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Karcher Bill To Crack Down On Tax-cheating Home Builders Now Law

TRENTON – A bill sponsored by Senator Ellen Karcher which will increase penalties on home builders who misclassify construction workers in an attempt to circumvent New Jersey tax laws was signed into law by Governor Corzine today.

“Too many home contractors are relying on cheap day labor on their projects, and refusing to pay fair wages and benefits,” said Senator Karcher, D-Monmouth and Mercer. “At the same time, they are costing the State of New Jersey millions in lost tax revenue, which is borne on the backs of honest, taxpaying citizens. We need to increase the penalties on these deceptive business practices, and ensure that all New Jersey employees are receiving a living wage.”

The bill, S-2579, will establish a presumption of an employer-employee relationship, which the employer would have to overcome in order to classify construction workers as independent contractors. The new law will ensure that any employer, or any representative of the employer, who fails to pay wages, benefits, taxes or other contributions is guilty of a disorderly persons offense, and could face a fine between $100 and $1,000 and possible imprisonment of 10 to 90 days, or both. Each week in which an employee is misclassified, and each employee, will be considered a separate offense.

“The current penalties on the book have not done enough to deter home builders from taking short cuts on their workers’ pay and benefits,” said Senator Karcher. “Along with increasing the penalties, we must also increase enforcement, to send the message that if you cheat the State and your employees, you will get caught.”

Senator Karcher added that the maximum criminal penalties are intended as a tool against “only those egregious and repeat offenders who continually flaunt the law.”

The law will also provide much greater penalties if the misclassification occurs on a project which is subject to the prevailing wage law. Under this law, any misclassification of construction workers done knowingly on a public prevailing wage project will give prosecutors the ability to seek a fine of up to $150,000 and imprisonment of up to 10 years, depending on the initial cost of the construction project. Additionally, any misclassification done knowingly on a project paid for with public funds will be punished with mandatory debarment, prohibiting the contractor from bidding or being involved with any future public works contracts.

“When it comes to public contracts, we need to have an even higher standard from the contractors working on our infrastructure,” said Senator Karcher. “We cannot subsidize unfair employment practices by turning a blind eye when they’re being conducted on the public dime.”

Senator Karcher noted that, along with closing a loophole that has cost millions in lost income tax revenue, this bill will protect workers, who are left without a safety net should they be hurt on the job site.

“When many of these misclassified workers are hurt on the job, their employers dump them in the nearest emergency room and walk away,” said Senator Karcher. “If the worker suffers any sustained disability, they are at a loss, without worker’s compensation or disability insurance protection, let alone health benefits. This law will force employers to comply with fair employment standards, so that should the worst happen on a construction site, they and their families will be protected.”

The bill was approved last month by the Senate by a vote of 24-12, and by the Assembly by a vote of 55-22 with 3 abstentions.

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