New Jersey’s Wage Theft Act Just Stiffened Fines & Penalties Against Employers That Don’t Pay Proper Wages – A Lot!

Written by: Jacqueline Voronov, Esq. and Jeffrey Daitz, Esq. 

Hey New Jersey business owners- listen up! The State of New Jersey wants you to know that it is definitely pro-employee when it comes to wage and hour laws.   Under the robust new Wage Theft Act (S-1790), touted as the “toughest wage theft statute in the country,” employers that violate wage and hour laws by not paying minimum wage, overtime or failing to pay for hours worked could be liable for treble damages and fines.  The law also extends the statute of limitations from two to six years for workers to file claims, strengthens joint employer liability, and strengthens anti-retaliation provisions to protect employees who speak out against wage and hour violations.

Below is a synopsis of the key provisions of the new law that could trip up unwary employers:

Significantly Increased Penalties, Including Possible Jail Time

The Wage Theft Act (WTA) starkly increases the penalties available for “knowing” violations, which can even result in jail time.  First-time violations may subject employers to fines between $500 and $1,000 and/or imprisonment between 10 and 90 days. Second or subsequent violations are punishable by a fine between $1,000 and $2,000 and/or imprisonment between 10 and 100 days.

Express Prohibition of Retaliation and Presumption of Retaliation

The WTA expressly prohibits retaliation against employees who complain about alleged violations of wage and hour laws.  Employee activity explicitly protected from retaliation is not limited to formal complaints filed with the New Jersey Department of Labor (NJDOL) or a court, but includes complaints to employers or employee representatives and even general discussions about wage rights with other employees.

An employer that takes any adverse action against an employee within 90 days of his or her filing a complaint will be presumed to have done so in retaliation for the complaint.  Presumed retaliators face damages of triple the pay their adverse action cost the employee, unless they can prove by “clear and convincing evidence” they weren’t motivated by the complaint.  Read that again- that is almost a criminal liability standard.

In addition to the various other penalties and remedies, an employer may have to offer reinstatement to an employee discharged in retaliation for complaining about a violation.

Availability of Liquidated Damages and Attorneys’ Fees

The WTA vastly expands employer liability, permitting employees to recover attorneys’ fees and liquidated damages of up to 200 percent of the wages recovered, in addition to the recovered wages. Thus, New Jersey has effectively more than tripled employers’ potential wage liability for violations. Although the law also provides employers with a good faith defense to liquidated damages, that defense is only available where the violation was a first offense, was made in good faith, and where the employer admits the violation and pays the employee the amounts due within 30 days.

In practical terms, this means that, in certain limited circumstances, the WTA’s provision for treble damages and tripling of the limitations period could potentially result in recoveries up to nine times larger than would have been available before the enactment of the WTA.

Expanded NJDOL Enforcement and Investigative Authority

The WTA expands the NJDOL’s enforcement investigative and authority in several major ways.  First, the WTA authorizes the NJDOL to hear employee claims of retaliation in violation of State wage and hour laws.  Second, the WTA increases the jurisdictional limit on claims the NJDOL can hear from $30,000 to $50,000.  Additionally, the NJDOL may now investigate both wage and retaliation claims going back six years from the date a claim was filed.

The news only gets worse for those employers who don’t have a stellar track record when it comes to record keeping.  The WTA provides that where employers fail to maintain adequate records, the NJDOL will presume that the employee is entitled to the amounts claimed in the complaint, and the employer will have the burden of proving otherwise.

Significantly Increased Audit Risk

The WTA further amends the New Jersey Wage Collection Law to increase audits.  When the NJDOL finds an employer owes an employee more than $5,000 in wages, the NJDOL must now: (a) inform the employer of the NJDOL’s right to audit the employer, or successor firms; and (b) notify the Division of Taxation of the wage liability finding and recommend the Division of Taxation also perform an audit to ensure proper withholding and payment of payroll taxes and other taxes.

License Suspension / Stop-Work Orders for Failure to Timely Comply

Where an employer fails to comply with an NJDOL determination or court judgment to pay wages or damages to an employee within 10 days of when that payment has been ordered the NJDOL may direct the appropriate agencies to suspend licenses held by the employer or its successor company until the employer complies with the determination or judgment. The NJDOL may also issue stop-work orders against violating employers, which can last until the violation is corrected, and which may result in the employer being placed on probation for two years, during which time the employer may be required to file periodic compliance reports with the NJDOL.

Joint and Several Liability With Staffing Agencies

The WTA provides that “labor contractors” (e.g., staffing agencies) that provide laborers or workers to “client employers” shall be jointly and severally liable for violations of State wage and hour laws. The WTA states that both the staffing agency and employer have the right to recover the costs associated with the other’s violations.

Required Distribution of Written Statement of Employee Rights

The WTA requires employers to provide to each current and newly hired employee a notice of employee rights under the State Wage and Hour Laws. The notice also must explain how to file claims.

Wage Violator “Naming and Shaming”

Violations will be made public on the New Jersey Department of Labor and Workforce Development website.  In addition to general statistics on the number of complaints, investigations, license suspensions, the NJDLWD website will display the following about violations of State Wage and Hour Laws or court judgments about such violations:

1. The name and address of the employer;
2. The nature of the claim;
3. The number of employees affected, together with the amount of wages owed; and
4. Any rulings regarding penalties, license suspensions, or revocations resulting from the claim.

Wage Nonpayment Is Now A Crime

Lastly, the WTA makes the “pattern of wage nonpayment” a criminal offense.  Pattern of wage nonpayment is committed when an employer knowingly violates, for a third or subsequent time, the wage payment laws subject to the WTA.  Pattern of wage nonpayment is a third-degree crime, and is punishable by imprisonment for three to five years and/or a fine of up to $15,000.

The Takeaway

These changes and amendments should concern all New Jersey employers. Claims arising out of State wage and hour laws are now far more attractive to workers and employers may find themselves staring down the barrel when it comes to fines and penalties.   Employers should consider conducting internal audits of pay, timekeeping, and record keeping practices, especially in view of the significantly increased potential liability.

Hall Booth Smith, P.C. attorneys are available to answer any questions you may have on this or other employment law issues.