Choose Site

LawFlash

New Jersey WARN Act to Impose Mandatory Severance Pay, Stricter Employer Obligations

January 23, 2020

The amended New Jersey WARN Act will impose significantly stricter obligations (including potential individual liability) and make New Jersey the first state to mandate severance pay to employees separated as a result of certain layoffs, transfers, or terminations of operations—even if the employer provides the requisite advance notice. The law takes effect on July 19, 2020.

Governor Phil Murphy signed into law Senate Bill 3170 (S. 3170) on January 21, amending the Millville-Dallas Airmotive Plant Job Loss Notification Act (the New Jersey WARN Act), the state’s analogue to the federal Worker Adjustment and Retraining Notification Act.

Prior to amendment, the New Jersey WARN Act generally required NJ private employers with 100 or more full-time workers (including employees outside the state) to provide 60 days’ advance notice in the event of a “mass layoff” or a “transfer” or “termination” of operations at a covered “establishment” within the state, and mandated the payment of severance only if the employer failed to provide affected employees with the required amount of advance notice before such termination or layoff.

The amended law significantly toughens the New Jersey WARN Act. In addition to lengthening the notice period (from 60 days to 90 days) and expanding the definitions of “mass layoff” and “establishment,” the bill requires covered employers to pay severance to both full- and part-time employees impacted by such events even if the employer timely complies with all applicable notice requirements. The amendment creates considerable potential financial liability for covered New Jersey employers seeking to reduce their workforces.

All Employees to Receive Severance (Even When Notice Is Provided)

Under the previous iteration of the New Jersey WARN Act, covered employers were only required to make severance payments if they failed to provide the required amount of notice of termination or layoff. Under the amended law, however, an employer conducting a “mass layoff” or a “transfer” or “termination” of operations must pay each affected employee one week of severance for each full year of his/her employment, even if the employer provides the full 90 days’ notice. An employer that fails to provide such notice to any affected employee must pay that employee an additional four weeks of pay. An employee’s right “to severance provided pursuant to” the relevant section of the New Jersey WARN Act cannot be waived without approval of the waiver by a court or the commissioner of Labor and Workforce Development.

If affected employees are entitled to severance under a collective bargaining agreement “or for any other reason,” the employer is required pay either the statutorily mandated severance or the severance provided for such “other reason,” whichever is greater. The amendment does not explicitly address whether severance greater than the statutorily mandated amount, provided for such “other reason,” may be conditioned upon a release of claims. Furthermore, statutorily mandated severance under the amendment is “regarded as compensation due to an employee . . . earned in full upon the termination of the employment relationship,” suggesting that such severance must be included with the employee’s final payment of wages. It remains unclear whether the employer can delay providing such payment pending an employee’s decision of whether to accept a greater offer of severance conditioned on a release of claims.

Increased Notice Period

Before the amendment, the New Jersey WARN Act—like the federal WARN Act—required covered employers to provide 60 days’ written notice to affected employees (and any collective bargaining units or other employee representatives) and certain state and local government officials of a mass layoff, transfer of operations, or termination of operations. The new law increases the required period of advance notice to 90 days for covered employers.

Reduced ‘Mass Layoff’ Minimum Threshold

Previously, “mass layoff” was defined as the termination of employment within any 30-day period (or 90-day period within which two or more group terminations can potentially be aggregated) of either (1) 500 or more full-time employees at an establishment, or (2) 50 or more full-time employees comprising at least 33% of the full-time employees at an establishment. The new law removes the 500-employee and 33% requirements, and counts both employees “at” an establishment and employees “reporting to” an establishment. Accordingly, 50 or more qualifying terminations will trigger notice and severance requirements regardless of what percentage of the workforce that may constitute.

Both Full-Time and Part-Time Employees Are Now Counted

Before the amendment, the separation of “part-time” employees (working fewer than 20 hours per week on average or employed for fewer than 6 of the preceding 12 months) was not counted when calculating whether a New Jersey WARN event had occurred. The amendment removes the distinction between “full-time” and “part-time” employees. Now, all employees (regardless of their hours or the length of their employment) count toward New Jersey WARN trigger thresholds, and if New Jersey WARN is triggered, all employees must receive notice and severance. Furthermore, New Jersey WARN, as amended, now covers all employers with 100 or more employees (including employees outside the state), regardless of how many are “full time” or “part time”; previously only those employers with 100 full-time employees were covered.

Separations at All Facilities Across the State Are Aggregated

Previously, New Jersey WARN Act analysis was site specific, conducted separately for each different “establishment,” which was defined as either a single location operated for longer than three years or a group of contiguous such locations, such as a group of buildings forming an office park. The new law removes “contiguous” from this definition, meaning that all of an employer’s facilities within New Jersey are considered one aggregated “establishment”; only temporary construction sites and operations in effect for three years or less are excluded. For example, an employer with 50 facilities throughout the state that separates one employee at each of those facilities (all within a 30-day period) will have conducted a “mass layoff” triggering advance notice and severance requirements—regardless of where in the state those facilities are located.

Individuals May Be Held Liable for Payment of New Jersey WARN ‘Severance’

As amended, the New Jersey WARN Act defines an “employer” to include

  • “any individual” who “act[s] directly or indirectly in the interest of an employer in relation to an employee”;
  • “any person who, directly or indirectly, owns and operates” either the employing entity or a corporate subsidiary owning and operating the employing entity; and
  • “any person who . . . makes the decision responsible for the employment action that gives rise to a mass layoff subject to notification.”

Because the New Jersey WARN Act compels “employers” to provide severance when the act is triggered, individual employees (such as owners, operators, managers, and decisionmakers) may now be exposed to personal liability for triggering the New Jersey WARN Act and/or failing to provide requisite advance notice.

Recommended Next Steps for Employers

The amendment to the New Jersey WARN Act imposes new strict burdens and significant risks on all employers operating in or across New Jersey with at least 100 employees (including employees outside the state) that are facing mass layoffs, transfers, or terminations of operations. Accordingly, an employer that is contemplating a reduction in force that will affect its New Jersey–based operations is well advised to consider carefully what, if any, obligations it may have under the New Jersey WARN Act and to consult legal counsel as appropriate to ensure compliance with the amended statute. Employers should also consult legal counsel to assess whether their employee separation processes, headcount tracking procedures, and/or severance policies and plans should be revisited or revised to facilitate compliance with the amended New Jersey Warn Act.

Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

Princeton
August W. Heckman III
Terry D. Johnson
Thomas A. Linthorst
Sean P. Lynch
Joseph A. Nuccio
Richard G. Rosenblatt
Michelle Seldin Silverman
James P. Walsh, Jr.