Sweeping NJ “Wage Theft” Law Exponentially Expands Exposure for Wage Claims

As the result of a sweeping “Wage Theft” law (“Law”), which became effective upon enactment on August 6, 2019,  New Jersey employers will face toughened penalties and increased exposure for failure to pay wages, benefits and overtime (collectively “wages”) owed to workers. Employers should take immediate notice because any missteps or mistakes may prove extremely costly. In sum, the Law:

• makes employees eligible to receive 200% liquidated damages for all unpaid wages and benefits and recovery of attorneys’ fees and costs;
• permits employees to bring collective actions on behalf of “similarly situated” employees;
• increases potential fines and provides for jail time for repeat offenders;
• extends the statute of limitations to six years;
• broadens protections against retaliation; and
• lowers employees’ burdens of proof.

The liquidated damages and attorneys’ fees provisions, in particular, have “break the budget” potential.

Liquidated Damages & Attorneys’ Fees

After an employer’s first violation, the Law requires the assessment of liquidated damages of up to 200% for an employer’s “knowing” failure to pay an employee the full amount of wages “agreed to” or “required” by law. A showing of “willfulness” is not required.

The Law essentially encourages lawsuits and employers may expect plaintiffs in civil actions to argue that after a single violation however long ago, any future violation —regardless of whether it was inadvertent, made in good faith or based on reasonable grounds, and regardless of when it occurred or what it involved— entitles employees to triple their claimed unpaid wages.

In addition, the Law allows employees who prevail in civil actions to recover unpaid wages also to recover attorneys’ fees and costs.

Collective Actions by Similarly-Situated Employees

The Law provides that an employee can bring an action on behalf of similarly-situated employees for any form of unpaid wages.  Previously, New Jersey provided for such lawsuits only in the case of minimum wage violations.

Thus, as long as they are similarly situated, large groups of New Jersey employees will now be able to join in collective actions in New Jersey state court seeking lost wages and liquidated damages, and attorneys’ fees and costs, for unpaid wages going back six years.

Limitations Period

Previously, claims for unpaid minimum wages or unpaid overtime compensation had a two year statute of limitations. The Law establishes a six year statute of limitations for all wage claims, including for claims alleging retaliation under the Law.

Expanded Prohibition against Retaliation

The Law broadens protection to employees who complain about unpaid wages by prohibiting retaliatory action against an employee because the employee has complained about an alleged nonpayment of wages.

Presumptions Against the Employer

For wage claims investigated by the New Jersey Commissioner of Labor and Work-force Development (“NJDOL”), the law creates a presumption that a violation occurred if an employer fails to produce employee records it was required by law to keep.

The Law also establishes a presumption of retaliation if an employer has taken an adverse employment action against an employee within 90 days of the employee filing a complaint with the NJDOL or filing a lawsuit for unpaid wages.

Significantly, the Law applies not only to “traditional” wage and hour claims, i.e., failure to pay minimum wage and failure to pay overtime, but to virtually all other forms of compensation, including “benefits arising out of any employment agreement.” Thus, for example, private claims alleging failure to pay amounts due under commission plans, bonus plans, and other benefits included in an employment agreement, such as an automobile allowance or equity participation promised in an executive’s employment agreement — previously, breach of contract claims — now carry potential liability for triple damages and attorneys’ fees and costs.

Actions to take to reduce risk and exposure include:

• confirming that employees and any independent contractors are all properly classified;
• ensuring nonexempt employees record every minute of time worked and preserving time records for at least 6 years;
• reviewing employment and compensation agreements, as well as non-ERISA benefits programs to eliminate any ambiguities with respect to how payments are calculated and when payments are earned and paid;
• reserving, where possible, the right to modify or terminate an agreement or plan and to make payment discretionary; and
• making sure that your handbook contract disclaimer is airtight.