Continued health insurance coverage for a period of time (<a href="https://www.dol.gov/general/topic/health-plans/cobra">COBRA</a> or employer-covered)

Stock options or restricted stock payouts

Outplacement or career counseling services

<a href="https://www.irs.gov/filing/federal-income-tax-rates-and-brackets">Federal income tax</a>

<a href="https://www.ssa.gov/people/materials/pdfs/EN-05-10297.pdf">Social Security tax (FICA)</a>

<a href="https://www.irs.gov/taxtopics/tc751">Medicare tax</a>

New Jersey State Tax Treatment of Severance Agreements

<a href="https://www.nj.gov/treasury/taxation/git_over.shtml">New Jersey Gross Income Tax (NJGIT)</a>

State unemployment and disability contributions (with certain limits)

Back pay — still taxable as wages

Compensatory damages for emotional distress — may be taxable or not, depending on whether they stem from physical injury

Reimbursement of expenses — may be non-taxable if structured properly

Attorney’s fees — often taxable to you, unless directly paid to your lawyer

Severance and Unemployment Benefits in NJ

Practical Examples of Taxable Severance Agreements

Negotiating the Tax Side of a Severance Agreement

Lump sum vs. installments — Lump sums may qualify you for unemployment sooner, but could trigger a larger one-time tax burden. Installments spread out income but may block unemployment.

Characterization of payments — Make sure the agreement specifies whether payments are wages, damages, reimbursements, or attorney’s fees. This affects how they’re taxed.

Tax withholding — Confirm how federal and state taxes will be withheld. You don’t want an unexpected bill later.

Benefits continuation — Health insurance or COBRA payments may be structured in ways that affect your taxable income.

Outplacement services — Sometimes employers agree to pay directly for career counseling or retraining, which may avoid taxable income to you.

Federal and State Differences: What’s to Look Out For

At the federal level, damages for physical injury are not taxable, but emotional distress damages generally are.

At the state level, New Jersey tends to follow federal rules, but differences in definitions or credits can create mismatches.

Common Mistakes Employees Often Make in Severance Agreements

Assuming severance is tax-free. It’s not — it’s taxable income.

Failing to plan for higher brackets. A big severance can push you into a higher rate for the year.

Overlooking unemployment rules. The structure of your severance can delay your benefits.

Not reviewing the agreement’s language. From how payments are described, which affects tax treatment, to hidden restrictions like <a href="/blog/understanding-non-compete-clauses-in-nj-severance-agreements">non-compete clauses</a> — fine print can cost you later.

Forgetting about estimated taxes. If your withholding isn’t enough, you could face penalties.

Contact Us For Free Consultation. Let’s Plan Your Taxes.&nbsp;

Tax Implications of Severance Agreements in New Jersey

The Line Between Employees and Contractors

Who controls your schedule and how you do your work

Whether your work is part of the company’s main business

If you supply your own tools or rely on the company’s equipment

Whether you’re free to take on other clients in the same line of work

How you’re paid: a flat project fee versus hourly wages

New Jersey’s ABC Test For Independent Contractors

A — You’re free from the company’s control when performing your work.

B — The work you do is outside the usual course of the company’s business.

C — You run your own independently established business in the same trade.

Big Moves in New Jersey on Misclassification

In 2022, <a href="https://www.nj.gov/labor/lwdhome/press/2022/20220913_misclassification.shtml">Uber agreed to pay $100 million</a> to the state over unpaid unemployment and disability contributions tied to driver misclassification.

In 2025, the New Jersey Department of Labor proposed new rules to clarify <a href="https://www.nj.gov/labor/lwdhome/press/2025/20250428_ABC.shtml">how the ABC test should be applied</a>. The idea is to make it harder for companies to skirt the law while still allowing real contractors — like accountants, plumbers, or graphic designers who run their own businesses — to stay independent.

Your company sets your schedule and tells you exactly how to do your job.

You perform work that is central to the company’s business.

You don’t market yourself as a separate business or have your own client base.

You use the company’s tools, software, or systems instead of your own.

You’re paid like an employee — hourly, weekly, or by shift — rather than by project.

Pressure companies to adopt fairer policies

Where Does This Leave Independent Contractors in New Jersey?

True independent contractors — people who run their own businesses, set their own rates, and work for multiple clients — generally cannot unionize in New Jersey. They also have to be careful about collective rate-setting because of antitrust laws.

Misclassified workers — those treated like contractors on paper but employees in practice — may actually have the right to organize. Both federal law and New Jersey’s ABC test offer ways to challenge misclassification.

Have Questions About Union Options? Contact Us For Your Free Consultation

Can Independent Contractors Unionize in New Jersey?

Jobs historically associated with women, such as caregiving or administrative work, often pay less than male-dominated jobs requiring similar levels of skill and responsibility.

Subjective performance reviews can reflect unconscious gender or race bias, influencing pay raises and promotions.

Stereotypes about leadership, assertiveness, or family responsibilities can disadvantage workers of colour in advancement opportunities.

New Jersey’s Legal Framework on Equal Pay

Broad Coverage: The law applies to all employers, public and private, regardless of size.

Protected Categories: Unlike federal law, which focuses primarily on sex-based wage disparities, the New Jersey law covers pay discrimination based on any protected category under the :<a href="https://www.nj.gov/lps/dcr/downloads/NJ-Law-Against-Discrimination-Most-Updated.pdf">New Jersey Law Against Discrimination (NJLAD)</a>: including race, age, disability, sexual orientation, gender identity, and more.

“Substantially Similar” Work Standard: Employers cannot pay workers differently for “substantially similar work,” which is determined by a combination of skill, effort, and responsibility. This makes gender-neutral evaluations especially important: to <a href="/blog/how-to-spot-pay-discrimination-when-job-titles-are-the-same">spot pay discrimination when job titles are the same</a>, it’s important to look at the actual duties, not the labels.

Employer Burden of Proof: If a wage disparity exists, the employer must show that the difference is due to legitimate factors such as seniority, education, training, or merit — and that these factors are applied consistently.

<a href="https://en.wikipedia.org/wiki/Equal_Pay_Act_of_1963">Equal Pay Act of 1963 (EPA)</a>: Prohibits sex-based pay discrimination for equal work in the same establishment.

<a href="https://www.dol.gov/agencies/oasam/centers-offices/civil-rights-center/statutes/title-vii-civil-rights-act-of-1964">Title VII of the Civil Rights Act of 1964</a>: Prohibits employment discrimination, including pay discrimination, based on sex and other protected characteristics.

Responsibilities and decision-making authority.

Effort (mental, physical, and emotional).

Performance reviews tied to stereotypesWomen may be described as “emotional” or “lacking leadership,” while men are praised for assertiveness.

Overvaluing physical labor over caregiving skillsJobs requiring emotional intelligence or interpersonal skills may be undervalued compared to those requiring technical or physical strength.

Motherhood penaltiesWomen who take maternity leave or request flexible schedules may face unfairly negative evaluations — and with the rise of <a href="/blog/equal-pay-claims-and-remote-work-disparities-in-nj">remote work disparities</a>, they can also be penalized for working from home or seeking flexibility that male colleagues aren’t judged for.

Networking advantagesMale employees may have more access to mentors or higher-visibility projects, which boosts evaluations and pay prospects.

The Legal Importance of Gender-Neutral Evaluations in NJ

Evidence in lawsuitsCourts will look closely at how employers evaluate jobs. If evaluations are subjective or inconsistent, it may suggest discrimination.

Defining “substantially similar work”Gender-neutral job evaluations can help determine whether roles with different titles actually involve similar skill and responsibility, making them comparable under the law.

Protecting against retaliation claimsEmployees who raise pay equity concerns are protected under NJLAD. Having fair systems in place helps employers show they took concerns seriously.

Examples of Gender-Neutral Evaluation Systems

Point-factor systems: Jobs are rated on factors like education, responsibility, working conditions, and effort. Each factor is assigned points, creating a measurable value for comparison.

Skill-based pay systems: Pay is linked to the skills an employee demonstrates, not assumptions about their role.

Competency frameworks: Employers define clear competencies for each role and evaluate employees against the same benchmarks.

Gather information. Compare job duties, responsibilities, and pay rates with colleagues.

Document concerns. Keep records of conversations, performance reviews, or evaluation results.

Ask for clarification. Request details on how your role was evaluated and how pay was determined.

Consult HR… cautiously. While HR may help, remember: their loyalty is to the company.

Speak with an attorney. An equal pay act attorney in New Jersey can help you assess whether you have a legal claim under NJLAD or the Equal Pay Act.

Have Questions About Pay Equality? Contact Us for Legal Perspectives

NJ Legal Perspectives on Gender-Neutral Job Evaluations for Pay Equality

Taking FMLA leave for a reason not covered under the law.

Submitting false or exaggerated medical certifications.

Using approved medical leave for unrelated personal activities.

Falsifying records or hours to qualify for FMLA protections.

Why Employers Resort to Fraud Accusations in NJ FMLA Cases

Suspicion about timing: An employee requests FMLA leave right after being denied a vacation request, raising employer concerns about motive.

Visible activities during leave: An employee is spotted doing physical activities while on leave for a medical condition, even if those activities are allowed by their doctor. Employers sometimes misinterpret this, leading to fraud accusations that can carry serious FMLA fraud legal consequences.

Inconsistent documentation: Medical certifications that appear vague, incomplete, or contradictory can fuel suspicion.

Retaliation motives: Certain employers misuse fraud accusations as a way to retaliate against workers who exercise their rights. This kind of <a href="/blog/employer-retaliation-after-fmla-leave-what-s-illegal">retaliation after FMLA leave</a> is certainly illegal under both federal and state law.

Lack of understanding: Many managers simply don’t understand what FMLA allows. For example, they may assume someone on leave must be completely incapacitated, when in reality intermittent or partial leave is perfectly legal.

<a href="https://www.nj.gov/oag/dcr/downloads/fact-FLA.pdf">New Jersey Family Leave Act (NJFLA)</a>: Provides eligible employees with up to 12 weeks of leave in a 24-month period to care for a family member or bond with a new child. Unlike the FMLA, it does not cover the employee’s own medical condition. Importantly, employers cannot pressure or <a href="/blog/can-you-be-forced-to-return-early-from-fmla-leave">force you to return early from your leave</a>: doing so could violate your rights under state law.

<a href="https://www.nj.gov/lps/dcr/downloads/NJ-Law-Against-Discrimination-Most-Updated.pdf">New Jersey Law Against Discrimination (NJLAD)</a>: Protects employees from retaliation and harassment based on disability, pregnancy, or other protected categories. If an employer uses a fraud accusation as a pretext to discriminate, this law may apply.

<a href="https://www.nj.gov/labor/forms_pdfs/lwdhome/CEPA270.1.pdf">Conscientious Employee Protection Act (CEPA)</a>: Also known as the state’s whistleblower law, CEPA protects employees who report or object to employer practices they believe are unlawful. If your <a href="/blog/denied-fmla-leave-in-new-jersey">employer denies you FMLA leave</a> and you speak up about it only to face punishment — CEPA can serve as an important safeguard against retaliation.

Requesting clarification from your health care provider.

Conducting surveillance (sometimes hiring private investigators).

Interviewing co-workers about your activities.

Discipline or termination: Employers may use fraud claims as grounds to fire an employee.

Damage to reputation: Accusations may create distrust among co-workers or supervisors.

Loss of benefits: Wrongful termination can cost an employee health coverage, retirement benefits, or income.

Emotional stress: Being accused while dealing with illness or caregiving responsibilities adds enormous strain.

Stay calm and professional. Emotional reactions may hurt your case.

Ask for specific details. Find out what evidence your employer is relying on.

Provide documentation. Share medical certifications, doctor’s notes, or other proof.

Avoid discussing with co-workers. Keep conversations professional to avoid rumors.

Consult an employment lawyer. A professional FMLA attorney in NJ can help you determine if your rights were violated and guide you on next steps.

Fraud Accusations Can Be Devastating… and Illegal

Wondering How to Protect Yourself From FMLA Fraud Accusations? Contact Us for Free Consultation

FMLA Fraud Accusations: How NJ Employees Can Protect Themselves

Workplace Interruptions: Everyday Annoyance or Something More?

They happen so frequently that they interfere with your ability to do your job.

They appear targeted at you, rather than spread evenly among staff.

They are paired with negative comments, ridicule, or dismissiveness.

They occur after you’ve asked the interrupter to stop.

Disability (including invisible disabilities)

The Connection Between Interruptions and Bias

Gender bias: Women are more likely to be interrupted in meetings than men, sometimes to the point of being silenced.

Racial bias: Employees of color may find their input dismissed or cut short, reinforcing patterns of exclusion.

Disability bias: Workers with conditions that affect speech or pace may be targeted with interruptions, creating unequal treatment.

When Interruptions Create a Hostile Work Environment

Happen regularly: It’s not just about one meeting, but a repeated experience.

Cause harm: The interruptions prevent the employee from completing work, limit participation, or damage reputation.

Are tied to bias: The behavior is directed at someone because of gender, race, religion, or another protected characteristic.

Impact employment: The conduct alters the terms and conditions of employment, making it harder for the employee to do their job.

Examples of Interruptions That May Cross the Line

In meetings: A manager repeatedly cuts off one employee while allowing others to speak at length. The interruptions include comments like, “We don’t need to hear this,” or “You’re overcomplicating things,” directed only at that employee.

During phone calls or tasks: A co-worker deliberately interrupts an employee’s workflow every few minutes, even after being told it’s disruptive.

Tied to protected categories: An older worker is consistently interrupted with remarks like, “Let’s hear from someone with a fresher perspective,” implying age bias.

To undermine authority: A female manager is constantly interrupted by male subordinates in front of clients, eroding her credibility.

Employers are responsible for preventing and addressing harassment in the workplace. <a href="/blog/legal-consequences-of-ignoring-workplace-harassment-complaints-in-nj">Ignoring workplace harassment complaints</a> (whether by brushing them off, delaying action, or failing to investigate) can expose the employer to liability under New Jersey law.

If a supervisor is responsible for harassment, the employer is generally held liable.

If a co-worker is responsible, the employer may still be liable if it knew (or should have known) and failed to take action.

Employees are protected against retaliation if they report harassment or file a complaint.

Document the behaviorKeep notes on when the interruptions happen, who is involved, and what was said. Save emails, chat messages, or meeting notes if relevant.

Address it directlySometimes, the interrupter may not realize the impact. Politely but firmly saying, “I’d like to finish my point,” can set a boundary.

Report to management or HRIf the behavior continues, raise the issue internally. Companies are legally obligated to investigate harassment complaints.

File a formal complaintEmployees can file complaints with the <a href="https://www.njoag.gov/about/divisions-and-offices/division-on-civil-rights-home/">New Jersey Division on Civil Rights (DCR)</a> or the <a href="https://www.eeoc.gov/">Equal Employment Opportunity Commission (EEOC)</a> if the issue isn’t resolved internally.

Seek legal adviceConsulting with a workplace harassment lawyer in NJ can help you understand if the interruptions amount to harassment and what remedies may be available.

Repeated Workplace Interruptions Might Not Be Coincidence

Dealing with Repeated Workplace Interruptions: Harassment in NJ?

If you worked 48 hours one week, instead of paying you 8 hours at time-and-a-half, your employer might say, “We’ll give you 12 hours of time off next week.”

The 40-hour threshold applies to each week — not averaged over several weeks.

Daily overtime (over 8 hours in a day) is not required under NJ law unless otherwise stated in a contract or union agreement.

Exempt employees (executives, professionals, administrative staff meeting certain salary and duty tests) are generally not entitled to overtime.

Can Private Employers Offer Comp Time Instead of Overtime?

Loss of immediate pay — Instead of receiving overtime wages in your paycheck, you’re essentially lending your employer free labor in exchange for a future promise of time off.

Scheduling conflicts — Employers may deny your request to use comp time when you actually need it, or try to <a href="/blog/can-you-be-forced-to-clock-out-but-keep-working-in-nj">force you to clock out but keep working anyway</a>.

Forfeiture of rights — If you leave the company before using comp time, you could lose it entirely.

Violation of law — If your employer replaces legally required overtime pay with comp time, you’re being shortchanged under NJ and federal wage laws.

New Jersey Wage and Hour Law: Reinforcing Overtime Protections

Liquidated damages (often doubling the owed amount)

Common Employer Tactics Around Comp Time in New Jersey

Calling it “flex time” — Allowing workers to leave early another day in exchange for staying late earlier in the week. If this results in more than 40 hours in one week without overtime pay, it’s still illegal.

Banking hours — Some employers promise to “even things out” in the next pay period, but that’s not allowed. Overtime must be calculated on a weekly basis, not averaged across paychecks. Carefully <a href="/blog/nj-wage-violations-understanding-your-pay-stub-rights">understanding your pay stub </a>can help you spot when overtime pay is being delayed or improperly calculated.

Pressuring employees to agree — Some workers may feel forced to accept comp time because they don’t want to be seen as difficult. But consent doesn’t make an illegal policy legal.

Know your rights: Understand that comp time is not a lawful substitute for overtime pay in the private sector in New Jersey.

Document hours: Keep careful records of your hours worked, including time sheets, schedules, pay stubs, and emails or texts related to overtime or comp time.

Raise the issue internally: Some employers may not realize their mistake. Bringing up the law could lead to correction without conflict.

File a complaint: Employees can file a complaint with the <a href="https://www.nj.gov/labor/">New Jersey Department of Labor and Workforce Development (NJDOL)</a> or the <a href="https://www.dol.gov/">U.S. Department of Labor</a>.

Consult an attorney: A wage and hour attorney in New Jersey can help recover unpaid wages, pursue penalties, and protect against retaliation.

Provides real financial compensation for longer workweeks.

Prevents employers from overworking employees without cost.

Ensures workers share in the economic value of their extra labor.

Still Have Questions About Overtime Law? Contact Us for Free Consultation

Comp Time vs. Overtime Pay: What's Allowed in NJ?

Firing or demotion after filing a gender discrimination complaint

Denying promotions or raises because an employee reported sexual harassment

Giving unfairly negative performance reviews after a worker speaks out about sexist practices

Assigning less desirable shifts or workloads to punish someone who filed a complaint

Excluding employees from meetings or opportunities after they oppose unequal treatment

Threatening or harassing an employee for supporting a co-worker’s discrimination claim

Gender Retaliation in New Jersey: Legal Framework

1. New Jersey Law Against Discrimination (NJLAD)

File a complaint about gender discrimination or harassment, whether it’s about pay, promotions, or even <a href="/blog/gender-bias-and-remote-work-are-women-at-a-disadvantage-in-nj">gender bias in remote work</a>

Assist in someone else’s complaint or investigation

Refuse to participate in discriminatory practices

Otherwise oppose unlawful employment practices

2. Title VII of the Civil Rights Act of 1964

3. Conscientious Employee Protection Act (CEPA)

Did the negative action occur shortly after I filed a complaint or opposed discrimination?

Is the treatment inconsistent with my past evaluations or record?

Have others who did not complain been treated differently in similar situations?

Common Scenarios of Gender-Based Retaliation

Termination after ComplaintThe most blatant form of retaliation: firing an employee shortly after they file a discrimination or harassment complaint.

Constructive DischargeInstead of direct firing, the employer makes the work environment intolerable, forcing the employee to resign.

Pay or Promotion DenialsAn employer may deny raises or block promotions for workers who speak out against gender bias or challenge <a href="/blog/gender-stereotypes-at-work-nj">harmful gender stereotypes in the workplace</a>.

Harassment or OstracismCo-workers or supervisors begin to treat the employee differently: excluding them from meetings, making negative remarks, or isolating them.

Negative Performance ReviewsA sudden drop in performance ratings after a complaint is filed can be evidence of retaliation.

More than $469.6 million obtained for 13,516 workers through mediation, conciliation, and other administrative resolutions.

Roughly $190 million secured for 3,041 federal employees and job applicants.

An additional $40 million recovered for 4,304 individuals through successful litigation.

Lost health insurance or retirement contributions

How to Protect Yourself if You Suspect Retaliation

Dates and details of discriminatory incidents

When and how you reported the discrimination

Employment Law Insights & Resources

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Dealing with Repeated Workplace Interruptions: Harassment in NJ?

Comp Time vs. Overtime Pay: What's Allowed in NJ?

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