Legal Update

Jan 21, 2020

UPDATE: New NJ WARN Act Signed into Law
"THOU SHALL NOT LEAVE"—A New Jersey Bill Awaiting Signature By the Governor Would Dramatically Re-Write Existing Mass Layoff Laws

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UPDATE: On January 21, 2020, the Governor of New Jersey signed Senate Bill 3170 into law, pushing state law far past the corresponding federal requirements of the WARN Act. Governor Phil Murphy issued an omnibus press release identifying this new law as one of 153 pieces of legislation he signed into law on January 21, 2020. The law is scheduled to go into effect 180 days after the date of its enactment, which is July 19, 2020.

Seyfarth Synopsis: On Monday, January 13, 2020, the New Jersey state legislature passed Senate Bill 3170 which, if signed by the Governor, would result in sweeping changes to what was once a mass layoff notification statute that would now make New Jersey the first state to require severance for layoffs of 50 or more within a 30-day period, while also vastly expanding the definition of “employer,” as well as including all part-time employees within the statute’s calculations.

Legal Backdrop

Since 2007, New Jersey employers have been required to consider two similar, but slightly different, statutes when considering mass layoffs and plant closings or relocations. Generally, the federal Worker Adjustment and Retraining Notification (“WARN”) Act requires employers with more than 100 employees to provide at least 60 days’ advance written notice to employees (or their union representatives) affected by a “mass layoff” or “plant closing,” as well as similar notice to designated state and local government officials. Failure to provide such notice could result in liability to affected employees for back wages and benefits for the period for which notice was not provided (up to the full 60 days), as well as civil fines. Similarly, New Jersey’s own “Millville Dallas Airmotive Plant Job Loss Notification Act” (“NJ Warn Act”) has required, and currently requires, covered employers to give 60 days’ advance notice whenever there is a “mass layoff,” “transfer of operations,” or a “termination of operations.”  

The existing NJ Warn Act provides that a “termination of operations” (referred to as a “plant closing” under federal law) refers to the permanent or temporary shutdown of a single establishment, or of one or more facilities or operating units within a single establishment during any continuous period of not more than 30 days which results in the termination of employment of 50 or more full-time employees.

The two statutes essentially provide protections to full-time employees only at present, but the existing NJ Warn Act has maintained some notable distinctions, such as:  

  • A “mass layoff” refers to a reduction in force which is not the result of a transfer or termination of operations and which results in the termination of employment at an establishment during any 30-day period for 500 or more full-time employees, or for 50 or more of the full-time employees representing one third or more of the full-time employees at the establishment. Unlike the federal act, the NJ Warn Act categorizes transfers as separately actionable events.
  • A “transfer of operations” refers to the permanent or temporary transfer of a single establishment, or one or more facilities or operating units within a single establishment, to another location, inside or outside of New Jersey. This is unlike federal WARN, where a worker does not experience an employment loss in a closing or layoff if the employer offers to transfer the worker to a job at a different site within a reasonable commuting distance with no more than a 6-month break in employment, or the worker accepts the offer within 30 days, regardless of distance.
  • Under federal WARN, the notice is provided to either the affected employees or their bargaining representative, but under the NJ Warn Act, each employee to be terminated and any collective bargaining unit representative must receive the notice.
  • There are severance penalties for employers that fail to provide proper notice, which are offset by those penalties provided under federal WARN.
  • Under the NJ Warn Act, there is a mechanism by which to potentially aggregate smaller events involving terminations of employment at a single establishment occurring within any 90-day period.

New Bill’s Proposed Sweeping Changes

As presently drafted and revised, S. 3170 will change the landscape for employers looking to establish sites in New Jersey and those contemplating whether to remain or grow there.  The proposed amendments would result in significant changes, including:

  1. Increase Notice. The bill would increase the minimum number of days of notice that covered employers must give to employees of a covered plant closing, transfer, or mass layoff. While current law only requires 60 days’ advance notice to employees affected by certain types of covered events, mirroring the federal law, the new bill would require 90 days’ advance notice.
  2. Part-Time Employee Coverage. The bill would eliminate the “full-time employee” distinction of calculating the 100 employee coverage threshold and the 50 employee layoff minimum, thus including part-time employees in the analysis.
  3. Add a Severance Benefit and Enhance Severance Penalties. The bill seeks to modify the severance requirement under current law that presently serves as a penalty for failure to give proper notice by turning it into layoff benefit for any covered mass layoff.  If signed into law, the severance requirement of one week’s pay for each full year of service would be the first of its kind in the United States and the sums due would be regarded as compensation due to an employee for back pay, and considered to have been earned in full upon the termination of the employment relationship. The bill would also mandate an additional four weeks of severance to be paid if the employer does not comply with the notification rule.
  4. Eliminate Waivers. The bill would eliminate an employer’s ability to obtain a waiver of the employee’s right to severance unless it is approved by the Commissioner or a court.  
  5. Make Everyone an Employer. The bills seeks to drastically expand the definition of “employer” to include “any individual, partnership, association, corporation, or any person or group of persons acting directly or indirectly in the interest of an employer in relation to an employee, and includes any person who, directly or indirectly, owns and operates the nominal employer, or owns a corporate subsidiary that, directly or indirectly, owns and operates the nominal employer or makes the decision responsible for the employment action that gives rise to a mass layoff subject to notification.” 

Earlier versions of the bill would have imposed additional requirements for those purchasing businesses to continue the employment (with essentially unchanged wages and benefits) of all employees of the prior owner for lengthy periods following a purchase, and by including bankruptcies and other transactions/events in the definition of a change of control.  Mercifully, the most recent version of the bill has eliminated these earlier efforts to impact business transactions and bankruptcies. 

Employer Outlook

The bill passed both the Senate and the Assembly on January 13, 2020.  If signed by Governor Phil Murphy and passed, the bill is set to take effect 180 days after the date of its enactment. Concerned employers and employer organizations should consider reaching out to their elected officials seeking to hit the pause button on this draconian law, which stands to make New Jersey one of the least employer-friendly states in the union.  Additionally, employers that are contemplating closures or mass layoffs should consider accelerating their analysis so as to utilize the 180 day safety period until a potential effective date.  Unfortunately, employers contemplating establishing or expanding operations in New Jersey should also consider re-visiting their analysis, as well as re-visiting efforts to seek tax incentives from the state that may moderate back end risk. 

While no one wants to see mass layoffs take place, while citizens should be concerned about employers that operate unscrupulously or place their employees at undue risk of job loss, and while all of us that live or work in New Jersey want to see the state thrive, there is reason for concern about efforts to restrain employers and create burdens on businesses within the state that may curtail business investment and development.