Restructuring the Analysis: New Jersey Now Mandates Severance Pay for Mass Layoffs
On January 21, 2020, Governor Murphy signed Senate Bill 3170 into law, amending the Millville Dallas Airmotive Plant Job Loss Notification Act, New Jersey’s mini-WARN Act (NJ WARN Act), in several significant ways and further deviating from the federal Worker Adjustment and Retraining Notification Act (federal WARN Act). The amended NJ WARN Act is set to take effect on July 19, 2020.
EXPANDED SCOPE OF COVERAGE
Under the amended NJ WARN Act, employers with 100 or more employees will be covered by the NJ WARN Act. Currently, the law applies only to employers that employ 100 or more full-time employees and excludes part-time employees, defined as (1) employees who have been employed for less than six months or (2) employees working less than 20 hours per week. Beginning July 2020, employers must count all employees, regardless of tenure or the amount of hours worked, in determining whether the employer meets the threshold number of 100 employees for coverage under the NJ WARN Act.
BROADER DEFINITIONS AND TRIGGERING EVENTS
Presently, the NJ WARN Act is triggered by:
A termination or transfer of operations during any continuous period of 30 days that resulted in the termination of employment of 50 or more full-time employees, or
A mass layoff that resulted in an employment loss at an establishment (a single place of employment) during any 30-day period impacting:
500 or more full-time employees, or
50 or more full-time employees representing at least one third of the full-time employees at the establishment.
The amended NJ WARN Act includes part-time employees in the analysis of whether a triggering termination of operations or transfer of operations has occurred. The new law also broadens the definition of “mass layoff” to cover all reductions in force that result in the termination of 50 or more employees (either full-time or part-time), eliminating the requirement that at least one-third of the workforce is affected by the mass layoff. Beginning July 2020, the NJ WARN Act will be triggered by:
A termination or transfer of operations during any continuous 30-day period that results in the termination of employment of 50 or more employees, or
A mass layoff that results in an employment loss at an establishment during any 30-day period impacting 50 or more employees at or reporting to the establishment.
The amended NJ WARN Act also expands the definition of “establishment” to include all of the employer’s locations within the state. An establishment may be a single location or a group of locations, including any facilities located in New Jersey, which means employers will have to aggregate all terminations within the state to determine whether the NJ WARN Act is triggered.
INCREASED ADVANCE NOTICE PERIOD
If a triggering event occurs, the employer must provide 90 days advance notice (increased from 60 days) of the termination or transfer of operations or mass layoff to the Commissioner of Labor and Workforce Development, the chief elected official of the municipality where the establishment is located, each employee who’s employment is being terminated and any collective bargaining unit.
MANDATORY SEVERANCE PAYMENT OBLIGATIONS
Under the amended NJ WARN Act, an employer will be required to pay severance in an amount equal to one week of pay for every full year of employment to affected employees, regardless of whether advance notice is provided. Currently, severance pay is required as a penalty for failing to provide WARN notice. Under the amended law, employers who fail to provide the required 90-day notice will be required to pay an additional four weeks of severance pay.
There is no maximum cap to the severance pay obligation. Therefore, an employee who worked for an employer for 25 years and whose employment was terminated as part of a mass layoff would be entitled to 25 weeks of severance pay under the amended NJ WARN Act. In calculating the amount of severance pay, the rate of pay must be the greater of the employee’s average regular rate of compensation over the past three years of employment or the employee’s regular final rate of pay. Severance pay is regarded as “compensation due to an employee” and “earned in full upon termination of employment.” Therefore, severance pay must be included as part of the employee’s final wages.
If an employee is otherwise entitled to severance pursuant to an agreement, policy or collective bargaining agreement, the employee is entitled to receive severance pay required under the NJ WARN Act or severance pay provided by an agreement, policy or collective bargaining agreement, whichever is greatest.
The amended NJ WARN Act also prohibits an agreement seeking to waive an employee’s right to severance without approval from the New Jersey Department of Labor and Workforce Development or a court.
To the extent an employer wants to obtain a general release of claims in exchange for severance, that employer will have to offer more than what an employee is required to receive under the law to constitute adequate consideration.
The amended NJ WARN Act departs from the federal WARN Act in significant ways that will require employers to conduct a separate analysis to determine whether the employer is subject to federal and state WARN laws and whether a mass layoff or plant closure triggers federal or state WARN laws. Given the expansive amendments to the NJ WARN Act, employers should consult with counsel in advance of any anticipated restructurings or reductions in force.