Professional Employer Organizations (PEOs) in New Jersey are facing ongoing uncertainty regarding their obligations for reporting employee separations, despite recent legislative changes intended to clarify these responsibilities.
In November 2022, New Jersey enacted Bill S2357, also known as P.L. 2022, c.120, which took effect on July 31, 2023. The law introduced new requirements for employers to notify the Department of Labor and Workforce Development “immediately and simultaneously” when an employee is separated from employment. It also mandated that separated employees receive a separation notice (BC-10) and an additional form used to determine unemployment benefit eligibility. Employers failing to submit this information in a timely manner face penalties of $500 or 25 percent of any fraudulently withheld amount, whichever is greater.
PEOs serve as co-employers with client companies under N.J.S.A. 34:8-72(c), managing HR tasks such as payroll and workers’ compensation while the worksite employer oversees daily operations. Typically, only the worksite employer is immediately aware when an employee leaves, and PEOs may not be informed until days later.
To address concerns about responsibility and liability for timely reporting, the National Association of Professional Employer Organizations (NAPEO) sought legislative changes to shift these duties from PEOs to client companies. On August 21, 2025, Governor Phil Murphy signed legislation (A5506/S3773) amending P.L. 2022, c.120 to move liability and penalties for non-compliance from PEOs to client companies.
However, confusion persists among industry participants because some PEOs continue to be contacted by state authorities regarding separation notices. An outdated FAQ on the Department of Labor & Workforce Development website still lists PEOs as responsible parties for these notifications.
“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,” the release states. “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.”
NAPEO continues efforts to secure definitive clarification so that liability rests with client companies as outlined in A5506/S3773.
If businesses have questions about how these developments affect them, they are encouraged to contact Ian G. Zolty, Dustin W. Osborne or another member of the Workers’ Compensation or Professional Employer Organizations practice groups.
