Skip to main content

Employers Beware! Repeat Violations of Wage, Benefits, and Tax Laws Could Cost Business its License

On January 14, 2010, Governor Corzine signed into law S. 2773 (“Act”). The Act, which takes effect July 13, 2010, penalizes New Jersey employers who repeatedly violate New Jersey laws regarding wages, benefits, and taxes. The law provides for the suspension or revocation of an employer’s license if the Commissioner of Labor and Workforce Development (“Commissioner”) finds that the employer has repeatedly violated these laws. Therefore, it is important to be cognizant of your responsibilities pursuant to the Act.

Pursuant to the Act, if the Commissioner determines that an employer failed to properly maintain and report records concerning wages, benefits or taxes of one or more employees, and, in connection with that failure, has failed to pay such wages, benefits or taxes or other contributions or assessments as required by those laws, then the Commissioner can audit the employer and any successor firm within 12 months after its determination.

If the audit reveals that the employer or any successor firm has continued in its failure to maintain and report wage, benefit, and tax records, then the Commissioner can direct any agency to suspend one or more of the employer’s or successor firm’s licenses for a period of time determined by the Commissioner. The Act defines “licenses” broadly to include certificates of incorporation (for New Jersey corporations), certificates of limited partnership (for New Jersey limited partnerships), and certificates of formation (for New Jersey limited liability companies), and certificates of authority (for foreign entities authorizes to conduct business in New Jersey. The term “licenses” also includes any licenses certificate, permit or registration pursuant to the New Jersey Alcohol Beverage Control Act and the Public Works Contractor Registration Act.

An employer that fails to properly maintain and report wage, benefit, and tax records runs the risk of having is entity status suspended or revoked. The severity of the punishment is based on several factors: (a) the number of employees at issue; (b) the amount of the wages, benefits, and taxes unpaid by the employer; (c) prior misconduct; (d) the employer’s good faith efforts to comply with the reporting requirements; and (d) role of the employer’s officers, directors or principals in violating the reporting requirements.

An employer and any successor firm that has been deemed to have violated the maintenance and reporting requirements will be subject to a second audit within 12 months after the Commissioner’s first violation determination. If the Commissioner determines that the violation has continued, then the Commissioner may direct any agency to permanently revoke a “license” held by the employer or successor firm. That means that an entity may lose its corporate, limited partnership or limited liability company status. In that case, in New Jersey, the default would make the business into a general partnership. In addition, an employer that holds a liquor license could have that license revoked.

In addition to the maintenance and reporting requirements, the Act also requires employers to post a notification of their obligations to maintain and report records concerning the payment of wages, benefits, and taxes and advise employees how to file complaints about possible violations of the Act. Employers must also issue a copy of this notification to its current employees on the form issued by the Commissioner within 30 days after the form is issued by the Commissioner. Employers must give a copy of the notification to new employee at the time of hiring. If an employer fails to abide by these requirements, the employer may be found guilty of a disorderly persons offense and subject to $100 to $1,000 fine.

Lastly, the Act prohibits an employer from firing or in any other manner discriminating against an employee who makes an inquiry or complaint to his employer or the Commissioner regarding possible violations of the Act or testifies in any proceeding in connection with any potential violation. An employer who fires or discriminates against an employee for reporting or testifying as to a violation, will be required to rehire the employee, pay all reasonable legal costs, all lost wages and benefits, and a punitive damages equal to two times the amount of the lost wages and benefits.

Employers should be careful to comply with the maintenance, reporting, and notification requirements pursuant to the Act. In addition, employers should correct any violations promptly and take measures to avoid future violation. The failure to do so may result in the suspension or loss of licenses necessary for the operation of your business.

66 Park Street • Montclair, New Jersey 07042
tel: 973-783-3000 • fax: 973-744-5757 •