Effective April 10, covered New Jersey employers must comply with new requirements under the New Jersey mini-WARN Act. New Jersey will join New York and Maine as one of three jurisdictions where employers are required to provide 90 days’ advanced notice to affected employees. (See our prior blog here).
Key changes to NJ-WARN include the following:
- The employers covered by NJ-WARN has been expanded by the amendments, to include any employer who employs 100 or more employees, whether full-time or not (previously it required employment of 100 or more full-time employees).
- The threshold for a “mass layoff” triggering NJ-WARN has been reduced significantly. Under the amended law, a “mass layoff” means the termination of 50 or more employees at a covered establishment in a 30-day period. Previously, a mass layoff meant (i) the termination of 50 or more employees comprising 1/3 of the workforce at the establishment, or (ii) the termination of 500 or more employees.
- The scope of employees that count toward the 50-employee threshold for a “mass layoff” has been expanded:
- Both employees “at” the establishment and “reporting to” the establishment are counted, which may include remote employees in New Jersey as well as other states. Prior to the amendments, the threshold for a mass layoff included 50 or more employees “at” the establishment.
- Both part-time and full-time employees must be counted toward the threshold. Previously, only full-time employees counted toward the threshold.
- The definition of a covered “establishment” has been expanded to include a non-contiguous group of locations / facilities of an employer within the State (previously it applied to contiguous worksites / office parks of an employer). Based on the amendment’s legislative history, this appears to be aimed at retail companies with multiple locations in the State. However, it is unclear how this could apply to largely or entirely remote workforces, and how it “squares” with the inclusion of remote, out of state, employees in the 50 employee threshold.
- Covered employers will be required to provide at least 90 days’ notice (as opposed to the prior 60 days’ notice) before the first termination of employment occurs in connection with a termination or transfer of operations, or mass layoff. If the employer fails to provide 90 days’ notice, the employer is required to provide the terminated employee with four weeks of pay (which is a new requirement) in addition to statutory severance (see next bullet point).
- In addition to notice, covered employers will be required to provide severance pay equal to one week of pay for each full year of employment to each terminated employee. (Previously, the law required one week of severance pay for each year worked only if the employer failed to provide the required 60 days’ notice.)
Overall review of NJ-WARN amendments
Here’s a quick review of what will be required once the amendments take effect.
NJ-WARN applies to employers with 100 or more employees anywhere in the US, when:
- A covered establishment transfers or terminates operations which results, during any continuous period of not more than 30 days, in the termination of 50 or more employees; or
- An employer conducts a mass layoff (i.e., termination of 50 or more employees in a 30-day period) at a covered establishment.
Terminations for cause or poor performance excluded
Although NJ-WARN’s “termination of employment” definition excludes (1) voluntary departures, (2) retirement, and (3) terminations for misconduct, the statute does not clearly specify whether ordinary terminations for cause or poor performance can trigger its requirements. But our research into NJ-WARN’s legislative history strongly suggests that terminations for cause or poor performance are not covered by NJ-WARN. In the February 27, 2006 New Jersey Assembly Labor Committee hearing, NJ-WARN’s lead senate sponsor clarified that the legislation was not intended to apply to employees terminated for poor performance.
Note on aggregation
Under the new amendments, an employer whose layoff decision affects employees at multiple New Jersey worksites may be subject to NJ-WARN’s notice and severance requirements even if less than 50 employees are terminated at each individual worksite.
To determine whether a termination or transfer of operations or mass layoff is subject to NJ-WARN’s notification requirements, employers generally must aggregate any terminations of employment for two or more groups at a single “establishment” occurring within any 90-day period. If the aggregate number of terminations of all the groups is 50 or more, then the terminations are subject to NJ-WARN’s notice and severance requirements (unless the employer can demonstrate that each group’s cause of terminations is separate and distinct from the other groups’ causes). And since the definition of an “establishment” has been expanded to include an employer’s non-contiguous group of locations / facilities within New Jersey, multi-site employers should consider the aggregate impact of any layoff decision affecting multiple worksites.
NJ-WARN’s updated “mass layoff” and “establishment” definitions have also created some ambiguity regarding the statute’s application to remote employees. Specifically, a “mass layoff” now includes employees “at or reporting to” the “establishment.” And since “establishment” has been amended to include “a group of locations,” there is an argument that terminated remote employees should be counted for purposes of determining NJ-WARN applicability. But the legislative history of the NJ-WARN amendments suggests the changes were aimed at retail companies with multiple locations in New Jersey, and therefore NJ-WARN’s application to remote employees remains unclear.
If either of the triggering events occurs, the employer must provide notice at least 90 days’ before the first termination of employment occurs in connection with the termination or transfer of operations or mass layoff.
The notice must be provided to each employee whose employment is to be terminated, any collective bargaining units of employees at the establishment, the Commissioner of the New Jersey Department of Labor and Workforce Development, and the chief elected official of the municipality where the establishment is located.
Severance pay requirements
In addition to notice, employers must provide to each employee whose employment is terminated severance pay equal to one week of pay for each full year of employment. If the employer provides any employee with less than 90 days’ notice (even 89 days instead of 90), the employer must provide that employee with an additional four weeks of severance pay.
What else should employers know about severance pay under New Jersey’s mini-WARN?
- The rate of severance pay provided by the employer must be 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.
- If the employer provides other severance pay pursuant to a collective bargaining agreement or for any other reason (e.g., under a severance plan or other contract) that is more than the severance pay requirement under NJ-WARN, the employer must provide the employee with the greater severance pay amount.
- Severance will be regarded as compensation due to an employee for back pay and losses associated with the termination of the employment relationship, and earned in full upon the termination of the employment relationship (notwithstanding the calculation of the amount of the payment with reference to the employee’s length of service). In other words, the severance payment will be required when an employee’s final pay is due, which, in New Jersey, is the first regularly scheduled pay date following termination.
- Any back pay paid to the employee for an employer’s violation of federal WARN will be credited toward meeting the severance pay requirements of NJ-WARN.
- In addition, a waiver of the right to severance by an employee is not effective without approval by the Commissioner of the New Jersey Department of Labor and Workforce Development or a court of competent jurisdiction.
In addition, an employer cannot require an employee sign a release of claims in exchange for only the statutory severance–which ups the ante for employers of the costs of obtaining a release at the time of termination.
What should employers do now?
- If employers with employees in New Jersey (or who report to establishments in New Jersey) remember one thing when considering layoffs, it is that they may have statutory notice and severance obligations now.
- Such employers should familiarize themselves with the changes in the law, and keep an eye out for possible guidance from the New Jersey Department of Labor and Workforce Development and other legal developments regarding NJ-WARN before the April 10, 2023 effective date.
- Employers should monitor the number of layoffs in New Jersey leading up to the statute’s effective date, to determine whether a triggering event under the amended NJ-WARN may occur through aggregation rules (i.e., looking 90 days backward and 90 days forward – and looking at all New Jersey worksites).
- Employers considering a reduction in force that includes employees in or reporting to a site in New Jersey should consult with trusted employment counsel well in advance to assess whether the amended NJ-WARN statute may be triggered and to determine any additional obligations under the new statute.
- For more, check out our other recent blog and video chat on this topic.
For help navigating layoffs, furloughs, or other reduction in force or cost-cutting measures in the US and around the world, contact your Baker McKenzie employment attorney.