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ACCNJ LEGAL & INSURANCE UPDATE APRIL 2024 |
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New Jersey Attorney General Files First Worker Misclassification Lawsuit Under the Enhanced State Labor and Benefits Laws
In 2020 and 2021, Governor Murphy signed legislation that enhanced the State’s power to curtail worker misclassification by granting the State the power to bring actions in Superior Court, increase penalties, and enhance authority to issue stop-work orders. On December 11, 2023, the New Jersey Attorney General’s Office filed its first lawsuit (Asaro-Angelo v STG Logistics Inc., et al.) under these enhanced labor laws against two shipping and logistics companies to halt their alleged practice of misclassifying over 300 drivers as independent contractors.
The New Jersey Department of Labor’s investigation (beginning in 2019) revealed the companies failed to meet any of the requirements for classifying their workers as independent contractors under the “ABC test,” used to determine whether a worker is an employee or an independent contractor for purposes of the New Jersey Wage Payment Law and the New Jersey Wage and Hour Law. Under this test, workers are presumed to be employees unless the employer can establish all three of the following criteria: (1) the worker is largely free from the control or direction of the company over the performance of the work; (2) the type of work being performed by the worker is outside the company’s usual course of business or is performed outside the company’s place of business; and (3) the worker has their own independent trade, job, profession or business.
As detailed in the State’s Complaint, the State argues that although the companies required drivers to purchase and maintain their trucks in the drivers’ names, they exercised sufficient control over the drivers to render them employees under the law. Accordingly, the State is seeking to recover millions of dollars in back wages, penalties, fines, as well as damages for the companies’ alleged improper deductions. ACCNJ staff will monitor for updates as the lawsuit continues to make its way through the Court. However, in light of the State’s clear intent to pursue similar misclassification claims, employers should take the necessary steps to ensure compliance with the law by thoroughly reviewing their pay, timekeeping, and classification practices. |
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Unions Permitted to File Prevailing Wage Claims on Behalf of Non-Member Workers
Last month, Governor Murphy signed a Bill (S1438 / A5794), which amended the Prevailing Wage Act to permit unions to file prevailing wage claim suits on behalf of workers on covered projects regardless of whether the workers belong to the union. As you know, New Jersey has historically permitted a union representing workers on a project to commence an action in court on their behalf. However, the updated law goes one step further in that, regardless of whether the union represents the worker(s) employed on the project, the organization now can sue a contractor or subcontractor for any unpaid wages owed to such individuals.
Employers found in violation of the Prevailing Wage Act are liable for unpaid wages plus any interest owed, and penalties or liquidated damages. Further, the prevailing party (which now may include labor organizations) is entitled to reasonable attorney’s fees and costs if the court finds a contractor or subcontractor at fault. However, it is important to note that a carveout applies when the worker's performance under a contract is pursuant to a collective bargaining agreement (CBA) to which the employing contractor is signatory. Under these circumstances, the union is prohibited from filing a wage theft claim against a contractor on a worker’s behalf, as any remedy available to the worker would be governed by the terms of the CBA.
Whether a contractor has a unionized workforce is irrelevant to whether they must pay prevailing wages on a public works project, as with this new law, any contractor or subcontractor performing prevailing wage work can be sued by a union, except those covered by the carveout mentioned above. Therefore, all contractors engaged in public works should remain diligent in their pay practices and, if necessary, consult with wage and hour counsel. |
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U.S. District Court Bars Racial Criteria for Minority Business Development Agency Programs
On March 6th, the U.S. District Court for the Northern District of Texas ruled in favor of a group of plaintiffs that challenged the eligibility criteria for access to the U.S. Minority Business Development Agency (MBDA), a federal agency with the explicit purpose of assisting minority-owned businesses. Ultimately, the Court was left to determine whether the program's presumption that certain racial groups are economically or socially disadvantaged and thus eligible for the agency's services violated the Equal Protection Clause and was, therefore, unconstitutional.
In applying a strict scrutiny analysis, the Court found no compelling government interest and granted a permanent injunction barring the MBDA from "using an applicant's race or ethnicity in determining whether they can receive business center programming." While the Court acknowledged minority businesses still face economic disadvantages, it concluded the government had not shown specific instances of past discrimination that are causally linked to disadvantages today. Additionally, the Court also ruled the MBDA’s presumption was not narrowly tailored because it was both under- and over-inclusive, as it excluded businesses owned by individuals from the Middle East, North Africa, and North Asia while presumptively including firms owned by well-off individuals who fall under one of the statutory minority groups.
This decision marks the latest shift in the law relating to programs designed specifically to assist individuals and groups historically, socially, and economically disadvantaged in the United States. It is important to note that the ruling only applies to one federal agency (MBDA) and not to state programs. However, government contractors should be conscious of these new developments as this ruling could potentially impact current and future programs focused on increasing the participation of historically underrepresented groups in the federal marketplace. |
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Associated Construction Contractors of New Jersey |