The History of the 2020 Amendments to the New Jersey WARN Act
The Worker Adjustment and Retraining Notification Act (the “Federal WARN Act”) is a federal law that requires employers to provide advance notice to their employees in the event of a plant closing or mass layoff. Certain states, such as New Jersey and California, have established their own analogous state laws, or “mini-WARN Acts.” New Jersey’s mini-WARN Act, the Millville Dallas Airmotive Plant Job Loss Notification Act (the “NJ WARN Act”), first became effective in 2007 and contained provisions in line with the Federal WARN Act. These laws, and New Jersey’s in particular, have always been regarded as being complex and a trap for the unwary.
In January 2020, the risk of non-compliance was significantly raised when Governor Phil Murphy signed Senate Bill 3170 into law, memorializing radical changes to employers’ obligations under the NJ WARN Act. These changes were originally scheduled to go into effect on July 17, 2020, but the State has repeatedly postponed implementation due to the COVID-19 pandemic. On April 14, 2020, Governor Murphy delayed the effective date until 90 days following the expiration of Executive Order 103 (the public health emergency associated with COVID-19). On January 11, 2022, Governor Murphy issued Executive Order 280 which declared that the emergency declared in Executive Order 103 remained in full force and effect.
It remained unclear when the 2020 amendments would take effect until January 10, 2023, when Governor Murphy approved legislation to make the 2020 amendments effective 90 days after signing on April 10, 2023. The law provides that any individual or private business establishment in operation in the State of New Jersey for longer than three years is subject to the NJ WARN Act once the 2020 amendments become effective.
A Summary of the 2020 Amendments
-
More Employers Will Be Covered
Currently, the NJ WARN Act covers all employers that have been operating in New Jersey for longer than three years and that have 100 or more full-time employees. Starting in April 2023, however, the NJ WARN Act will apply to employers with 100 or more employees, including employees that work outside of the state and regardless of whether those employees are full- or part-time. Additionally, the 2020 amendments broaden the definition of “employer” to include individuals acting either directly or indirectly in the interest of an employer, as well as any persons making the decisions that give rise to an event triggering notice. This change will make a significant difference in how many employers are subject to the NJ WARN Act, and opens the door for owners, executives, and other decisionmakers to be exposed to potential individual liability if the NJ WARN Act is violated.
-
Obligations are Being Added in the Event of a “Change of Control”
At present, the NJ WARN Act is triggered and notice is required to any affected employees in two situations: first, when a “mass layoff” occurs, and second, where there is a termination or transfer of operations. However, the 2020 amendments will impose a new set of obligations in the event of a “change of control,” which is defined as “any material change in ownership of an employer,” or “any filing seeking bankruptcy protection.” If a change of control occurs, both the predecessor employer and the successor employer will be subject to a new set of obligations with regard to any “covered employee,” or any individual who: (1) is not a managerial, supervisory, or confidential employee; (2) works more than 20 hours per week; and (3) has been employed by the predecessor employer for at least 90 days immediately prior to the change of control. These new obligations include but not are not limited to: (1) the successor employer’s obligation to retain all covered employees for at least the transition period (180 days immediately following a change of control), unless the New Jersey Department of Labor and Workforce approves a reduction in the workforce; (2) the successor employer is obliged to maintain the same total compensation for all covered employees during the transition period; and (3) the predecessor employer must post public notice of the change of control no later than 15 days in advance. Further, for two years after the end of the transition period, the successor employer is only permitted to terminate covered employees without cause if the Commissioner of the Department of Labor and Workforce approves.
-
The Definition of “Mass Layoff” is Expanding
The 2020 amendments significantly change the definition of “mass layoff,” which is clearly intended to bring more employers within the purview of the NJ WARN Act when laying off groups of employees.
Previously, the NJ WARN Act defined “mass layoff” as a reduction in force that 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. Now, a “mass layoff” will mean whenever there is a reduction in force, not being the result of a transfer or termination of operations, that results in the termination of 50 or more employees, regardless of whether they are full- or part-time, at any establishment within New Jersey, including employees who “report to” any location in New Jersey. The law applies to any reduction in force if an employer reaches the 50-employee threshold during a 30-day period or if the employer meets that threshold by conducting a series of smaller, related layoffs within a 90-day period.
-
The Definition of “Establishment” is Expanding
Previously, the NJ WARN Act defined the term “establishment” as a single place of employment which has been operated by an employer for a period longer than three years. Under the 2020 amendments, “establishment” now includes either a single site of employment in New Jersey or a group of locations within New Jersey, even if they are not contiguous. This means that any employer operating at multiple locations within New Jersey will be subject to the NJ WARN Act if they terminate 50 or more full- or part-time employees within a 30-day period across their New Jersey locations combined.
-
The Length of the Notice Period is Increasing
The 2020 amendments impose much stricter requirements on employers conducting a mass layoff or termination/transfer of operations. The current NJ WARN Act requires employers to provide affected employees with notice of and specific information regarding a workplace shut down or mass layoff 60 days in advance, while the 2020 amendments require employers to provide at least 90 days’ notice of the shutdown or layoff.
-
Mandatory Severance is Being Implemented
Under the 2020 amendments, even when an employer provides affected full- and part-time employees with the required 90-day notice, this will no longer suffice, as employers will nonetheless be required to provide all terminated employees with severance pay equal to one week of pay for each full year of employment. Further, if the employer fails to provide the required 90-days’ notice, the employer will be subject to the penalty of paying an additional four weeks’ severance in addition to mandatory severance. An employee also may no longer waive his or her right to severance in a release agreement without approval from the New Jersey Department of Labor and Workforce or a court of competent jurisdiction.
Why These Changes Are More Than Problematic
For Employers
Because of the expansion of the definition of employer, the inclusion of part-time workers in the 100-employee threshold for the NJ WARN Act to apply, and the addition of obligations in the event of a change of control, many employers that were not previously subject to the Federal WARN Act and the NJ WARN Act now fall within the reach of the law. The inclusion of part-time and out-of-state workers in the 100-employee threshold will result in countless smaller businesses being subject to the NJ WARN Act. The expansion of the definition of “mass layoff” and “establishment” means that larger New Jersey employers will have to take extra care when terminating any employees across any locations in New Jersey, as layoffs of both full- and part-time workers aggregated across all New Jersey locations can trigger the need for notice and mandatory severance. Any employers who are considering selling their business or declaring bankruptcy will also have to familiarize themselves with the new “change of control” requirements under the NJ WARN Act as amended.
Additionally, while it was previously common practice for employers to ask employees to waive his or her right to sue in exchange for severance in a release agreement, employers should be aware that as of April 10, 2023, this practice will no longer be permitted absent approval from the Commission or a court. In fact, if notice is triggered under the NJ WARN Act as amended, employers will be obligated to pay full- and part-time employees a severance payment equal to one weeks’ pay for every full year worked. If notice is triggered under the amended NJ WARN Act and an employer fails to realize, they will be forced to pay every employee that was entitled to notice an additional four weeks of pay.
For these reasons, it is integral that employers take note of the new stringent requirements under the amended NJ WARN Act that will take effect this April. Smaller employers that have not previously been subject to the NJ WARN Act should reevaluate whether they qualify under the 2020 amendments, and larger employers should ensure that all of their New Jersey locations are communicating closely regarding any potential terminations in case layoffs across the State can be aggregated to reach the 50-employee threshold and trigger the need for an NJ WARN notice and mandatory severance payments.
For Everyone
Furthermore, it is not only employers that should worry about the impact of the 2020 amendments to the NJ WARN Act. With such aggressive requirements placed on all but the smallest of businesses, it is likely that businesses with the resources to operate elsewhere will increasingly choose other locations in an effort to avoid the NJ WARN Act’s punitive measures. It should be anticipated that businesses will be less likely to merge with or acquire New Jersey businesses due to the new prohibition on terminating employees without cause and to maintain total compensation for 180 days following the change of control and then for another two years thereafter. The 2020 amendments to the NJ WARN Act serve to punish struggling businesses by forcing them to pay mandatory severance to all employees, while simultaneously discouraging those struggling businesses from selling their assets or declaring bankruptcy with the new change of control obligations.
For many years, it has been common practice for purchasers of businesses to conduct an “asset purchase” to avoid exposure to the seller’s liabilities, including any employment liabilities. This was accomplished by the purchase agreement requiring that the seller terminate the employees the day before closing and the purchaser rehire those same employments upon passing of title. In many cases, the seller could negotiate favorable terms and conditions for such employees. Unfortunately, the NJ WARN ACT will totally negate this practice. In such case, everyone will be the loser: the seller, purchaser, and the affected employees. This cannot be the logical consequence of a law that was first intended to protect affected employees.
In today’s economic climate, more businesses are bound to face hardship, especially in the hostile legal environment that the Legislature has created in passing these 2020 amendments and various other laws in recent years. New Jersey residents should be concerned that the 2020 amendments will discourage employers from doing business in the state. Similarly, New Jersey employees should be wary of the mass layoffs that may occur prior to April 10 as employers attempt to get ahead of the effective date of the 2020 amendments. Although the 2020 amendments were theoretically intended to prevent hardship to employees, the new severe requirements may cause many more problems than they solve.