On February 4, 2019 New Jersey Governor Phil Murphy signed into law a bill that will eventually raise New Jersey’s minimum wage from the current rate of $8.85 per hour to $15 per hour by 2024. This follows on the heels of legislation establishing a paid sick leave law that covers most of the Garden State’s workforce, and that went into effect in late October. The following is an overview of these important legal developments.

Minimum Wage Increase

Much like New York’s recent minimum wage increase, New Jersey is phasing in its increase over the course of several years. The following are the rates applicable to most employers (there is a slower phase-in rate for small businesses with five or less employees, and those who employ agricultural employees or seasonal employees):

Date of Increase Minimum Wage

(Employers with 6 or More Employees)

Minimum Wage

(Employers with 5 or Fewer Employees)

July 1, 2019 $10.00 $8.85
January 1, 2020 $11.00 $10.30
January 1, 2021 $12.00 $11.10
January 1, 2022 $13.00 $11.90
January 1, 2023 $14.00 $12.70
January 1, 2024 $15.00 $13.50
January 1, 2025 $15.00 + Adjustment for Inflation $14.30
January 1, 2026 $15.00 + Adjustment for Inflation $15.00

New Jersey employers who pay their employees at or near the minimum wage must adjust pay rates to comply with the new law. Additionally, for those employers with employees who “customarily and regularly receive gratuities and tips” within the meaning of the Fair Labor Standards Act, and who utilize the State’s current tip credit of $6.72 by paying a cash wage of $2.13, the tip credit is also scheduled for phased-in increases (though they do not increase each year).

 

The tip credits are as follows:

Date of Tip Credit Increase Tip Credit Cash Wage
July 1, 2019 $7.37 $2.63
January 1, 2020 $7.87 $3.13
January 1, 2021 $7.87 $4.13
January 1, 2022 $7.87 $5.13
January 1, 2023 $8.87 $5.13
January 1, 2024 $9.87 $5.13

Employers who utilize a tip credit must ensure that the when the tip credit being taken is added to the cash wage being paid to the employee, the total equals or exceeds the minimum wage.

 

Tax Credits for Businesses That Employ Impaired Workers

Tacked onto the minimum wage law is a provision that gives tax credits to businesses that employ individuals with impairments. To qualify, the worker must earn at least the applicable minimum wage, have a work capacity that is significantly impaired by age, injury or physical or mental deficiency, and be an individual the state has previously found to be eligible for prescribed drugs or other accommodations in order to perform the essential functions of their job.

 

New Jersey Paid Sick Leave Act

With the recent enactment of its paid sick leave law, New Jersey joins a growing list of states requiring such leave. The New Jersey Paid Sick Leave Act mandates that employers provide up to 40 hours of paid sick or safe leave per year to “covered employees,” which includes nearly all workers in the state with certain very limited exceptions. The law requires that that employers establish a “benefit year,” which can be a calendar year or any other 12-month period. Employers may opt to give their employees 40 hours at the start of the benefit year, or they may require that hours be accrued at a rate of 1 hour for each 30 hours worked. Employers that already provide their employees with paid time off (such as vacation days or paid time off) may apply those days towards the Act’s leave requirements, so long as the leave may be used for purposes specified by the Act.

The following is a summary of the Act’s major provisions:

  • Covered Employees.The Act defines “employee” as “an individual engaged in service for compensation to an employer in the business of the employer who performs that service in New Jersey.” “Employee” does not include individuals employed in the construction industry under contract pursuant to a collective bargaining agreement, per diem health care employees or public employees provided with sick leave at full pay under any other law or rule of New Jersey. Independent contractors are also excluded.
  • Accrual of Leave.For those employers who opt not to “frontload” their employees’ leave at the beginning of the benefit year, leave is accrued at the rate of 1 hour for every 30 hours worked.
  • Use of Leave.Permissible purposes for taking leave include the following:
  • Time needed for diagnosis, care, or treatment of an employee’s mental or physical illness, injury, or other adverse health condition, or for preventative medical care for the employee (including dental appointments and routine medical appointments).
  • Time needed for the employee to aid or care for a family member of the employee during diagnosis, care or treatment of, or recovery from, the family member’s mental or physical illness, injury, or other adverse health conduction, or during preventative medical care for the family member.
  • Absence necessary due to circumstances resulting from the employee, or a family member of the employee, being the victim of domestic or sexual violence.
  • Time during which the employee is not able to work because of a closure of the employee’s workplace, or the school or place of care of a child of the employee, due to a public health emergency.
  • Time needed by the employee in connection with a child of the employee to attend a school related conference, meeting, function or other event requested or required by the school, or to attend a meeting regarding care provided to the child in connection with the child’s condition or disability.
  • Notice of Need for Leave.An employer may require an employee to provide advance notice of the need to use earned sick leave that is foreseeable. Such notice is not to exceed seven calendar days prior to the date the earned sick leave is to begin and must include notice of the intention to use the leave and its expected duration. If the reason for the leave is not foreseeable an employer may require an employee to give notice of the intention to use the leave as soon as practicable, but the employer may require such notice from the employee only if the employer has notified the employee of this requirement.
  • Unused Leave at End of Benefit Year.An employer is not required to pay accrued but unused sick leave at the end of a benefit year or upon separation; doing so is voluntary.
  • Notice Requirements.Employers are required to conspicuously post a notice, in a form prescribed by the Commissioner of Labor, detailing the Act’s requirements in the workplace, including its provisions prohibiting retaliation.

The foregoing is just an overview of this law. For additional information, a comprehensive summary may be found on the New Jersey Department of Labor and Workforce Development’s website: https://nj.gov/labor/forms_pdfs/lwdhome/Legal/earnedsickleave.pdf

In conclusion, if your company is located in New Jersey I would encourage you to check with your attorneys and/or financial advisors to ensure that your pay and benefits practices comply with these new laws.

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Article by Lawrence I. Cohen

Laurence I. Cohen is a partner with Pike, Tuch & Cohen, LLP, a Bellmore, NY-based law firm.

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