New Jersey's Expanded Mini-WARN Law to Take Effect Soon

​After a two-year delay, the amendment to the New Jersey Millville-Dallas Airmotive Plant Job Loss Notification Act, the state's mini-WARN law, will take effect on April 10.

The amendment expands the coverage of the law to workplace reductions-in-force and significantly increases an employer's obligations. Definitions, notice timelines, employers' severance obligations, and payment requirements for failure to provide notice are among the provisions revised. Employers seeking to restructure or remove business operations within the New Jersey will face increased risks.

On Jan. 10, Gov. Phil Murphy signed Assembly Bill 4768 to revise the effective date of the amendment. The amendment revises four defined terms: (1) establishment; (2) full-time employee; (3) part-time employee; and (4) mass layoff. These changes expand the law's coverage to previously exempted employers and employment actions and place differing obligations on employers with multistate operations that include locations within the state.

New Definitions

Previously, the law applied only to a "single place of employment" in which a mass layoff, termination of operations, or transfer of operations occurred. The new definition covers any establishment, meaning a place of employment that has been operated by an employer for a period longer than three years. Establishment may be a single location or group of locations.

It is not clear how far the legislature intended to go. Thus, for example, a company with operations at five separate locations, with a loss of at least 10 employees at each location, arguably may be subject to the notice-and-severance-pay requirements under the new definition. If the provision is interpreted broadly, any time at least 50 employees in the aggregate suffer a termination of employment within a 30-day or 90-day period in New Jersey, the notice-and-severance requirements under the new law would be triggered.

Employers with at least 100 employees, whether full-time or part-time, are covered employers under the new law. Previously, and consistent with its federal counterpart, the state law limited notice obligations to covered employment actions that affected only full-time employees. The new law makes no distinction between full-time and part-time employees. Now, if 50 employees (whether full-time or part-time) are affected by a mass layoff, termination of operations, or transfer of operations, the employer must meet the notice-and-severance obligations. Moreover, any employee suffering a termination of employment is counted toward whether a mass layoff, transfer, or termination of operations has occurred, including employees reporting into New Jersey (e.g., field employees and remote employees). This makes it more likely that an employment action is a covered event.

The new law expands the definition of mass layoff to include reductions in force beyond those that may trigger notice requirements under the federal Worker Adjustment and Retraining Notification (WARN) Act. The revised definition triggers a WARN event if an accumulation at least 50 employees are terminated in the state (including impacted employees reporting into New Jersey) within a 30-day or 90-day period.

What is clear is that any reduction in force of at least 50 employees at a single place of employment will require 90 days' notice and severance. Whether the revisions to these core definitions of the law also mean that a reduction of at least 50 employees at "any facilities located in the state" requires 90 days' notice and severance pay remains unclear. Unfortunately, there is a tremendous risk if employers are incorrect.

Notice and Severance Pay Mandates

Under federal WARN, covered employers must provide 60 days' written notice to affected employees of a mass layoff or a plant closing. Previously, the state law followed federal WARN in requiring 60 days' written notice. This has been increased to 90 days' written notice under the amendment.

Employers must pay each affected employee one week of severance for each full year of employment, even if the employer provides the full 90 days' notice. If an employer fails to provide the full 90 days' notice, it must pay each employee an additional four weeks of severance pay. This has made New Jersey among the very few states to require 90 days' advance notice and force employers to pay severance to employees who experience an employment loss by a mass layoff, transfer of operations, or termination of operations.

The definition increases the financial burden on a company. Severance related to a covered event is regarded as wages earned upon termination. Therefore, severance cannot be paid as a continuation of wages over a period of time. It must be paid in a lump sum on the first regularly scheduled pay day following the employee's final day of employment. The financial costs may be substantial if a large group of employees are terminated on the same day.

Although the state statute already defines employer, a separate provision has been added, likely to include private equity or venture capital firms within the definition.

Employer has been expanded to include any individual, partnership, association, corporation acting directly or indirectly in the interest of an employer in relation to an employee. It includes any person who owns and operates the nominal employer, or owns a corporate subsidiary that owns and operates the nominal employer, or makes the decision responsible for the employment action that gives rise to a mass layoff subject to notification.

This expanded definition suggests that an individual with no ownership interest, but who was directed to reduce headcount, reorganize operations, or develop and implement cost-saving measures that result in a covered employment action, may be held liable.

Waivers

The new law curtails an employer's ability to obtain a waiver of severance. New Jersey prohibits waiver of any severance payments absent approval by the commissioner of the Department of Labor or a court of competent jurisdiction.

Given the mandated severance, an employer's prior practice of conditioning severance upon signing a general release agreement may no longer satisfy the "consideration" requirement to support a release of claims. Companies may have to offer more than the severance guaranteed in the amended law to obtain an effective release of claims. This may still not be enough.

The new law requires an employer to provide an employee the severance payment under the law, a collective bargaining agreement, or an employer policy, whichever is greater. Arguably, an employer that provides greater severance under its own plan may be required by the statute to provide such severance, and the severance cannot constitute consideration for a release agreement. Such an interpretation likely would result in employers eliminating any severance policy that provided severance beyond New Jersey law.

What's Next

Employers with operations in New Jersey must undertake a broader analysis of the legal implications associated with any covered employment decision that results in the termination of at least 50 employees.

A company must determine whether the notice and severance obligations apply to any contemplated action to ensure the company maintains sufficient funding to meet any obligations imposed by the statute, among other considerations. Employers may wish to consider phased reductions in force, over longer periods of time, to avoid any single employment action falling within the definition of a mass layoff or other covered employment action.

If an employer seeks a release of claims as part of any severance payment, the company should consider modifying existing severance plans to avoid claims that the employer's plan is greater than the severance requirements of the new law and, thus, not subject to a release agreement. Employers likely will need to provide other considerations to support the release of claims.

Employers should review their current New Jersey operations, as well as whether out-of-state employees are reporting to the New Jersey location. Employers with satellite operations or remote employees that are reporting to a New Jersey location may want to consider whether it is possible to change the reporting relationships of these non-New Jersey residents. Employers must revisit severance plans, employment policies, and general procedures for obtaining releases from employees in exchange for severance pay to ensure compliance with the law.

A challenge to the new law is pending in the U.S. District Court for the District of New Jersey.

Timothy D. Speedy, Isaac J. Burker, Jeffrey J. Corradino, Michael Jakowsky, James M. McDonnell, Justin B. Cutlip and Jennifer Ellerkamp are attorneys with Jackson Lewis in California, New York and Colorado. © 2023. All rights reserved. Reprinted with permission.