The Worker Adjustment and Retraining Notification Act (the “WARN Act”) is a federal law that was passed by Congress in 1988 to protect certain workers by requiring employers to provide employees advance notification in cases of qualified plant closings and mass layoffs, including closings and layoffs in connection with mergers and acquisitions.
In 2007, the State of New Jersey passed the Millville Dallas Airmotive Plant Job Loss Notification Act (also known as the “NJ WARN Act” or the “mini-WARN Act”) with its own notice requirements.
In January 2020, Governor Phil Murphy signed amendments into law which were originally scheduled to go into effect in July 2020 but were postponed due to the COVID-19 pandemic.
The wait is now over and the amendments finally took effect on April 10, 2023. Some of the changes to take place are described below:
- Employee status. The new law no longer has a definition for “full-time employee” and “part-time employee.” The deletion of such distinction effectively includes part-time employees when calculating how many employees are being laid off, expanding the number of employers subject to those amended notification requirements.
- Employee threshold reduction. Prior to the amendments, “mass layoff” was defined as “a reduction in force which 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 or reporting to the establishment.” The definition of “mass layoff” was amended to simply reduce the threshold to 50 or more employees.
- “Establishment” definition expanded. Prior to the amendments, “establishment” was defined as “a single location or a group of contiguous locations, including groups of facilities which form an office or industrial park or separate facilities just across the street from each other” for a period longer than three years. Now the term “establishment” has been broadened to “a single location or a group of locations, including any facilities located in this State” for a period longer than three years. Accordingly, employers terminating employees at different locations throughout the state may still be subject to the NJ WARN Act’s requirements if those locations meet the required threshold of 50 or more employees in total.
- Notice period increased. Prior to the amendments, covered employers were required to provide employees with 60 days’ notice. Except for a natural disaster exception, such notice has now been extended to 90 days. This is substantially longer than the 60 days’ notice requirement under the federal WARN Act.
- Mandatory severance pay. In addition to providing employees with 90 days’ notice, covered employers must now also pay each terminated employee a week of pay for each full year of service with the company. New Jersey is the first state to require covered employers to provide employees with severance pay, whether they provide enough advance WARN notice or not. Previously, severance was only required under the NJ WARN Act if the notice was not given, which was consistent with the federal WARN Act’s trigger for mandatory payments. Now, if the employer fails to provide an employee with 90 days’ advance notice, it must pay each impacted employee four weeks’ pay along with the mandatory severance pay. Severance payments under a collective bargaining agreement or employer severance plan are counted towards the severance requirements under the amended NJ WARN Act, but the Act effectively now sets a guaranteed minimum for those payments.
- Change of control obligations. Last but not least, the 2020 amendments 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.” As a result, any employer looking to sell its business, enter into a joint venture, or declare bankruptcy will now need to carefully understand when the obligations are triggered and who will be responsible for them. Indeed, under the NJ WARN Act, both the predecessor employer and the successor employer will be subject to certain obligations throughout the change of control process. Any “covered employee” as well as any individual of the predecessor employer 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 will be covered by the NJ WARN Act, which will impose obligations on the successor employer. The successor employer will be obligated to: (1) 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; and (2) maintain the same total compensation for all covered employees during the transition period.
When to tell the employees about a change of control can be a daunting task that can make or break a transaction. Under the NJ WARN Act, the predecessor employer must now post a public notice of the change of control no later than 15 days prior to the change of control. Additionally, for two years after the end of the transition period, the successor employer will only be permitted to terminate covered employees without cause if the Commissioner of the Department of Labor and Workforce approves the termination based on regulations that have not yet been adopted and published. This restriction may have a chilling effect on M&A transactions involving New Jersey-based employees if not addressed properly by regulators.
New Jersey employers who anticipate mass layoffs or a plant closing, or are contemplating a merger or acquisition that could involve layoffs or a closing, and those looking to acquire businesses with employees in New Jersey should consult with counsel to understand these new responsibilities and requirements. Riker Danzig’s Labor and Employment Group and Corporate Group attorneys are available to answer any questions regarding issues raised in this Alert.
