Alert: New Jersey Requires Severance and Increased Notice to Employees Terminated in Layoffs

WHAT YOU NEED TO KNOW

On January 21, 2020, the New Jersey legislature amended the state’s mini-WARN Act, which previously required certain employers engaging in facility closings or mass layoffs in New Jersey to provide 60 days’ notice to affected employees. Effective July 19, 2020, the bill will expand the application of the Act to smaller employers, increase notice requirements to 90 days, and mandate severance pay for all affected employees in the amount of one week of pay per full year of service.

Expanded Definition of Covered Employers: As amended, the Act will cover employers with at least 100 full or part-time employees, excluding seasonal employees. Previously, only employers with 100 full-time employees fell under the Act. The Act also expands the definition of “employer” to include “any person or group of persons acting directly or indirectly in the interest of an employer in relation to an employee.” This addition will likely give rise to assertions of individual liability of directors and officers under the Act.

Expanded Definition of Covered Events: The Act also expands the definitions of facility closings and layoffs that will trigger the statute’s requirements. A covered transfer of operations, termination of operations, or mass layoff will now include the termination of 50+ full or part-time employees from a New Jersey “establishment” within a 30-day period (or within a 90-day period if it cannot be proved that terminations are for separate and distinct causes). Prior to the amendment, the Act only applied when an employer terminated 50+ full-time employees. The Act also broadens the definition of “establishment” to include non-contiguous locations within New Jersey.

Increased Notice and Mandatory Severance: The most notable changes to the Act are those increasing the notice requirements and mandating severance payments for impacted employees. Under the Act, a covered employer must now give 90 days’ notice before the first termination of employment occurs (previously, the Act required 60 days’ notice, which also coincided with the federal WARN Act). In addition to providing 90 days’ notice, employers must also pay all affected employees severance equal to one week of pay for each full year of employment. Severance is calculated as the “average regular rate of compensation received during the employee’s last three years of employment with the employer or the final regular rate of compensation paid to the employee, whichever rate is higher.” In addition, employers who fail to provide the full 90 days’ notice must pay an additional four weeks of severance. In short, employers can no longer offer severance in lieu of the required notice.

Notably, employees may only waive their right to severance if approved by the Commissioner of Labor and Workforce Development or a court of competent jurisdiction. Therefore, any claim for severance pay under the statute cannot be released by a traditional employee separation agreement. Employers that request a release of claims in connection with a plant closing or a layoff will have to provide additional consideration for the release beyond the severance and notice required by the Act.

WHAT YOU NEED TO DO

These changes will take effect on July 19, 2020. Employers thinking about reducing their workforce in New Jersey should consider the increased obligations under the Act, especially the need to pay severance to all affected employees. Smaller employers should examine whether these amendments will render them subject to the Act. Directors and officers should be aware that their decisions in relation to covered events could potentially give rise to individual liability if the required notice and severance are not provided.