In August 2019, the new Wage Theft Act ("WTA" or the "Act") was signed and became effective. The WTA amends key provisions of New Jersey's Wage Payment Law, Equal Pay Act, and the Wage and Hour Law, and contains a number of provisions that directly impact employers. The Act's intent is to punish employers that engage in a knowing pattern of non-payment of wages and other compensation. The potential penalty for such non-payment can be a term of imprisonment and up to $15,000 in fines. The practical impact of the WTA will affect employers in four major areas: (1) increased statute of limitations, (2) increased penalties, (3) a rebuttable presumption of retaliation; and (4) potential successor liability.
First, the WTA adds four years onto the statute of limitations to assert a wage claim under the State law. That is, the WTA's statute of limitations is six years, as opposed to the previous two-year period. The Act's limitations period is also longer than the limitations periods under the federal Fair Labor Standards Act (three years for willful violations and two years for other violations).
Under the statute as written, an employer's failure "to present employee records, as required pursuant to State wage, benefit and tax laws," would result in a rebuttable presumption that the employee worked for the employer for the period of time and for the amount of wages as alleged by the employee unless the employer can demonstrate good cause for its failure to present the records.
Second, the WTA increases employer penalties under the law, both criminal and civil. These violations are for "knowing" failures to "pay the full amount of wages to an employee agreed to or required by, or in the manner required by" law. The first violation is a disorderly persons offense and the employer shall be subject to punishment by way of a $500 to $1,000, between 10 and 90 days in jail, or both. The second violation is also a disorderly persons offense and the employer shall be subject to punishment through a $1,000 to $2,000 fine, between 10 and 100 days in jail, or both. And the third, and any subsequent, violation is a fourth degree crime that shall subject the employer to punishment by a $2,000 to $10,000 fine, up to 18 months in prison, or both. Each week in which an alleged violation of the Wage Payment Act occurs will constitute a separate and distinct actionable offense.
The Act also provides for liquidated damages on wage claims. Specifically, an employer can be liable for liquidated damages of up to 200% where it knowingly failed to compensate its employee for all wages "agreed to" or "required" by law. This could effectively result in treble damages as the employer pays the wages deemed to be due, then up to 200% (or twice) the amount owed to the employee. There is a good faith defense for first-time offenders if the employer can show that the purported violation constituted "inadvertent error made in good faith" and that the employer reasonably believed the conduct complained of did not violate the WTA. However, the employer can only benefit from this defense if it (1) admits to the violation and (2) pays the full amount owed within 30 days of its notice of the violation. The WTA also provides for recovery of attorneys' fees to employees who prevail on civil unpaid wage claims in addition to the damages recovered. As an additional deterrent, all employer violations will be made available to the public through the New Jersey Department of Labor and Workforce Development ("DOL") website.
Notably, the WTA does not limit liability to the employer's failure to pay wages. It also subjects employers to liability or penalties for failure to pay compensation and benefits, which the Act defines as including, but not limited to, "health benefits, pensions, medical treatment, disability compensation and workers' compensation, including death benefits to dependents of workers who have died as a result of their employment."
Third, the WTA increases protections for employees who make wage complaints. It prohibits retaliation against employees because the employee (1) complained to his or her employer, the New Jersey Commissioner of Labor and Workforce Development, or the employee's other authorized representative for wage non-payment; (2) initiated (or is about to initiate) proceedings to recover unpaid wages from the employer; (3) testified (or is about to testify) in a proceeding to recover unpaid wages; or (4) informed co-employees regarding their rights to fair wages under the WTA or another State law.
The WTA creates a rebuttable presumption of retaliation where an employer takes adverse action against an employee within 90 days of the employee's filing of a complaint with the DOL Commissioner or a civil action under the WTA. An employer can only rebut that presumption by offering "clear and convincing" evidence that the purported retaliatory act was done for other purposes - a legitimate business purpose. Further, the employer must offer reinstatement to a former employee who proves his or her termination was in retaliation for wage complaints under the Act.
Fourth, the WTA expands the definition of "employer" to encompass any successor entity of the employer, and establishes a rebuttable presumption of successor liability in claims brought before the DOL, which describes the liability a company could inherit when it buys or merges with another company. The WTA provides that an employer will be deemed a successor entity if the predecessor and alleged successor companies share at least two of the following:
- Perform similar work within the same geographical area;
- Occupy the same premises;
- Have the same telephone or fax number;
- Have the same email address or Internet website;
- Employ substantially the same work force, administrative employees, or both;
- Utilize the same tools, facilities or equipment;
- Employ or engage the services of any person or person involved in the direction or control of the other; or
- List substantially the same work experience.
The WTA also requires businesses to provide existing and new employees with a statement of their rights under the law and an explanation of how to file a claim. The DOL will prepare a model written notice for businesses to post in the workplace.
The protections under the Act might subject employers to criminal punishment or render employers civilly liable for inadvertent wage and hour violations. The new statutory scheme does not require a showing that an employer's violation was "willful" for all wage claims asserted under the Act. There is, therefore, an argument that the Act places a lower burden of proof on employees making wage claims than previous legal requirements. As such, the WTA could result in a spike in wage and hour claims filed in State court or before the DOL (as opposed to being filed in federal court per the federal Fair Labor Standards Act) due to the now much longer six year statute of limitations and corresponding greater recovery period.
In sum, business owners, managers, payroll administrators, and human resources professionals must be informed of these significant changes to New Jersey law, and must be proactive. Employers are well-advised to conduct a self-assessment of their payroll and record keeping processes, classification of workers as employees or independent contractors, and classification of employees as exempt or non-exempt.
Our team of employment law attorneys is available to assist New Jersey employers of all sizes with their wage and hour compliance efforts, including updating policies and record keeping procedures and reviewing employee classification practices.
Molly Kellett is an experienced litigator focusing on complex commercial cases and employment law. She approaches each matter with an eye toward maximizing efficiency, providing expedient solutions that protect clients from ...
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Marianne Tolomeo, of counsel in Connell Foley’s Labor and Employment Group, practices primarily in the areas of employment law and commercial litigation.
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Michael Shadiack is the Chair of Connell Foley’s Labor and Employment Practice Group. Representing a broad spectrum of employers and management personnel in the private and public sectors, he provides litigation defense and ...