Key Takeaways:

• A bill signed into law that took effect on July 31 will soon change PEO reporting requirements in New Jersey regarding separation of employment.

• While reporting requirements are expected to be significant under the law, which now carries a penalty provision for failure to comply, the Department of Labor and Workforce Development is working on guidance on how employers, including TPAs and PEOs, will be expected to meet reporting requirements.

• Employers and PEOs in New Jersey are encouraged to keep a close eye on this issue and are urged to register through Employer Access to ensure important communication regarding the law is received electronically.

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”).  According to its provisions, the Act went into effect on July 31. While the Act has not 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), professional employer organizations (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. The 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. The 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.

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. However, the Act, as written, places the reporting obligation and liability for non-compliance on the employer and the PEO.

It should be noted that since July 31, 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.

For those seeking guidance on the Act, you can go to the New Jersey Department of Labor and Workforce Development website, where you will find a list of frequently asked questions. You can click here to access and scroll down to the subheading “FAQs about new changes to the NJ Unemployment Compensation Law (P.L. 2022, c. 120; S2357).

One of the questions asks: “What if I use a TPA to manage my payroll matter?” 

The answer is for “all employers to register for Employer Access first; you will then be the administrator for your account. As the administrator, you can grant access to your authorized users, such as your TPA.”

Another question asks: “What if I use a PEO to administer the employment of my workers?” 

The answer is “Under the law, a PEO and client company are co-employers of the employees of the client company. Between the two entities, PEO and client company, the PEO is considered the responsible party for the purpose of reporting wage and separation information to NJDOL’s Division of Unemployment Insurance. Therefore, the PEO is expected to register through Employer Access for the purpose of communicating electronically with the Division regarding unemployment insurance claims.” 

Another question asks: “The recent changes to the Unemployment Compensation Law require that I report separation and wage information to NJDOL’s Division of Unemployment Insurance. When does this reporting requirement take effect?

The answer is “NJDOL’s Division of Unemployment Insurance has taken the first step toward implementation of this new requirement by communicating to all employers the need for them to register with Employer Access and provide an email address to the Division. However, the Division has not yet provided to employers the “directions” that would instruct them what information an employer must provide to the Division immediately upon an individual’s separation from employment. Until those “directions” are provided to employers by the Division, employers will not be expected to provide information to the Division immediately upon an employee’s separation from employment. The Department is at work preparing the “directions” to employers and is also in the process of creating an online form for use by employers to submit the required information. While the “directions” and online form are being developed, the Division will exercise its discretion under the law to neither assess penalties against employers, nor bar them from obtaining relief of benefit charges, for failure to provide information immediately upon an individual’s separation from employment. During this time, employers will continue to be required to respond in a timely manner, as they had previously, to all requests from the Division for separation and wage information. 

Clearly, the Act imposes some significant reporting requirements on PEOs and now carries a penalty provision for failure to comply.  While the new law went into effect on July 31, 2023, the Department is still working on guidance on how employers, including TPAs and PEOs, will provide the reporting required by the new law. For now, PEOs should maintain their current operations as they relate to DOL and the UI division.

We encourage employers and PEOs in New Jersey to keep a close eye on this issue. The first step, if you have not already done so, is to register through Employer Access so that all communication can be electronic. We also encourage you to reach out for updates as we will be following this issue closely. Goldberg Segalla will be happy to provide updates as the proposed regulations take shape.

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

• Ian G. Zolty
• Damon M. Gruber
• Sean J. McKinley
• Esther F. Omoloyin
• Or another member of our Workers’ Compensation practice group