Mandatory Severance Payments, Longer Notice Periods and Other Key Provisions of the 2020 New Jersey Warn Act

Mandatory Severance Payments, Longer Notice Periods and Other Key Provisions of the 2020 New Jersey Warn Act

Employment
February 6, 2020

New Jersey amended its existing WARN Act, otherwise known as the Millville Dallas Airmotive Plant Job Loss Notification Act ("NJ WARN Act"), and it will have significant impact on employers considering mass layoffs, transfers and termination of operations statewide.New Jersey’s new mini-WARN materially alters employer obligations and departs substantially from the Federal WARN statute. Employers need to understand their potential obligation to pay mandatory severance, provide written notice to employees and other requirements under the new law. Failure to understand these obligations could result in steep financial penalties and litigation.

On January 21, 2020, Governor Murphy signed into law amendments to the NJ WARN Act through Senate Bill No. 3170 ("SB 3170"). Although prior versions of the bill would have caused it to take effect immediately, last minute changes before it was sent to Governor’s desk delayed the effective date to the 180th day following the date of enactment - July 19, 2020. The NJ WARN Act was originally enacted in 2007 and required New Jersey employers with 100 or more full-time employees to provide 60-days’ notice if 50 or more full-time employees were going to be impacted by mass layoffs, transfer or termination of employment from an employer’s establishment. The new law makes several material changes to this requirement.   

The most significant change to the amended NJ WARN Act is that it requires any employer (regardless of size) to provide severance pay if a transfer of operations, a termination of operations or a mass lay off results in the termination of employment for 50 or more employees.  Because the new law eliminates the distinction between part-time and full-time employees, severance payment must be issued to all affected employees upon termination, irrespective of how many hours the employee works or the employee’s length of service. Severance pay is calculated based on an average of the employee’s regular pay rate for his or her last 3 years of employment, or the final pay rate, whichever is highest, unless the employee is guaranteed a higher severance rate as a result of a collective bargaining agreement. There are limited circumstances in which severance payments are not required: where employees have been separated due to voluntary departure or retirement; discharge or suspension for misconduct; seasonal employment layoffs; or where the employer offers the employee at a location inside the State that is within 50 miles of their original place of employment the same employment or a position subject to the same terms and benefits of employment.

With respect to notice, the new law mandates New Jersey employers with 100 or more employees must now provide 90 days’ notice to impacted employees (instead of 60 days under the original statute) if:

(a) an employer’s establishment undergoes a transfer of operations or termination of operations that results in the termination of 50 or more employees for a period of up to 30 days; or

(b) the employer conducts a mass layoff resulting in the termination of 50 or more employees in a 30 day period who are located at, or are reporting to an employer’s establishment. 

The definition of "establishment" was modified and now means any single location or group of locations, including any facilities located in the State. Accordingly, employers need to consider their total number of employees in New Jersey, not just a single location.   

Employers who fail to provide notice under the Act will face steep penalties, including an additional 4 weeks of severance pay. 

The definition of employer was expanded under the new law and applies to practically all employers in the State, including any individual, partnership, association, corporation, or any person or group of persons acting directly or indirectly in the interest of an employer in relation to an employee. This expanded definition broadens those who may be held responsible and are subject to claims for violation of the law’s provisions. 

The new law also makes clear that employers cannot rely on employment agreements to escape liability. The State will not recognize any employee’s waiver or release of their rights to severance payments required by the NJ WARN ACT, unless the waiver is expressly approved by the Commissioner of the Department of Labor and Workforce Development, or a court of law.

Employers facing tough employment decisions that could be defined as a mass layoff, or termination or transfer of operations should pay close attention to the fine print of the new NJ WARN Act in order to remain in compliance with the law and avoid potential financial exposure. Covered employers must consider the 90-day notice period, and contemplate terminations impacting all classifications of employees, instead of just full-time employees. Employers should also consider the financial impact of the new mandatory severance payments that must be issued to all covered employees. Employers who have questions or concerns regarding compliance with the newly enacted NJ WARN Act should promptly contact experienced employment counsel for assistance.