failure to pay an award of wages and or damages within 10 days carries a tremendous risk, as the WTL permits the Commissioner to issue a written determination to “any appropriate agency” calling for the suspension of one or more licenses held by the employer until payment is satisfied, or issue a stop work order against the individual or entity in violation. Such an order will apply only to the specific place of business or employment from which the violation arose, and will last until the Commission issues an order releasing it upon correction of the violation. Notwithstanding the stop work order, the halted employer must still pay all affected employees for the first 10 days of lost work.
The law also provides for automatic audits by the DOL where an employer has been convicted of a violation of state wage and hour laws, criminal prohibitions against theft or violation of a contract to pay employees. The prosecutor or court must communicate such convictions to the DOL. In addition, where the DOL Commissioner issues a decision finding wages due an employee of at least $5,000, the WTL directs that the Commissioner may audit the employer, must notify the Division of Taxation, and may recommend that the Division perform a payroll and withholdings audit of the employer. This measure, advocated by the Task Force, is likely to have the effect of expanding the scope of any single wage payment action in a manner that could result in more worker misclassification claims – i.e., an allegation that an employer failed to make withholdings from payments workers that it erroneously treated as independent contractors.
The law allows the DOL to reach a greater number of employees by allowing it to contract with community-based organizations to advise laborers of their rights and remedies under the state wage and hour laws. And the WTL directs the DOL to establish a “shame list” to be posted on a website identifying the employers, claims, number of affected employees and amount of wages determined to be owed 30 days after a final determination of violation.
New Crime: Pattern of Wage Nonpayment
The WTL establishes a new criminal prohibition concerning a pattern of wage nonpayment where the person knowingly violates the various laws regulating wage payment and has already been convicted twice under any of such laws. This is a third degree crime with no presumption of non-imprisonment. And a conviction for this new crime shall not merge with any other criminal offenses or convictions, meaning that there will always be an individual sentence for a conviction for a pattern of wage nonpayment. Other penalties include restitution to employees for unpaid wages as crime victims.
Notably, the law makes it easier for the DOL to identify “successor entities” by limiting the multi-factor test from meeting three of the factors down to two. This will make it more difficult for previously convicted employers to adopt alter egos and avoid coming within the two-conviction predicate for this new crime.
If, in the face of a claim or investigation, an employer fails to provide “sufficient employee records,” a rebuttable presumption is established that the employee worked for the employer for the time and wages alleged in the claim. The only exception is where records were lost in a natural disaster.
Notice of Employee Rights
As is the trend with progressive employment laws, the WTL requires distribution to all current employees and upon hire a Notice of Employee Rights, to be promulgated by the DOL.
All aspects of the law, besides the pattern of wage nonpayment crime, are effective immediately; the criminal law takes effect on November 1, 2019. In the face of the significantly increased risks, employers should consider performing a self-audit of their pay practices and compliance protocols. In light of the presumptions established in favor of employees for recordkeeping errors, any self-audit should ensure that all payroll and timekeeping records are properly maintained.
Employers should contact experienced labor counsel to review and revise their payroll and recordkeeping practices and attempt to avoid or minimize the risk of costly and punitive mistakes associated with wage nonpayment.