Many companies hire contract employees to perform specific tasks or duties outside of the scope of what others employees are expected to do. Contract employees often are not entitled to worker’s compensation, health care, 401 K or bonuses, which keeps payroll costs down for the company.
“According to the state’s definition, a contractor must be used for a finite job or the kind of work that is outside the scope of what regular employees do, and not have direct guidance or performance reviews by a supervisor at the company,” NewJersey.com reported.
Last week, the New Jersey Assembly proposed a bill that would define contract employees and provide a fine for companies that misclassify employees.
“Companies that knowingly misclassify their workers are denying employees benefits they are entitled to, including the right to workers’ compensation and protection under minimum wage and overtime laws,” said Assembly Budget Chairman Vincent Prieto, D-Secaucus. “It’s unethical, and with this bill, it will be illegal.”
The bill is sponsored by Assemblyman John Wisniewski, D-Middlesex who was inspired by a 2010 Obama Administration investigation that found eliminating wrongful job classifications could provide $7 billion over a decade in additional payroll taxes and penalties nationally.
“In 2005, New Jersey’s Department of Labor found employers had tried to save more than $625 million in unreported wages for 28,200 workers. Nearly 25,000 workers were misclassified the following year, the department found,” NewJersey.com reported.
If passed, companies that mislabel contract employees knowingly could face a $2,500 fine. Companies that accidentally mislabel a contract employee could face a fine of $1,000.
“Healthy competition is good for business, but companies that partake in this practice are giving themselves an unfair advantage over those companies that operate legitimately,” said Assemblyman Thomas Giblin, D-Montclair. “This bill ensures that companies do not hinder competition by cutting corners.”
The bill passed a 6-3 vote by the Assembly Labor Committee and now faces Republican opposition at the full Assembly. A similar bill is making its way to the Senate.