OK, we usually don’t do this (and we’re not sounding the alarms or anything), but we’ve got only TWO updates for you ... and they’re big. First, we’ll discuss President Biden’s announcement on non-compete agreements (yes, really – pay attention to this one). Second, we’ll discuss New Jersey’s smackdown on employee/contractor misclassification. That’s it, but there’s a lot of important stuff here.
Who doesn’t love a little competition?
Well, employers (for the most part, I guess?). Companies that have their employees sign non-compete agreements may need to get ready for a splash of cold water . . .
In a surprise announcement, President Biden issued an Executive Order laying out a plan to secure a “fair, open, and competitive marketplace”. Specifically, the Executive Order called out “powerful companies” that “require workers to sign non-compete agreements that restrict their ability to change jobs.” If that wasn’t enough to make employers nervous, the Executive Order also authorizes the federal government to “address agreements that may unduly limit workers’ ability to change jobs” and “curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.”
Whoa. While some states already ban (or significantly limit) non-compete agreements – California, Oklahoma, and North Carolina – a national rule would be *Ron Burgundy voice* kind of a big deal. We have to wait and see how this all shakes out. Is there more bark than bite? Will any national rule be limited by industry, employer size, etc.? What happens to current non-compete agreements? Does the term “other clauses” mean that things like non-solicit/non-poach agreements will be in the mix too?
We’re watching this closely. Stay tuned for more updates and maybe speak with a lawyer before completing your next new-hire package.
New Jersey lays down the law ( . . . on employee/contractor misclassification)
Worker classification is an issue that all companies have to deal with. 1099 v. W2, employee v. non-employee. In New Jersey, this debate is second only to whether that delicious thing is called Taylor Ham or Pork Roll.
Bear with us . . . we’re having fun here.
We’ve previously warned that New Jersey is not messing around with companies who improperly pay employees as independent contractors. Governor Murphy has made it very clear that he’s ramping up efforts to crack down on worker misclassification – a strategy used by many companies to minimize payroll and labor costs (including benefits). For example, several laws were passed last year that would subject companies found to misclassify workers to “stop work” orders and penalties up to $1,000 per employee. Employers must also post notices about employee misclassification for their workers to see. That was just the start apparently!
Last week, Governor Murphy signed 4 more laws into effect that ramp up the State’s efforts to sniff out – and penalize – companies that improperly classify employees as contractors. So, what’s the gist of these new laws?
· Increased “stop work” orders and mandatory pay to employees during the “stop work” period
· A simplified process for identifying misclassification (read: increased audits)
· Creation of the Office of Strategic Enforcement and Compliance to oversee these efforts
· Fines (big fines) on companies that fail to maintain appropriate wage records
· Additional punishment for companies that misclassify workers “for the purpose of evading insurance premiums” (the State will consider this insurance fraud)
As funny as our emails may be, this is actually no joke. Employers in the Garden State really need to get serious about worker classification. This move by Governor Murphy is reminiscent of measures taken by New York several years ago, which saw a tremendous increase in audits and penalties for worker misclassification. If your business uses contractors, make sure you review your practices – it’s becoming more and more likely that you’ll have to justify your workers’ contractor status. This likely starts with an assessment of your workers paid via 1099 to determine if they should be reclassified. Luckily, we know a few things about this.
Thanks for having fun with us on this one. We hope you learned a little, laughed a little, and that you’re now thinking about breakfast sandwiches.
Damien + Brian
ABOUT WEINSTEIN + KLEIN P.C.
Established in 2019, New York City-based Weinstein + Klein is a boutique law firm focused on labor and employment law, business matters, and litigation. Weinstein + Klein works with businesses, individuals, and entrepreneurs to protect their legal interests. In addition to advising clients on employment matters and working with businesses to minimize their risk of litigation, Weinstein + Klein advises small businesses and start-ups on various business law matters. For more information about Weinstein + Klein, please visit www.weinsteinklein.com.