KEY TAKEAWAYS:

• Bill S2357 passed in November 2022 and went into effect July 31, 2023, changing PEO reporting requirements in New Jersey regarding separation of employment.

• Reporting requirements are significant under the law, as there is a penalty provision for failure to comply.

• NAPEO was engaged to seek a legislative solution that moved the responsibility and liability to report information required under S2357 to the client level.

• On August 21, 2025, New Jersey Gov. Phil Murphy signed (A5506/3773) into law, which amends another statute (P.L. 2022, c.120) and moves liability and penalties from the PEO to a client company for failure to provide timely notice of separation of employment.

• Despite Gov. Murphy’s actions, there remains ambiguity over reporting as PEOs in New Jersey are still being contacted to provide notices of separation.

• An incorrect FAQ on the Department of Labor & Workforce Development website continues to list the PEO as the responsible party. This adds confusion for PEOs and clients looking to report separations.

• NAPEO is actively working to get final clarity on this issue as A5506/S.3773 is clear that liability should lie with the client company.

Professional Employer Organizations (PEOs) operating in New Jersey should be aware that S2357 was signed into law in November 2022 as P.L. 2022, c. 120 (the Act).

The Act went into effect on July 31, 2023. While the Act has not yet changed the reporting requirements discussed below, they will be changing in the near future regarding separation of employment.

Under N.J.S.A. 34:8-72(c), PEOs are co-employers with their client companies/worksite employers. The New Jersey Workers’ Compensation system has routinely found that PEOs and their worksite employers are dual employers for workers’ compensation purposes. PEOs focus on HR related tasks such as payroll, workers’ compensation and other employee benefits, while the worksite employer handles day-to-day operations and oversight of employees. PEOs act as the W2 employer of record with the Department of Labor and Workforce Development (Department).

The Act requires notification by an employer “immediately and simultaneously” when an employee is separated from their employer. The Act also requires employers to provide information sufficient to enable the Department of Labor to make a benefit determination immediately upon the separation of an employee from employment. In most instances, the worksite employer will be the only entity immediately aware when an employee is separated from employment. In the co-employment relationship, the worksite employer/client company is not currently required to notify the PEO immediately of a separation. The PEO is usually made aware of a separation when the client company chooses to inform the PEO, which is typically three days prior to its next payroll date.

It should be noted that since July 31, 2023, employers and the Division of Unemployment Insurance must conduct all communication electronically.

Effective July 31, 2023:

• All separated employees must still be furnished with a separation notice (BC-10), but now employers also have to “immediately and simultaneously” send the notice to the New Jersey Department of Labor & Workforce Development’s Division of Unemployment Insurance.
• In addition, employers will have to provide separated employees with a new form that will be issued by LWD that will be used to make the determination for unemployment benefit eligibility (and which must be submitted along with the BC-10).
• Employers now face a $500 fine or 25 percent of the “amount fraudulently withheld,” whichever is greater, for failing to timely submit the information to LWD.

Because the necessary information regarding separation resides with the worksite employer and may not, or cannot, be transferred immediately or simultaneously, to the PEO, the responsibility to report to the Department, and the liability associated with non-compliance, should lie with the worksite employer/client company.

On August 21, 2025, New Jersey Gov. Phil Murphy signed (A5506/S.3773) into law.  The law amends another statute (P.L. 2022, c.120) that requires employers to notify the New Jersey Department of Labor “immediately and simultaneously” when an employee is separated from their employer. This legislation provides important protections for PEOs by moving liability and penalties from a PEO to a client company for failure to provide timely notice.

Despite Gov. Murphy’s actions, there remains confusion as I have heard from some PEOs in New Jersey that they are being held responsible for reporting separations. We encourage PEOs in New Jersey to keep a close eye on this issue. Please reach out for assistance and guidance should this issue arise.

If you have questions about how this impacts your business, please contact:

• Ian G. Zolty
• Dustin W. Osborne
• Or another member of our Workers’ Compensation or Professional Employer Organizations practice groups