On Tuesday, November 6, voters will choose who will represent them in the New Jersey Legislature.  While property taxes and public corruption are top issues in the election campaigns, a proposal giving all employees paid family leave could see action when the Legislature returns in November.  The legislation would make New Jersey only the second state in the nation to impose a one-size-fits-all, paid-leave policy on all employers.

Prior to its summer recess, the Senate Budget & Appropriations Committee narrowly voted to release S-2249, sponsored by Senators Stephen Sweeney (D-Gloucester) and Barbara Buono (D-Middlesex).  The bill would provide every employee with 10 weeks of paid leave annually to care for a newborn or adopted child or an ill family member.   Financing for this program would come from a new employee payroll tax.  The tax would be used to establish a fund that is similar to New Jersey’s existing Temporary Disability Insurance (TDI) fund.

However, unlike existing unpaid-leave laws (state and federal) which apply only to employers with 50 or more employees, this bill would apply to all businesses.

“Hundreds of thousands of small businesses that have never had to cope with unpaid-leave laws suddenly will get hit with a paid-leave mandate,” said NJBIA President Philip Kirschner.  “This will be a heavy burden for all New Jersey employers.”

Under the proposed mandate, businesses would face the prospect of having key workers out for nearly three months at a time.  The mandate would force all businesses to shoulder increased costs related to temporary workers, overtime, and lost productivity.  Many employers that rely on skilled workers may not even be able to find qualified replacements.

Larger employers will face not only increased costs, but also considerable confusion over how the legislation will impact the current unpaid-leave laws.  S-2249 conflicts with the current federal Family and Medical Leave Act (FMLA) and the New Jersey Family Leave Act (NJFLA) in several areas.

For example, the bill prohibits employers from requiring employees to exhaust paid time off (such as vacation and sick time) before becoming eligible for paid leave.  The existing unpaid leave laws expressly permit employers to require the use of paid time off for leaves.  Why should an employee be allowed to take that time off in addition to the 10 weeks of paid leave?  This is why employers provide their employees with time off in the first place.  In conflicting with existing unpaid-leave laws, S-2249 would create enormous confusion for employers. 

While the bill does not currently provide for a direct increase in employer payroll taxes, businesses should be very concerned about the financing of this new mandate.  New Jersey has a history of diverting dedicated funds to pay for the State’s general operating expenses.  Since 1993, over $4 billion dollars has been diverted from the Unemployment Insurance Paid-Leave Trust Fund alone. 

Additionally, last year’s State budget diverted $50 million from the Temporary Disability Insurance (TDI) fund, and this year’s budget diverted another $75 million.  In fact, over the past 13 years the State Legislature has diverted nearly $600 million dollars from the TDI fund for general operating expenses!  All employers should be skeptical when the Legislature wants to create a new fund to support a paid-leave mandate with one hand while still taking money from existing funds with the other.  Businesses could be stuck with the bill if the money runs out.

Businesses already provide many programs that allow employees to balance the responsibilities of work and family, such as sick days and vacation, flexible scheduling and work-from-home arrangements.  Those policies vary from company to company because each company has different needs.  Paid family leave would put an end to such common-sense policies. 

A paid-leave mandate would also do further damage to New Jersey’s already poor reputation as a place for business expansion.  Job growth in New Jersey has slowed to half the rate of growth seen in the nation as a whole.  New Jersey also continues to fare poorly in most national surveys comparing state business climates. The cost of operating a business in New Jersey continues to increase; yet, elected officials continue to push for more costly employer mandates.

As election day approaches, we encourage you to reach out to your local legislative candidates.  Tell them to oppose the paid-leave measure.  It’s easy to send a quick online message to your legislators by clicking on the Membership Alert on our home page.

New Jersey would become the first state in the nation to require private businesses to provide 90 days notice prior to any business closing, transfer of operations or mass layoff, under a bill awaiting action by the Governor.

A-1044 (Van Drew, Johnson and Egan) requires employers with 100 or more employees to provide pre-notification to their employees, local municipalities and labor unions if they are planning any closings, transfers or terminations affecting 50 or more people.

NJBIA remains strongly opposed to both the severance and notification provisions of the bill and has asked Governor Corzine to veto the measure.  Both the notification and severance provisions go far beyond the requirements of the federal Workers Adjustment and Retraining Notification (WARN) Act and the requirements of laws in other states.

For most businesses, decisions to layoff employees or close operations are a last resort.  These decisions are often necessitated by economic downturns, loss of a major supplier or customer, or other factors that require an employer to cut its expenses or consolidate operations.

If a business is already in a financial bind, requiring it to provide 90 days advance notice of any potential layoffs would only worsen its situation.  Suppliers will demand cash payment for goods or services and customers will go elsewhere if a business has to broadly publicize its plans.

These factors could prevent a business from ever recovering, and this would lead to a loss of even more jobs.  This is why Congress utilized a 60-day notice provision when it enacted the WARN Act.  Additionally, every state that has adopted its own mandatory business closing law utilizes a 60-day notification provision.  Consistency in the notification provisions is critical, especially for multi-state employers.

Employers who fail to provide 90 days notice under the proposed law would get hit with severance penalties equal to one week of wages for each year an affected employee has worked. Missing even a single day’s notice could cost an employer hundreds of thousands of dollars and lead to further layoffs.  A less punitive penalty scheme would ensure that the businesses comply with the law without risking the loss of even more jobs.

New Jersey will never be able to improve its business reputation with these types of “Jersey Only” mandates.  It is imperative that the Governor veto this measure. 

Criminal penalties will be imposed on employers in construction who knowingly misclassify employees as “independent contractors,”  under a new State law enacted this summer.

The law (P.L. 2007, c. 114) presumes that work relationships in the construction industry are employer-employee — unless employers can prove otherwise.

In addition to imposing civil penalties, this law makes any “employer, officer, agent, superintendent, foreman, or employee of the employer” guilty of a disorderly persons offense with a mandatory sentence of between 10 and 90 days for improperly misclassifying an employee.

“Even an unintentional misclassification could result in serious penalties,” said NJBIA Vice President John Rogers.

Additionally, the law increases the penalty for “knowing” violations to a crime of the second degree if the amount of the contract exceeds $75,000; a crime of the third degree if the contract is between $2,500 but less than $75,000; or a crime of the fourth degree if the amount of the contract is less than $2,500.

Although the new law applies only to the construction trades, all businesses that utilize the services of independent contractors need to be aware of the regulatory problems that arise from misclassification.

Businesses frequently rely on outside help from individuals who have expertise in accounting, consulting, computer, IT and other services.   Unfortunately, the process used to determine whether someone is your employee or is truly an independent contractor is murky and difficult to navigate.  Yet, misclassifying employees in any industry can be a very expensive mistake.

The new law makes the pitfalls of misclassification even greater for businesses engaged in the construction industry.

NJBIA agrees that intentionally misclassifying workers hurts both reputable employers and employees alike.  However, imposing the same criminal penalties as are imposed for violent crimes goes too far.  The Association is also very concerned that a lack of clear guidance from the State about how to comply puts employers at risk for regulatory and criminal penalties.

For more information, contact John Rogers at ext. 209.