Pay Attention or Pay Up: A Costly Lesson in New Jersey Paid Sick Leave Noncompliance

Quick Hits

• Noncompliance with New Jersey’s Earned Sick Leave Law’s recordkeeping requirements creates a presumption that an employer failed to provide the earned sick leave required by the law.
• Vacation/PTO policies relied upon by employers to comply with the ESLL must provide paid leave for all purposes required by the ESLL.
• Failure to provide earned sick leave constitutes failure to pay wages under NJWHL, subjecting employers to claims for liquidated damages at 200 percent.

Under the ESLL, no formal class certification or collective action procedure is required to bring a claim on behalf of “other similarly situated workers.”

The Appellate Division affirmed that a concrete supplier’s paid leave policy violated several sections of the ESLL, including notice and recordkeeping requirements and providing paid sick leave, and that the company did not fall within the ESLL’s “construction industry” exemption. It also affirmed the standards required to assert an ESLL claim on behalf of other employees similarly situated without class certification or collective action procedures. This decision clarifies important questions for employers about the ESLL exemptions, the financial risks of noncompliance, and how groups of workers can assert their rights under the statute without the need for a class action.

The New Jersey Superior Court recently held that a concrete supplier’s vacation/paid time off (PTO) policies violated the ESLL, entitling the two plaintiffs and 133 similarly-situated unnamed employees to a total of $1.37 million in damages, including 200 percent liquidated damages—underscoring the financial risks of noncompliance with the ESLL’s accrual, use, notice, and recordkeeping requirements.

The appellate court also held that the company did not qualify for the ESLL’s construction industry exemption because its core business—producing and delivering sand, gravel, and ready-mix concrete—was classified as manufacturing, not construction of “houses, schools, or other structures.”

In 2018, New Jersey passed the ESLL, which grants all employees one hour of paid sick leave per every thirty hours worked, up to forty hours of paid sick leave per year. It applies to employers of any size, but it does not cover employees in the construction industry who are under a collective bargaining agreement (CBA).

Employers may be deemed compliant with the ESLL by offering paid time off, if such leave is usable for all purposes under the ESLL, and it accrues at or above the statutory rate. The ESLL permits workers to use leave for preventive care, diagnosis, and treatment for a mental or physical illness or injury, to care for a sick family member, to obtain services when the worker or a family member is a victim of domestic or sexual violence, to address circumstances arising from a public health emergency, or to attend a school-related meeting or event with regard to the worker’s child.

Background on the Case

The two plaintiffs, William Cano and Raymond Bonelli, worked for County Concrete Corporation as hourly drivers. They and other workers were represented by several unions with CBAs that allowed three days bereavement leave, six paid holidays, and between zero and fifteen paid vacation days, depending on tenure. Following the expiration of the CBAs, Cano and Bonelli sued the company on behalf of themselves and “other similarly situated employees,” alleging it did not provide paid sick leave as required by the ESLL.

Following a three-day bench trial, the trial court found that the company did not fall within the ESLL’s construction industry exemption because it does not construct houses or other buildings. The trial court then found that the company failed to provide ESLL-required notices, to meet ESLL recordkeeping requirements, and to provide plaintiffs required ESLL benefits. After awarding $8,880 and $9,120 to Cano and Bonelli, respectfully, the court established procedures to identify the “unnamed similarly situated plaintiffs” to determine their damages. The plaintiffs obtained certifications from 133 employees, and a judgment was entered awarding them $758,898.38 in damages. This included a 200 percent liquidated damages component.

County Concrete Corporation appealed, arguing that its vacation day policy was a compliant PTO policy under the ESLL, and that the trial court erred by finding that the company did not qualify for the construction industry exemption. It also argued that the unnamed plaintiffs did not have standing to pursue collective claims at trial or obtain damages without class certification.

The Appellate Division first confirmed that, as a manufacturer and supplier of concrete, sand, and gravel, County Concrete Corporation was in the manufacturing industry, not the construction industry. As such, the company did not qualify for the construction industry exemption.

Next, the Appellate Division determined that the company violated the ESLL by not providing paid leave for all purposes required by the ESLL. “Instead, paid leave was restricted to limited categories of vacation, bereavement, and holidays,” but did not include leave to care for a sick family member, attend school meetings, or seek help after domestic violence. The company also “required a doctor’s note for any illness-related absence, even for absences less than three days, which was not compliant with” the ESLL.

The Appellate Division affirmed the trial court’s finding that “there was no adequate, conspicuous posting of ESLL rights as required by section N.J.S.A. 34:11D-6,” noting that the only evidence of posting was at one worksite where the “notices allegedly posted were in an obscure location, not accessible to all employees.”

It similarly affirmed the trial court’s finding that the company “failed to maintain proper records as to its employees’ available leave and leave used for ESLL-covered purposes.” Specifically, it found that the company’s payroll company did not document the hours worked by employees and the sick leave earned and used by the employees. “Pay records, including paystubs, time detail reports, and summary reports did not reveal the employees use of ESLL sick leave,” the court noted. Where an employer fails to meet such recordkeeping requirements, “the ESLL presumes an employer has failed to provide the earned sick leave required,” the court stated.

Finally, the Appellate Division rejected the company’s arguments that the unnamed plaintiffs were not entitled to damages because there had been no class certification or collective action certification in the case. The court explained that the ESLL stipulates that a violation of the ESLL “‘shall be regarded as a failure to meet the wage payment requirements’” of the New Jersey Wage and Hour Law (NJWHL), and that the remedies, penalties, and other measures available under the NJWHL are applicable to the ESLL, including the right to bring an action on behalf of oneself or other similarly situated employees.

The court further concluded that neither the ESLL nor the NJWHL “specifically requires class certification or collective action procedures,” and that “[t]here is no other requirement that affirmatively necessitates or requires plaintiffs to file or notify a defendant of the identity of the similarly situated employees by way of class certification or through class discovery.”

Next Steps

Employers in New Jersey may wish to review their current sick leave and PTO policies and practices to ensure they comply with the paid leave obligations, statutory notice, and recordkeeping requirements of the ESLL.

In addition, Cano is a signal that exemptions under the ESLL will be narrowly construed and that misclassifying a workforce based on labels, rather than day-to-day job duties, can be costly. As such, employers that fail to grant the ESLL-required paid sick leave to employees in reliance on an ESLL exemption may wish to consider revisiting that decision.

Taking these steps proactively, before a claim arises, can significantly reduce legal risk and put employers in a stronger position if challenged.

Ogletree Deakins’ Morristown office will continue to monitor developments and will provide updates on the Construction, Leaves of Absence, and New Jersey blogs as new information becomes available.

Justine L. Abrams is a shareholder in Ogletree Deakins’ Morristown office.

Leslie A. Lajewski is a shareholder in Ogletree Deakins’ Morristown office.

This article was co-authored by Leah J. Shepherd, who is a writer in Ogletree Deakins’ Washington, D.C., office.

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