The global economic downturn means that we are likely to see more restructuring and reorganization measures during 2023. Employers need to be aware of compliance with the federal Worker Adjustment and Retraining Notification Act (the federal “WARN” Act), which requires advance notification in the case of plant closings and mass layoffs. Some states have also adopted laws, often referred to as “Mini-WARN Acts,” with their own notice requirements. Employers in such jurisdictions are required to comply with the more rigorous requirements imposed by federal or state law.
Among the states to have adopted a Mini-WARN Act is New Jersey. The Millville Dallas Airmotive Plan Job Loss Notification Act (“New Jersey Mini-WARN Act”), N.J. Stat. Ann. §§ 34:21-1 and 34:21-2, previously applied to employers which (1) conducted a mass layoff (defined as termination of (a) 500 or more employees or (b) 50 or more employees if they comprise 50% of the workforce at the place of employment), or (2) transferred or terminated operations at an establishment resulting in the termination of 50 or more full-time employees within a 30-day period. Covered employers were required to give 60 days’ notice of the impending transfer of operations, termination of operations, or mass layoff before the first termination of employment occurred.
The New Jersey legislature adopted amendments to the New Jersey Mini-WARN Act, which were originally intended to be effective on July 19, 2020, but the Governor deferred their implementation by Executive Order because of the pandemic. This deferral was lifted on January 10, 2023, allowing the Amendments to go into effect on April 10, 2023. The Amendments will impose some of the most onerous requirements on employers facing downsizings anywhere in the country. For example, the Amendments will:
- amend the definition of a covered employer from one employing 100 or more full-time employees to 100 or more employees, regardless of full- or part-time status, thereby expanding the number of businesses in the state subject to notification requirements. Full- and part-time employees affected by a triggering event are entitled to notice, and terminations of full- and part-time employees count toward the calculation of mass layoffs or operation transfers/terminations;
- extend 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 any employee, thereby expanding the law’s application substantially and imposing potential liability on parent companies, owners, and even non-owner individuals directed to reduce headcount, reorganize operations, or implement cost-saving measures that result in a covered employment action;
- require that terminations be calculated not only at the single place of employment at which a mass layoff, termination of operations, or transfer of operations occurs, but at the establishment level, meaning a place of employment that has been operated by an employer for a period longer than three years, which may be a single location or group of locations. In other words, terminations at different locations throughout the state may need to be aggregated (e.g., terminations of 10 employees at each of five separate locations);
- amend the definition of mass layoff to include reductions-in-force affecting at least 50 employees in the state within a 30-day or 90-day period, regardless of what percentage of the overall workforce this number constitutes; and
- increase the pre-termination notice period from 60 to 90 days before the first termination resulting from a mass layoff or transfer/termination of operations.
The most significant and burdensome requirement imposed by the Amendments pertains to severance pay. The existing New Jersey Mini-WARN Act required employers to pay severance to employees as a penalty if they failed to give the full 60 days’ notice in advance of termination. But beginning on April 10, 2023, New Jersey employers must provide affected employees with severance pay equivalent to one week of pay (calculated at their average rate of compensation during the last three years of employment with the employer or the final regular rate of compensation, whichever is higher) for each full year that they worked, even if the employer timely complies with the law’s notice requirement. If the employer fails to give the full 90-day notice, then in addition to the mandatory severance payment, it also must pay the employee an additional four weeks of severance pay; this four-week penalty is not prorated for partial compliance with the notice requirement. If employers have adopted a severance plan or are subject to a collective bargaining agreement (CBA) requiring severance, they will be required to comply with the more generous option – whether that is pursuant to the plan, CBA, or the statute. Any back pay provided by the employer to the employee pursuant to federal WARN Act requirements shall be credited toward meeting the New Jersey Mini-WARN Act severance requirement.
As a result, New Jersey is now one of the very few states to require 90 days’ advance notice of mass layoffs or operations-driven terminations and to force employers to pay such employees severance. Since severance is treated as wages earned upon termination, employers must issue the payment to affected employees in a lump sum on the first regularly scheduled payday following their termination date and cannot condition payment of the severance amount on the execution of a release. The Amendments do not allow employees to waive their right to severance without approval by a court or the New Jersey Department of Labor and Workforce Development. Aggrieved employees may pursue a private right of action to recover compensatory damages, in addition to reasonable attorneys’ fees, if their employer fails to provide the required severance payment when due.
A lawsuit is pending in New Jersey federal court alleging that the Amendments’ severance obligations are preempted by the Employee Retirement Income Security Act (ERISA), but pending a decision that the severance requirements are invalid, employers contemplating a reduction-in-force affecting their New Jersey employees should carefully review the numbers of persons affected, plan well in advance of the putative terminations to ensure sufficient notice, and review separation agreements with experienced legal counsel to determine whether consideration is provided in addition to the mandatory severance payments so as to effectuate valid releases of claims.