Staying Compliant in New Jersey: Key Employment Law Updates

Announcer: Welcome to the Ogletree Deakins podcast, where we provide listeners with brief discussions about important workplace legal issues. Our podcasts are for informational purposes only and should not be construed as legal advice. You can subscribe through your favorite podcast service. Please consider rating this podcast so we can get your feedback and improve our programs. Please enjoy the podcast.

Justine Abrams: Welcome to the Garden State of Change, everyone. Our home, beautiful New Jersey. My name is Justine Abrams. I’m here with my law partner, Mike Nacchio. If it feels like New Jersey employment law is constantly shifting, that’s because it is. Between new regulations, agency guidance, ongoing legislative activity, the compliance landscape for New Jersey employers is moving pretty quickly. In this episode, my esteemed colleague, Mike Nacchio, and I will walk through some of the latest developments and what they mean for New Jersey employers. Happy to be here with you, Mike. Let’s dive in.

Mike Nacchio: You too, Justine. Thanks for opening us up here. One of the things that is always very important for companies to be thinking about is if there is a dispute that arises with an employee, what is the forum that you’re going to be in to resolve that dispute or litigate it? And arbitration has always been a very preferred forum for employers.

One of the things that happened very recently in New Jersey, going back to December, was a decision from the New Jersey Appellate Division on what is called, as many of us may know, the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021. We call this the EFAA. And what the EFAA was is a law that was signed into effect by President Biden back in 2022. The EFAA amended the Federal Arbitration Act, really for the first time in its 100-year history. The EFAA, in its language passed by Congress, said that no pre-dispute arbitration agreement would be valid or enforceable with respect to a case filed under federal, state, or tribal law, and relates to, as the language in the statute, if it relates to a sexual assault dispute or sexual harassment dispute.

And so since 2022, in litigation in the courts on motions to compel arbitration, the management bar and the plaintiff’s bar have advocated for different positions. The plaintiff’s bar has said that the “relates to” clause in the EFAA means that the entire case belongs in court if a sexual harassment or sexual assault claim was included in a multi-claim action. The management bar said that the reference to sexual assault or sexual harassment reflected a decision by Congress to keep this narrow.

Well, in December of last year, the New Jersey Appellate Division in a case called McDermott essentially sided with the plaintiff’s bar. And what the appellate division said was that the EFAA renders any pre-dispute arbitration agreement unenforceable as to all claims in a multi-claim dispute where a plaintiff pled a viable claim involving sexual harassment. The McDermott Court held that there still, of course, has to be a nexus though between the sexual harassment dispute and other non-sexual harassment claims to satisfy the meaning of that clause relate to in the EFAA.

There is a petition for review of this decision at the New Jersey Supreme Court, but it is definitely one to be mindful of. And in the McDermott case in particular, the court found that the plaintiffs met their burden because the non-sexual harassment claims were materially and substantially informed by the nature of the sexual harassing employment relationship with the actor itself, the manager. Also, we have developments in the space of regulations, particularly in regards to disparate impact. Justine, we’re going to move on to that now if it’s a good time.

Justine Abrams: Yeah. Switching gears a little bit. My understanding is that, in 2025, the federal government deprioritized enforcement of the disparate impact theory of liability, but that New Jersey continues to enforce it. Do I have that right? And if so, what’s happened recently in New Jersey on that front?

Mike Nacchio: Yeah, you’re really hitting the nail on the head. And as the United States Department of Justice under the Trump administration removed disparate impact discrimination from its enforcement paradigms regarding state and local governments, the presidential executive orders from the president ordered agencies to stop enforcement of anti-discrimination laws based on theories of disparate impact. States have stepped up, especially states like New Jersey, New York, California.

And the New Jersey DCR regulations on disparate impact have reinforced that the New Jersey law against discrimination prohibits employment practices or policies that disproportionately harm a protected group, even absent discriminatory intent. Again, it’s about disparate impact. And so, this is going to apply to situations where there may be policies or practices that negatively affect pregnant employees, have restrictions on language, citizenship, height, weight, physical ability requirements, driver’s license requirements, criminal history restrictions. These situations arise, not only during employment, but they extend to selection procedures as well for recruiting activities.

So, this is definitely something to watch out. Because those sorts of policies, policies that may appear to be neutral on their face, but that may have a disproportionate negative impact on protected classes, those policies will still draw scrutiny at the state level.

Justine Abrams: Interesting, interesting. Sneaky way of imposing liability there. I also understand that New Jersey recently issued guidance on language discrimination under the New Jersey law against discrimination. I understand that that statute, there’s lots of efforts to expand protected categories under that statute, but that there’s recent guidance specifically on language discrimination. Why is this a significant development for employers right now?

Mike Nacchio: Well, it again reinforces that the policy, especially if there was an English only policy or an English qualification policy, it’s going back to the concern that it could be a proxy to discriminate based on a protected characteristic. New Jersey is a state where a quarter of the residents are foreign born. One third of them speak a language other than English at home. And so English only policies or English qualification policies are really going to draw scrutiny here in New Jersey as well. They’re presumptively unlawful unless there’s an exception that is job related and consistent with business necessity. So, something to really bear in mind here as well.

Justine Abrams: So, the key word there is proxy. Was language qualification used as a proxy to discriminate based on a protected characteristic like nationality, ancestry, race, things like that. Do I have that right?

Mike Nacchio: You got it right. The march forward with regulations too has been put on pause briefly by the new governor, which I think dovetails nicely into the issue of independent contractor regulations. Do you want me to touch on that real briefly?

Justine Abrams: Sure. Yeah. As I understand it, the ABC test still exists, but there’s new regulations that made it get harder to classify workers as independent contractors under it. What’s really changed here?

Mike Nacchio: These were put in place under the Murphy administration and the Department of Labor proposed them back in May of last year. And you’re right, the ABC test is still the applicable test in New Jersey. These regulations would have made it more difficult for a worker to satisfy that test. When the governor came in, new governor, and in January, she froze these regulations. So these are on hold until at least April 23rd, which is really around the corner next week.

So, employers in New Jersey should keep an eye on this, and see if these regulations go into effect because they would make it, as we said, more difficult, without getting into too much granular detail, to demonstrate that you were free of control of the worker, that the work was performed outside the usual course of business of the employer, and that the worker was customarily engaged truly in an independently established business. A big takeaway is that the worker simply having an LLC or an independent business registration would be insufficient by itself to establish an independent contractor status. So, something to watch out for.

Justine Abrams: Got it. Got it. Okay. I think we’re switching gears here to my side of the presentation. And the first New Jersey update I wanted to talk about is the expansion of the New Jersey Family Leave Act. This was Governor Murphy’s, one of his last parting gifts before he left office earlier this year, an even harder New Jersey Family Leave Act statute to comply with.
There’s four major changes that I want to discuss. First, the definition of employer. Right now, only employers with 30 plus employees need to comply with the statute. Come July 17th of this year, that threshold drops to 15. So, some smaller employers who weren’t covered before may be covered effective July 17th of this year.

The second major change to the New Jersey Family Leave Act is the definition of employee. Right now, employees are only eligible for New Jersey Family Leave Act leave if they’ve worked 12 plus months and at least 1,000 hours during the 12 months immediately proceeding the leave. Starting July 17th, eligibility expands to those who have worked just 250 hours and at least three months of employment.

There’s some confusion in the new law about exactly how that 250 hour requirement works. The statutory amendment states that the employee must have worked 250 hours in the 12 months proceeding leave, but Governor Murphy’s press release announcing the amendment states that the employee has to have worked 250 hours in the three months proceeding leave. So, hopefully we will get some guidance from the state on that before July to clarify.

Perhaps the biggest change, the third change to the New Jersey Family Leave Act, involves job restoration rights. In general terms, the amendment now states that employees who are receiving benefits under the New Jersey Family Leave insurance program or the New Jersey Temporary Disability insurance program must be restored to their jobs. Okay. Simple enough, right?
Not really. Here’s why that’s so confusing. The New Jersey Family Leave Act is a leave law. It provides employees with time off from work. By contrast, New Jersey Family Leave Insurance, NJFLI, and New Jersey Temporary Disability Insurance, NJTDI, they don’t provide leave at all. They simply provide wage replacement benefits while someone is on leave, and those benefits are only available for certain types of leave. For example, NJTDI provides pay to employees who are out on medical leave, but medical leave was never covered by the original New Jersey Family Leave Act statute. Remember, this is not the federal FMLA Family Medical Leave Act. It’s the New Jersey Family Leave Act. There’s no medical in the name of the statute. Under the TDI program, an employee can receive up to 26 weeks of pay while out on medical leave. Meanwhile, the original New Jersey Family Leave Act only provided 12 weeks of family leave.
So now that the New Jersey Family Leave Act amendments state that employees collecting medical leave benefits under NJTDI have job restoration rights, it raises an obvious question. Does that mean that the New Jersey Family Leave Act now effectively provides job protection for up to 26 weeks of medical leave, instead of just the 12 weeks of family leave that it originally covered? Remains to be seen.

Finally, the last big change to the New Jersey Family Leave Act statute provides that if an employee is eligible for New Jersey earned sick leave and either TDI benefits or FLI benefits, they may select the order in which those benefits are taken.

Mike Nacchio: That’s a big change. And has the state issued guidance yet on that component of the TDI amendment, Justine?

Justine Abrams: No. No, not to my knowledge. It has not yet.

Mike Nacchio: Right. Okay. So, we’ll be on the watch out for that. And then I understand in New Jersey, there has been a renewed push to focus on non-competes. What has happened in this space?

Justine Abrams: Yeah. So, New Jersey’s tried to pass legislation banning or limiting non-competes every few years, it seems. So far, every attempt has failed. But this latest bill, which is bill A5708 and S4358, appears to have more momentum and broader support than its predecessors, apparently, because of the swing of the political pendulum.

The current bill, what it would do is effectively ban most non-competes in New Jersey with limited exceptions for senior executives. Yeah, so who’s a senior executive under the bill? Someone who holds a, quote, “policymaking position” and earned at least $151,164 in total compensation in the year before their employment ended.

Now, what happens to everyone else, meaning non-senior executives. Let’s talk about that first. All non-competes for non-senior executives would be void. In other words, if the employee’s not in a policymaking role and earns less than that $151,164 threshold annually, then their non-compete would be unenforceable under this bill. And importantly, that would apply to both new and existing non-competes.

Now, even for senior executives, the bill imposes strict limitations. First, employers would not be able to enter into new non-competes with senior executives after the law’s effective date. And second, existing non-competes would be void unless they meet a list of several specific conditions. There’s too many to talk about today. I don’t have enough time. But some of the key ones are the temporal restriction in the non-compete for the senior executive has to be 12 months or less post-termination. The geographic reach of it has to be limited to within New Jersey and to the areas within New Jersey where the employee provided services, or had a material presence or influence in their last two years of employment. The restricted activities have to be limited to the work that the employee actually performed in their last two years. The non-compete can’t contain any penalty to the employee for challenging it, like an attorney’s fee clause. And the non-compete has to provide for garden leave, meaning the employer continues to pay the employee during the restricted post-employment period.

So, what do you do if you have, assuming this bill was passed and you had a non-senior executive sign a non-compete in the past, or you have a senior executive sign a non-compete that doesn’t comply with all of these conditions. The answer is you have to give written notice within 30 days of the law’s effective date. For non-senior executives, your lower level employees, that means written notice that their non-competes are no longer enforceable. And for your senior executives, that means written notice of all the changes you made to that executive’s non-compete agreement to bring it into compliance with the new law.

Notably, the bill would not apply to or have any impact on non-competes entered into in connection with the sale of a business or current non-compete litigations, meaning causes of action that accrued prior to the law’s enactment. Importantly, the bill would also ban all no poach agreements, meaning agreements between two companies not to hire one another’s employees. There’s no exceptions to that rule. And finally, the bill would create a private cause of action for employees to bring with a two-year statute of limitations.

Mike Nacchio: And I saw that it would permit attorney’s fees. Is that right?

Justine Abrams: I believe that is correct. Yes.

Mike Nacchio: Wow. Now let’s talk about, I understand there was a case in the earned sick leave law space, and this was a painful lesson for a particular company here.

Justine Abrams: Yeah. So finally, this year, we get our first published appellate division decision interpreting the New Jersey Earned Sick Leave Law. Very exciting stuff, definitely a costly lesson for this employer, but a lesson that New Jersey employers should really pay attention to so that they don’t have to suffer through it themselves.

Quick refresher on what the New Jersey Earned Sick Leave Law is. What it does is it requires most employees in New Jersey to accrue one hour of paid sick leave for every 30 hours worked, up to 40 hours of paid sick leave per year, to be used for personal sick reasons, to care for a family member, for domestic sexual violence reasons, a public health emergency, and certain school related activities. There are very limited exceptions under the statute.

So, in this new case that just came out, Cano v. County Concrete Corporation, the employer was a concrete supplier, and its employees were unionized and covered by CBAs. The CBAs, the collective bargaining agreements, provided the employees with three days of bereavement leave, six paid holidays, and between zero to 15 days of vacation, depending on their tenure.

But the vacation leave had restrictions. It had to be requested by a certain period each year. It was subject to rescheduling. In addition, though the employer said that it allowed employees to use that vacation for whatever they wanted, there weren’t any records of when they used it for sick time. So, two employees sue under the New Jersey Earned Sick Leave Law on behalf of themselves and 103 similarly situated employees. They alleged that the employer failed to provide earned sick leave in compliance with the statute, specifically that the vacation policy was not a lawful substitute for earned sick leave.

The employer and defense argued it was exempt from the New Jersey Earned Sick Leave Law under the statute’s construction industry exemption. Under that exemption, employers are not required to comply with the law if their employees are, quote, “performing services in the construction industry” and are covered by a CBA. The employer also said, again, vacation policy complied with the law, even if we’re subject to it, because the employees were allowed to use it for whatever they wanted. Okay.

There are four key holdings here. First, the court rejected application of the construction industry exemption. The court said the employee’s workers supplied concrete, but they didn’t actually construct buildings or structures, so they’re not under the exemption. The takeaway from that is courts are likely to interpret the New Jersey Earned Sick Leave Law’s exemptions very narrowly.

Second, the court ruled that the employer violated the statute’s notice in record keeping requirements because not only did it fail to post a mandatory poster, it also failed to maintain records showing hours worked and sick leave accrued and used. Importantly, under the statute, failure to maintain those records creates a presumption of non-compliance.

Third, because there were no records, the court held that the leave was presumptively not available for all of the purposes stated in the New Jersey Earned Sick Leave Law statute, as it was limited to vacation, bereavement, and holidays.

And fourth, the court allowed relief for the 103 additional employees without requiring formal class certification. The result was a financial mess for the employer. The two named plaintiffs were awarded $9,000 each about, based on the value of 40 hours of denied sick leave plus 200% liquidated damages. But the real impact came from the 103 additional employees, unnamed plaintiff. They were given, under the same calculation, $760,000 in unpaid wages and liquidated damages. On top of that, there was a bill of $600,000 from the lawyers in attorney’s fees. The final judgment was 1.4 million.

The lesson from this case is simple. You have to pay attention to the New Jersey Earned Sick Leave Law and update your leave policies and make sure that they continue to be updated, or you got to be prepared to pay up.

Mike Nacchio: Just in the time we got left, I know that the minimum wage increased to $15.92 in January. And I see, and I know that the state updated their requirements for reporting the BC-10 information online, and employers should go online to the portal and register because that has to now be submitted electronically to the New Jersey Department of Labor. But I know there’s been a big change in update, not a big change, but an update to the pay transparency regulations. Can you, in the time we got left, to give us an update on that?

Justine Abrams: Sure. Yeah. So, in general, the New Jersey Pay Transparency Law, which by the way, went into effect in 2025, requires New Jersey employers to do two things. One, disclose pay and benefits information in postings for, quote, “new jobs and transfer opportunities,” and two, make, quote unquote, “reasonable efforts to notify current employees of promotional opportunities within the affected department.” These regulations, I think, are also subject to Governor Sherrill’s 90-day regulatory pause, but even if they are paused, they give us a good sense of how the state intends to enforce the law.

So, what are the key clarifications that these new regulations on the New Jersey Pay Transparency statute, what are they? First one is which employers are covered? The statute applies to employers with 10 plus employees. The regulations clarify that that means 10 plus employees anywhere, not just in New Jersey, as long as the employer does business in, employs persons in, or takes applications from within New Jersey. So, the law could apply to employers who have zero employees in New Jersey if they do business or take applications from here.
The second clarification that the regulations provide are about job postings. The statute requires employers to disclose either the exact pay or a pay range in job postings. Regulations clarify two important points about pay ranges. One, when the employer includes a range, it must contain a bottom and top number. So, you can’t just post an open-ended range like $20 an hour and up. And two, the range can’t exceed a 60% spread.

The third big clarification, what counts as a new job or a transfer opportunity under the statute? Since the statute requires disclosure of pay and benefits information for new jobs and transfer opportunities, the regulations define those terms. A new job is simply a job that is neither a promotion nor a transfer opportunity. And a transfer opportunity is a change in job title and no increase in compensation. Pretty self-explanatory.

And then the last clarification from the regulations is, what are those reasonable efforts employers have to put forth to notify employees of promotional opportunities? One, employers have to conspicuously post notification of the promotional opportunity in workplace locations accessible to all employees in the relevant department, lunchroom, bathroom, whatever that might be. And two, if the employer maintains an internet or intranet site for the exclusive use of its employees, the notice must be posted on that site too.

Mike Nacchio: Well, that’s a very helpful update. And I think we are just about out of time. So, I think it’s been, hopefully, a very informative podcast for you, and we thank you for joining us. Justine, is there anything you’d like to add?

Justine Abrams: Just that if you have any questions, you know where to reach us.

Mike Nacchio: That’s right. Okay. Well, thank you for being here with us.

Justine Abrams: Thanks.

Announcer: Thank you for joining us on the Ogletree Deakins podcast. You can subscribe to our podcast on Apple Podcasts or through your favorite podcast service. Please consider rating and reviewing so that we may continue to provide the content that covers your needs. And remember, the information in this podcast is for informational purposes only and is not to be construed as legal advice.