The employer also kept zero payroll records — and a court presumption made it worse
An employer who kept zero payroll records and paid a worker only with a basement apartment just lost at New Jersey's highest court.
In Sergio Lopez v. Marmic LLC (A-27-24) (089632), decided March 19, 2026, the state Supreme Court ruled unanimously that employers cannot substitute informal arrangements for lawful wages — and that failing to maintain employment records can turn a court presumption squarely against them.
The case centered on Sergio Lopez, hired in June 2015 as superintendent of two Newark buildings owned by Marmic LLC, a realty management company. After discovering Lopez had provided an invalid Social Security number on his W-4 form, owner Mike Ruane stopped paying him — telling Lopez it would be "against the law" — and offered a rent-free basement apartment instead.
Lopez continued working for more than three years. Marmic maintained no records relating to his employment. At trial, Ruane agreed Lopez had performed the work he described. Yet the lower courts dismissed the claim, finding Lopez not credible because of the invalid Social Security number and faulting him for not proving his exact hours.
The Supreme Court saw it differently.
Chief Justice Rabner, writing for all seven justices, held that there is no broad-based exception to New Jersey's wage and hour laws for barter arrangements. A rent-free apartment, the Court found, is not proof that the employer properly compensated Lopez for his labor.
More pointedly for employers: when a company fails to keep the wage and hour records the law requires, a rebuttable presumption kicks in. The employee's account of hours worked and wages owed is presumed correct unless the employer can prove otherwise. Marmic, which admittedly kept no records at all, had nothing to counter with.
The Court also addressed immigration directly. Federal immigration law bars employers from hiring undocumented workers, but it does not excuse them from paying for work already performed. Ruling otherwise, the Court reasoned, would give employers a financial incentive to hire undocumented workers and pay them less than the law requires — the exact outcome federal immigration law is designed to prevent.
The case was sent back to a different trial judge to determine the appropriate amount of damages owed.
For HR professionals, the decision is a sharp reminder that compliance shortcuts carry consequences. The record-keeping obligation falls on the employer, not the employee — and the absence of records does not make a wage claim disappear. It makes it harder to defend against one.
Informal pay arrangements, whether involving housing, meals, or other non-cash benefits, do not replace the obligation to pay lawful wages under state law. And while this ruling is binding only in New Jersey, it echoes decisions from courts in Minnesota, Maryland, Connecticut, Georgia, and Kansas, as well as multiple federal circuits.
The message from the bench is consistent and increasingly hard to ignore: if someone works for you, you pay them. The paperwork is not optional. And a basement apartment is not a paycheck.
