Construction Industry Wage and Hour Issues

Our lawyers handle all aspects of employment law. One of the most important areas is the classification of workers as employees or independent contractors, especially in the construction industry.

Under the Federal Fair Labor Standards Act and the New Jersey Wage and Hour Law,  all non-exempt employees must receive “overtime” pay (one and a half times their normal rate) for all work over 40 hours per week.   Non-exempt employees include virtually all employees in the construction industry except executives, professionals, a few high level administrative personnel, and certain salespeople. 

On the other hand, independent contractors do not need to receive “overtime” pay.  In addition, most independent contractors do not receive benefits like health insurance, paid vacation, paid sick time, and the like.  Employers do not have to pay payroll taxes on independent contractors, but the contractors have to pay “self-employment tax.”  There is therefore an incentive for employers to classify workers as independent contractors, while it is often better for the workers themselves to be classified as employees.  The United States Department of Labor estimates that as many as 10 to 30 percent of all independent contractors are misclassified.

There are severe penalties for employers who misclassify workers through the federal and state taxing authorities, as well as the New Jersey Department of Labor and Workforce Development and the United States Department of Labor.  These agencies often investigate and audit businesses to ensure that they are not misclassifying their workers, especially when they receive complaints from current or former workers about pay violations.  Violation of the Federal Fair Labor Standards Act and the New Jersey Wage and Hour Law can subject an employer to fines, penalties, liability for twice the amount which a court finds that the employee should have been paid, and responsibility for the employee’s attorneys fees and litigation costs.

In response to perceived widespread misclassification in New Jersey’s construction industry, New Jersey adopted the Construction Industry Independent Contractor Act. The Act imposes more drastic consequences on employers in the construction industry than do either the Fair Labor Standards Act or the Wage and Hour Law.  Indeed, it imposes criminal liability on the employer, with potential prison sentences of between 10 days and 10 years, depending on the amount of the unpaid wages, and stiffer fines.  Violation of the Construction Industry Independent Contractor Act can also cause the employer to be barred from working on government contracts, and lead to suspension of its registration – and thus its ability to do business at all.  If an employer violates a stop-work order issued by the New Jersey Department of Labor and Workforce Development, it can be liable for fines of up to $5,000 per day.  The employer can be sued by individual employees or in a class action.

The test for whether a worker should legally be classified as an independent contractor or an employee is complicated, but comes down to control, and whether the worker’s service are in the ordinary course of business.  Because the test complicated and has serious consequences, McLaughlin & Nardi’s New Jersey construction industry employment attorneys have successfully handled many wage and hour cases.  E-mail us or call (973) 890-0004 to obtain assistance.