S2496

An Act concerning the payment of independent contractors and supplementing chapter 11 of Title 34 of the Revised Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. As used in this act:

“Client” means a sole proprietorship, partnership, corporation, limited liability company, association or other business entity or a nonprofit organization contracting with an independent contractor in any occupation, industry, trade, business or service for compensation equal to or greater than $600. The term “client” does not include a person or any governmental entity, or a general acute care facility licensed by the Commissioner of Health and Senior Services pursuant to P.L.1971, c.136 (C.26:2H-1 et seq.), including rehabilitation, psychiatric, and long-term acute facilities.

“Commissioner” means the Commissioner of Labor and Workforce Development.

“Compensation” means the earnings of an independent contractor. The term “compensation” includes reimbursement for expenses.

“Independent contractor” means a sole proprietor who is not an employee and who is hired or retained by a client for an amount equal to or greater than $600.

2. An independent contractor shall be paid the compensation earned in accordance with agreed work terms. If an independent contractor and client did not agree on a date for payment of compensation earned, the independent contractor shall be paid the compensation earned not later than the last day of the month following the month in which the compensation is earned. The agreed work terms shall be in writing, signed by both the client and the independent contractor, kept on file by the client for a period of not less than six years, and made available to the commissioner upon request. The agreed work terms shall include a description of how compensation that is earned and payable shall be calculated. The failure of a client to provide the written work terms, upon request of the commissioner, shall give rise to a presumption that the terms that the independent contractor has presented are the agreed work terms.

3. The commissioner shall investigate, and attempt to adjust equitably, controversies between clients and independent contractors. The commissioner may take assignments of claims for compensation from independent contractors or representatives of independent contractors. The commissioner may bring any legal action necessary to collect a claim for compensation, and the client shall be required to pay the costs and reasonable attorney’s fees as may be allowed by the court.

4. Any independent contractor may file with the commissioner a complaint regarding a violation of section 2 of this act for an investigation of the complaint and statement setting the appropriate remedy, if any. Failure of a client to keep adequate records shall not constitute a bar to the filing of a complaint by an independent contractor. In a case in which the client fails to keep or provide adequate records the client shall bear the burden of proving that the complaining independent contractor was paid the compensation earned in accordance with agreed work terms.

5. The commissioner may bring any legal action necessary, including administrative action, on behalf of any independent contractor paid less than the compensation to which the independent contractor is entitled under the agreed work terms pursuant to this act. In addition to any remedies provided pursuant to any other laws of this State, the commissioner may assess against the client an additional amount as liquidated damages, unless the client proves a good faith basis for believing that its underpayment of compensation was in compliance with this act. Liquidated damages shall be calculated by the commissioner as no more than 100% of the total amount of compensation found to be due to the independent contractor. In any action instituted in the courts upon a compensation claim by an independent contractor, or the commissioner, in which the independent contractor prevails, the court shall allow such independent contractor all reasonable attorney’s fees and, unless the client proves a good faith basis to believe that its underpayment of compensation was in compliance with this act, an additional amount as liquidated damages equal to 100% of the total amount of compensation found to be due to the independent contractor. The remedies provided by this section may be enforced simultaneously or consecutively so far as not inconsistent with each other.

6. Notwithstanding any law, rule, or regulation to the contrary, an action to recover upon a liability imposed by this act must be commenced within six years. All independent contractors shall have the right to recover the full amount of compensation accrued during the six years previous to the commencing of the action, whether that action is instituted by the independent contractor or the commissioner.

7. a. The commissioner shall provide to each independent contractor who files a complaint regarding a violation of a provision of this act with a description of the anticipated processing of the complaint, including the investigation, case conference, potential civil and criminal penalties, and collection procedures.

b. Each independent contractor and the representative of the independent contractor, if any, shall be notified in a timely manner by the commissioner of the following:

(1) Any case conference before it is held, with the opportunity to attend; and

(2) Any award and collection of back compensation, civil penalties, any intent to seek criminal penalties, and, in the event that criminal penalties are sought, a notification of the outcome of prosecution.

8. If the commissioner determines that a client has violated a provision of this act by failing to pay the compensation of an independent contractor, the commissioner shall issue to the client an order directing compliance therewith, which shall describe particularly the nature of the alleged violation. In addition to directing payment of compensation found to be due, the order, if issued to a client who previously has been found in violation of a provision of this act, or to a client whose violation is willful or egregious, shall be subject to a civil penalty in an amount equal to double the total amount of compensation found to be due, collectible by the commissioner in a summary proceeding pursuant to the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.).

9. Any client who does not pay the compensation of its independent contractors in accordance with the provisions of this act, and the officers, agents, or representatives of any client who knowingly permit the client to violate the provisions of this act by failing to pay the compensation of any of its independent contractors in accordance with the provisions of this act, shall be guilty of a disorderly persons offense for the first offense, and in the event that any second or subsequent offense occurs within six years of the date of conviction for a prior offense, shall be guilty of a crime of the fourth degree for each offense.

10. This act shall take effect immediately.

STATEMENT

This bill provides that an independent contractor must be paid the compensation earned according to work terms agreed to by the independent contractor and its client, and requires the Department of Labor and Workforce Development to act as a regulatory agency in certain circumstances regarding these work agreements.

Under the bill, an independent contractor must be paid the compensation earned in accordance with the agreed work terms. If an independent contractor and client did not agree on a date for payment of compensation earned, then the independent contractor shall be paid the compensation earned not later than the last day of the month following the month in which the compensation is earned. The bill also provides that work terms, agreed to by the independent contractor and the client, shall be in writing, signed by both parties, kept on file by the client for a period of not less than six years, and made available to the Commissioner of Labor and Workforce Development upon request.

The bill requires the commissioner to investigate, and attempt to adjust equitably, controversies between clients and independent contractors. The commissioner may take assignments of claims for compensation from independent contractors, or agents or representatives of independent contractors. The commissioner may also bring any legal action necessary to collect a claim for compensation.

The bill provides that any independent contractor may file with the commissioner a complaint regarding a violation of the requirement to pay compensation to an independent contractor, for an investigation of the complaint and a statement setting the appropriate remedy, if any. In a case in which the client fails to keep or provide adequate records, the client will bear the burden of proving that the complaining independent contractor was paid the compensation earned in accordance with agreed work terms.

The bill provides that the commissioner may bring any legal action necessary, including administrative action, on behalf of any independent contractor paid less than the compensation to which the independent contractor is entitled under the agreed work terms. The commissioner may also assess against the client an amount as liquidated damages, unless the client proves a good faith basis for believing that its underpayment of compensation was in compliance with the provisions of this bill. Liquidated damages must be calculated by the commissioner as no more than 100% of the total amount of compensation found to be due to the independent contractor.

In any action instituted in the courts upon a compensation claim by an independent contractor or the commissioner in which the independent contractor prevails, the bill requires the court to allow the independent contractor all reasonable attorney’s fees and, unless the client proves a good faith basis to believe that its underpayment of compensation was in compliance with the provisions of this bill, an additional amount as liquidated damages equal to 100% of the total amount of compensation found to be due to the independent contractor.

Further, any action to recover compensation pursuant to the provisions of the bill must be commenced within six years. Under the bill independent contractors have the right to recover the full amount of compensation accrued during the six years previous to the commencing of the action, whether that action is instituted by the independent contractor or the commissioner.

Each independent contractor who files a complaint regarding a violation of a provision of this bill will be provided with a description of the anticipated processing of the complaint, including the investigation, case conference, potential civil and criminal penalties, and collection procedures by the commissioner. Each independent contractor and the representative of the independent contractor, if any, will be notified in a timely manner by the commissioner of the following:

1. Any case conference before it is held, with the opportunity to attend; and

2. Any award, collection of back compensation, civil penalties, any intent to seek criminal penalties, and, in the event that criminal penalties are sought, a notification of the outcome of prosecution.

The bill also provides that if the commissioner determines that a client has failed to pay the compensation of its independent contractors, the commissioner shall issue to the client an order directing payment, which will describe particularly the nature of the alleged failure to pay. In addition to directing payment of compensation found to be due, the order, if issued to a client who previously has been found in violation of a provision of this bill, or to a client whose violation is willful or egregious, will be subject to a civil penalty in an amount equal to double the total amount of compensation found to be due.

The bill provides that any client who does not pay the compensation of all of its independent contractors in accordance with the provisions of this bill, and the officers, agents, or representatives of any client who knowingly permit the client to violate the provisions of this bill, will be guilty of a disorderly persons offense for a first offense, and in the event that any second or subsequent offense occurs within six years of the date of conviction for a prior offense, will be guilty of a crime of the fourth degree. A disorderly persons offense is punishable by a term of imprisonment up to six months, a fine not to exceed $1,000, or both. A crime of the fourth degree is punishable by a term of imprisonment up to 18 months, a fine not to exceed $10,000, or both.