Worker misclassification has become a significant battleground in New Jersey, with state labor officials taking increasingly aggressive action against employers who improperly classify employees as independent contractors. Recent enforcement actions demonstrate the state's commitment to protecting workers' rights and ensuring access to crucial benefits.
Major Enforcement Actions Signal Serious Consequences
The New Jersey Department of Labor and Workforce Development (NJDOL) has ramped up its enforcement efforts, delivering substantial financial penalties to companies that misclassify workers. In a landmark case, Lyft paid $19.4 million after an audit revealed the ride-share company improperly classified over 100,000 drivers as independent contractors from 2014 to 2017.
The audit was triggered when Lyft drivers filed for unemployment insurance and disability benefits, only to discover that Lyft had not made required contributions to state funds on their behalf. This case highlights how misclassification can leave workers without a safety net when they need it most.
Workers' Compensation: A Critical Protection Lost
When workers are misclassified as independent contractors, they lose access to workers' compensation coverage—a fundamental protection for workplace injuries and occupational exposures. This means that if a misclassified worker suffers an injury on the job, develops an occupational illness, or faces workplace-related health issues, they may be left to bear the medical costs and lost wages entirely on their own.
Workers' compensation provides essential coverage for:
- Medical treatment for work-related injuries
- Lost wage compensation during recovery
- Rehabilitation services
- Death benefits for families of workers killed on the job
- Coverage for occupational diseases and exposures
Without this protection, a construction worker injured on a job site, a delivery driver hurt in an accident, or a cleaner exposed to hazardous chemicals could face financial ruin from medical bills and inability to work.
Stop-Work Orders: Immediate Intervention
NJDOL has issued 203 stop-work orders since expanding these powers in July 2019. A recent example involved R.V. Drywall Inc., a Pennsylvania contractor working on a New Jersey school project, which received a stop-work order for failing to properly classify three construction workers.
These orders can assess civil penalties of $5,000 per day against employers who continue working in violation of the order, demonstrating that the state takes worker protection seriously.
Beyond Workers' Compensation: The Full Scope of Lost Benefits
Misclassified workers lose access to numerous protections and benefits:
- Unemployment insurance
- Temporary disability benefits
- Family leave benefits
- Minimum wage and overtime protections
- Earned sick leave
- Workplace safety law protections
- Equal pay protections
Economic Impact on All Employers
Misclassification doesn't just harm workers—it creates unfair competition. Law-abiding employers who properly classify workers and make required contributions end up subsidizing the costs when misclassifying employers avoid their responsibilities to unemployment and other trust funds.
Strong State Response Delivers Results
New Jersey's comprehensive enforcement efforts have generated significant benefits for employers and workers alike. The state recently delivered more than $300 million in savings to employers through reductions in unemployment insurance contribution rates, thanks to a UI Trust Fund that now exceeds $3 billion—one of the strongest reserves in the nation.
Resources for Workers and Employers
Workers who suspect they've been misclassified can find information about their rights at myworkrights.nj.gov. Employers can learn about legal requirements and access services at nj.gov/labor.
The message from New Jersey officials is clear: worker misclassification will not be tolerated, and the state will continue to pursue aggressive enforcement to protect workers' rights and ensure fair competition among businesses.
Key Takeaways
- Major Financial Consequences: Lyft paid $19.4 million for misclassifying over 100,000 drivers
- Workers' Compensation at Risk: Misclassified workers lose critical protection for workplace injuries and occupational exposures
- Multiple Benefits Lost: Misclassification strips workers of unemployment insurance, disability benefits, family leave, and wage protections
- Active Enforcement: NJDOL has issued 203 stop-work orders since 2019, with penalties up to $5,000 per day
- Economic Fairness: Proper classification protects law-abiding employers from unfair competition
- Strong Results: Enforcement efforts have strengthened New Jersey's unemployment trust fund, delivering $300+ million in savings to employers
Recommended Citation: Gelman, Jon, NJ Fights Worker Misclassification (09/20/2025) https://workers-compensation.blogspot.com/2025/09/nj-fights-worker-misclassification.html
Blog: Workers' Compensation
LinkedIn: JonGelman
LinkedIn Group: Injured Workers Law & Advocacy Group
Author: "Workers' Compensation Law" West-Thomson-Reuters
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© 2025 Jon L Gelman. All rights reserved.
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