It’s not that often that we get a week when both the Federal Government AND New Jersey throw down the hammer and unleash some new employment law developments, so bear with us while we nerd out on this one . . . We’re talking employee/contractor classification, the (potential) end of non-competes in New Jersey, and Pennsylvania’s commuter transit benefits! First stop: the United States Department of Labor.
Side bar: Why are we talking about Pennsylvania? Well, to borrow someone else’s vibe, we’ve decided to expand our talents to Pennsylvania and are now representing clients all throughout the Commonwealth (we’ll have to get used to saying that . . . ). We still love Taylor ham, but cheesesteaks have our hearts too.
Contractors Beware – DOL Nails Down New Independent Contractor Test
The Department of Labor (“DOL”) has released a new proposal seeking to establish a six-step test for classifying individuals as employees or independent contractors. Previously, only two factors of the “economic realities test” – the nature/degree of control over the work and the worker’s opportunity for profit or loss – were considered in determining proper classification. Why have two factors when you can have six? The new rule provides for consideration of the following factors: (1) the extent to which the work performed is an integral part of the employer’s business; (2) the worker’s opportunity for profit or loss depending on their managerial skill; (3) the extent of the relative investments of the employer and the worker; (4) whether the work performed requires special skills and initiative; (5) the permanency of the relationship; and (6) the degree of control exercised or retained by the employer. So, that’s a bit different, isn’t it?
As our clients know all too well, this worker misclassification stuff has been a growing concern, particularly in the construction industry where using day laborers is a common practice (allegedly). This issue isn’t limited to construction though, so all of you should revisit whether your “independent contractors” are actually independent contractors. And, as a reminder for those of you in New Jersey, employee misclassification can land you in big trouble, resulting in stop work orders, hefty fines, and insurance fraud violations. Federal and State governments are taking this seriously – so should you.
Non-Competes in New Jersey – The Beginning of the End
We recently discussed bans on non-disparagement clauses, but let’s not forget that non-competes are also on the chopping block. Over the summer, a bill was introduced seeking to severely restrict the use of non-competes in New Jersey employment agreements. Among those restrictions were limits on the duration of restricted periods to just one year, requiring mandatory and PAID “garden leave” equaling the employee’s wages during the restricted period, and limiting non-solicitation protections.
And that’s not all. The proposed law makes non-competes completely unenforceable against several categories of workers, including interns, underaged employees, employees with earnings below a certain threshold (to be determined by the State), and employees with less than one year of service. Non-competes are also unenforceable against independent contractors. Further, an employee must be notified that they’ll be subject to a non-compete either at the time a formal offer of employment is made, or at least 30 business days before starting work.
Like with other states which have enacted similar laws, choice of law provisions won’t save you and fee-shifting provisions will not be valid in the event an employee challenges the non-compete. Lastly, the proposed law also makes no-poach agreements (defined as an agreement “between employers . . . that restricts or hinders the ability of an employer to contract for the services of a low-wage employee”) invalid.
Cue Ron Burgundy because this is (not even “kinda”) a big deal. We’re watching this closely.
Philly Commuter Transit Benefits
Even though there’s really only one “City” to us, we don’t want to neglect you Philly folks (we’re all apparently good at football right now, so let’s just savor this moment). According to a recent city ordinance enacted by Mayor Kenney, starting December 31, 2022, Philadelphia employers with 50 or more employees will be required to provide commuter benefits to employees who have worked an average of at least 30 hours per week over the past 12 months. Employers must provide: (1) a transportation fringe benefit plan that complies with Internal Revenue Code Section 132(f), under which a covered employee may voluntarily elect pre-tax payroll deductions for qualified transportation expenses; (2) an employer-paid benefit where the employer pays for an employee’s mass transit expenses; or (3) any combination of the two. Violations of the ordinance expose employers to fines of $150 to $300 per day of non-compliance.
These updates are quite significant and continue the trend we’ve seen with respect to pro-employee regulations across the tri-state area. For all you employers out there, we’ve got you – just don’t shoot the messenger.
As always, if you’ve got questions – you know we’ve got answers.