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The Impact Of New Jersey’s Wage Theft Law On Small Business Owners

After some big changes in 2019, it’s apparent that New Jersey takes wage theft very seriously. The state adopted the new Wage Theft Act (WTA) and amended its Wage and Hour Law back on Aug. 6, 2019, giving it some some of the toughest laws in the nation regarding wage and hour enforcement.

The new WTA has a direct impact on business owners in New Jersey, but it’s important for those outside the state to be aware of the updates as well. The Garden State is a common testing ground for legislative changes, so other states may adopt similar laws over time. As such, let’s break down exactly what New Jersey’s wage and hour enforcement laws mean for business owners (and what they can do to avoid issues).

A small business owner’s hand caught in a trap after attempting wage theft.

How the WTA Impacts Business Owners

The adoption of the WTA places a lot more pressure on employers when it comes to correctly paying wages to employees. Simply put, the new rules are clearly designed to discourage owners from committing wage theft – and severely punish those who do, unwittingly or not. There are a few notable takeaways that owners should know:

The WTA increases how much employees can earn back

Employers who owe workers will have to pay back more to the affected employees than in the past. These employees can claim increased damages for any missing overtime or other hours, which can total up to 200 percent of the unpaid wages in addition to the original pay. That means employers can be on the hook for three times back wages. Employers found guilty of wage theft may also have to pay reasonable costs and attorney fees for the affected employee, making the situation even more costly.

The WTA increases the statute of limitations for back pay

Previously, any claims for missing pay had to be made within two years of the incident. The WTA tripled that window, which means that aggrieved workers can now fight for back pay within a six-year time period.

The WTA offers more protection against retaliation

The new legislation makes a concerted effort to protect employees when they inquire about missing pay. Any adverse action – including discipline, demotion, or termination – made within 90 days of a complaint about their pay is automatically presumed to be a form of retaliation. The employer can appeal this presumption, but will need “clear and convincing evidence” to successfully argue that the adverse action was justified and not made in retaliation. Employers found guilty of retaliation must make right by the affected employee, which can include reinstating that person to his or her position if fired or demoted.

The WTA enacts harsher financial and criminal penalties

Not only does the WTA make it easier for employees to claim back pay, it also drops the hammer on businesses to deter them from making the same mistake again. Wage theft can result in both a notable fine and jail time, with increasing punishments for repeat offenders. The penalties are as follows:

  • First violation – $500 to $1,000 fine, imprisonment of 10 to 100 days, or both
  • Second violation – $1,000 to $2,000 fine, imprisonment of 10 to 100 days, or both
  • Third and subsequent violations – The employer is charged with a fourth degree crime and faces a $2,000 to $10,000 fine, imprisonment of up to 18 months, or both

The WTA adds joint liability

With the new rules, employers may also get in trouble even if they themselves didn’t commit wage theft. Violations committed by hired contractors make a business jointly responsible if any of these contractors commit anything deemed as wage theft or retaliation.

Potential Danger Areas for Wage Theft

Regardless of whether a discrepancy in an employee’s wages is a genuine accident or a purposeful act, New Jersey’s new rules are a clear indication that it’s more important than ever to accurately complete payroll. However, there are a couple instances where someone who isn’t a payroll professional could make a mistake. These can include:

  • Incorrectly paying the wrong rate for overtime hours
  • Not applying different hourly rates for employees who perform two different types of tasks 
  • Making a mistake when calling or faxing in payroll numbers

It’s also important to consider the potential aftermath of a wage theft violation. Not only would you have to deal with the WTA-mandated penalties, word of that violation can spread to other employees. Even an accidental case of wage theft can create distrust among your employees and cause employees to be hypervigilant in the future. People are very sensitive about their pay, and an upset workforce can lead to less motivated employees and can even force good talent to leave for what they perceive to be a safer workplace.

Protect Your Business Against Accidental Wage Theft and Other Payroll Issues

Whether your business is based in New Jersey or somewhere else, it’s crucial to carefully record and maintain payroll documentation and employee hours. Not only will proper payroll management help protect your business against costly penalties, it’ll also ensure that your employees get exactly what they should each pay period.

Of course, accurate payroll administration is easier said than done for someone without an experienced background. Managing payroll and filing taxes is a time-consuming process even when done accurately, which can take time away from other key business functions. Fortunately, GMS can help you manage your company’s payroll while you focus on growing your business.

At GMS, we have the experts and processes in place to diligently process your payroll, manage and file taxes, and protect your business from costly compliance issues. We’ll do an HR analysis and identify new policies and procedures to help you protect your business from any current or future issues. Contact our New Jersey office or one of our other locations today about managing payroll or any other critical HR function for your business.



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