The amendments widen the gap between the federal WARN Act and the NJ WARN Act, making compliance with both laws a more challenging proposition.
On January 21, 2020, months before the COVID-19 pandemic emerged in the United States, New Jersey Governor Phil Murphy signed into law New Jersey Senate Bill 3170, ushering into law significant amendments to the Millville Dallas Airmotive Plant Job Loss Notification Act (NJ WARN Act), New Jersey’s state law counterpart to the federal WARN Act. Originally set to take effect in July 2020, the pandemic set into motion a series of postponements. Pursuant to New Jersey Senate Bill 2353, signed into law on April 14, 2020, the amendments will take effect 90 days after the termination of Executive Order No. 103, which declared a state of emergency arising from the COVID-19 pandemic and remains in effect.
That being said, although the amendments remain in abeyance for now, New Jersey employers should be mindful of the significant changes coming to the NJ WARN Act and the dramatically different landscape they will face once the amendments take effect. In lengthening the required notice period, expanding the scope of coverage and mandating severance pay even when adequate notice is given, the amendments make New Jersey’s mini-WARN law among the nation’s broadest and most expensive to implement. The amendments widen the gap between the federal WARN Act and the NJ WARN Act, making compliance with both laws a more challenging proposition.
Amendments to the New Jersey Law
We summarize below the key changes to the NJ WARN Act:
Expanded Scope of Covered Employers
Currently, the NJ WARN Act applies to employers with 100 or more full-time employees. As amended, the 100-employee threshold for coverage applies regardless of whether the employees are employed full time or part time.
Expanded Scope of “Mass Layoff” Triggering Notice
The current NJ WARN Act defines “mass layoff” only with respect to employment losses within any 30-day period affecting a threshold number of full-time employees who work at an “establishment.” As amended, a mass layoff triggering notice occurs if an employer terminates, within any 30-day period, 50 or more employees, regardless of their full- or part-time status and regardless of whether they work at or merely report to any establishment.
Aggregation of Worksites Across New Jersey
Further expanding the scope of a mass layoff, the amendments to the NJ WARN Act change the definition of an “establishment.” The current NJ WARN Act defines an “establishment” as a single location or group of contiguous locations. The amended NJ WARN Act defines “establishment” to include multiple locations within New Jersey, regardless of how far apart they are. Therefore, when counting employment losses to determine if a mass layoff has occurred, New Jersey employers must consider what is happening at all worksites within the state.
Increased Notice Period
The amendments increase the notice period from 60 days (the length of time required under the federal WARN Act) to 90 days. With this change, New Jersey will join New York and Maine as the only other states that impose a 90-day notice period for covered events under a mini-WARN law.
Mandatory Severance Pay Even When Proper Notice Is Given
Currently, the NJ WARN Act requires employers to pay severance only to full-time employees affected by a notice-triggering event and only in the event that 60 days’ notice is not given. In its amended form, the NJ WARN Act makes the right to severance pay automatic even when affected employees receive the full 90 days’ notice to which they are entitled. Employees affected by a notice-triggering event under the amended NJ WARN Act are entitled to one week of severance pay for each completed year of service, regardless of their full- or part-time status. However, union-represented employees with a right to severance pay under a collective bargaining agreement are not entitled to receive additional severance pay under the NJ WARN Act, as amended.
In making the right to severance pay automatic, New Jersey will stand alone as the only state requiring severance pay in addition to adequate notice under a mini-WARN law. Like New Jersey’s current NJ WARN Act, Hawaii and Maine require severance pay under their mini-WARN laws only if a covered employer fails to give adequate notice. The federal WARN Act has no severance pay obligation.
Additional Severance Pay When Proper Notice Is Not Given
As amended, the NJ WARN Act penalizes employers that fail to give 90 days’ notice of a triggering event by requiring payment of four additional weeks of severance pay. In effect, an employee who completed one year of service with a covered employer and is entitled to notice under the amended law will be owed five weeks’ severance pay from the employer. The amendments do not spell out whether an employee with less than one year of service is entitled to four weeks’ worth of severance pay in this circumstance, given that they have no right to mandatory severance under the NJ WARN Act, as amended.
Exceptions to the New Severance Pay Obligation
New Jersey Senate Bill 2353 not only pegged the effective date of the NJ WARN Act to the lifting of Executive Order No. 103, it also made additional modifications to the statute retroactive to March 9, 2020. Most notably, Senate Bill 2353 changed the definition of “mass layoff” under the as-modified NJ WARN Act to exclude “national emergencies” and certain other events from triggering the severance obligations. These changes made clear that mass layoffs resulting from the COVID-19 pandemic, as a national emergency, did not trigger the new severance obligations.
Bar on Private Releases
Under the amended NJ WARN Act, affected employees are entitled to severance pay without any requirement of a release. In fact, the amendments provide that a release of claims under the NJ WARN Act is enforceable only if the New Jersey Department of Labor and Workforce Development or a court approves the release. Accordingly, New Jersey employers accustomed to providing severance pay only in exchange for a release agreement will need to change their practice to comply with the changes.
New Obligations in a Change of Control
Currently, the NJ WARN Act requires notice only in the event of a mass layoff, termination of operations or transfer of operations. As amended, an entirely new set of obligations applies in the event of a “change of control,” defined as “any material change in ownership of an employer” or “any filing seeking bankruptcy protection.” In the event of a change in control, both the predecessor employer and the successor employer will be subject to a new set of obligations under New Jersey law once the amendments to the NJ WARN Act take effect.
Potential for Individual Liability of Decision-Makers
The amendments to the NJ WARN Act broaden the definition of a covered “employer” to include individuals acting “in the interest of an employer” and persons making the decisions that give rise to a mass layoff-triggering notice. In effect, the amended NJ WARN Act makes owners, executives and business leaders involved in the decision-making process of a reduction in force vulnerable to liability in their individual capacities for violations of the NJ WARN Act.
What This Means for Employers
The impending changes to the NJ WARN Act underscore the need for New Jersey employers to plan far in advance of implementing any business changes that trigger notice under the act, as amended. By way of example, the combined effect of the expanded definitions of “mass layoff” and “establishment” will make many more reductions in force of New Jersey employees subject to the strict requirements of the NJ WARN Act.
Further, employers should account for the new expense of mandatory severance pay when planning the budgetary and operational effects of a business change resulting in employment losses. Noncompliance with the NJ WARN Act may be costly to employers, not only because of the new severance pay requirements, but also because the NJ WARN Act gives employees a right to pursue claims in court, including potential class action claims and the potential negative publicity that accompanies litigation.
Complicating matters is the need for New Jersey employers to ensure compliance with both the NJ WARN Act and the federal WARN Act in the event a business change triggers notice under both laws. Among the many distinctions between the federal and state statutory schemes is the amount of notice required, the events triggering notice, the exceptions to the notice requirement and the penalties for violations.
New Jersey employers should review their severance pay policies and practices, as well as any employment agreements, collective bargaining agreements and ERISA plans addressing severance, before the amendments take effect to ensure compliance with the NJ WARN Act.
New Jersey employers contemplating a reduction in force, plant shutdown or transfer, M&A transaction or bankruptcy filing may want to confer with legal counsel for guidance navigating their obligations under the NJ WARN Act and managing the employee relations issues that come with any major business change.
About Duane Morris
Our attorneys will continue to monitor the status of the NJ WARN Act amendments. Stay tuned for an update once the effective date of the amendments is known.
For More Information
If you have any questions about this Alert, please contact Michael R. Futterman, Patrice E. LeTourneau, Kathryn R. Brown, any of the attorneys in our Employment, Labor, Benefits and Immigration Practice Group or the attorney in the firm with whom you are regularly in contact.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.