After nearly three years of waiting and speculation, the amended New Jersey WARN Act that was first signed into law in January 2020, will finally become effective on April 10, 2023.
The amended New Jersey WARN Act, also known as the Millville Dallas Airmotive Plant Job Loss Notification Act ("Amended WARN Act" or the “Act”) significantly impacts mass layoffs, transfers and termination of operations statewide. As discussed in more detail below (and in our firm’s initial article on the Act) employers need to be prepared for mandatory severance for all separations covered by the Act, a 90-day notice period, and other substantial changes, before undertaking any employment actions that are covered by the Act. Failure to understand these obligations could result in steep financial penalties and costly litigation.
Amended WARN Act on Hold for Three Years, Now Becomes Effective in April 2023
New Jersey Governor Phil Murphy first approved a significant overhaul of the existing NJ WARN Act in January 2020, when he signed Senate Bill 3170 into law. SB 3170 was supposed to go into effect in July of 2020, but those plans were sidelined by the COVID-19 pandemic. The Amended WARN Act was ultimately put on hold until 90 days after the expiration of Executive Order 103, which declared a statewide public health emergency due to COVID.
Nearly three years later, the legislature grew tired of waiting and passed legislation that was signed by Governor Murphy on January 10, 2023. The law, S3162 / A4768, dictates that the Amended WARN Act will become effective in 90 days, on April 10, 2023, regardless of the status of EO 103.
Key Changes Under the Amended WARN Act
The original NJ WARN Act required New Jersey employers with 100 or more full-time employees to provide 60-days’ advanced notice if 50 or more full-time employees were going to be impacted by mass layoffs, transfer or termination of operations related to an establishment. Severance was not required unless the employer failed to give proper notice under the statute. But these rules all changed under the Amended WARN Act.
Highlighted below are the most significant changes that employers doing business in New Jersey will now contend with under the Amended WARN Act:
- Events Triggering WARN Act Notice
The Amended WARN Act significantly broadens the definition of a “mass layoff” which triggers a longer notice period, mandatory severance payments and other obligations.
Under the Amended WARN Act, a covered “mass layoff” generally includes any reduction in force that results in the termination of 50 or more employees who work at, or report to, the establishment. This includes full-time and part-time employees who report to the establishment, regardless of any other location (or home office) where they might work. The Amended WARN Act does not specify that those “reporting to” an establishment, including remote employees, need to work in New Jersey in order to trigger obligations under the Act. Employers will need to stay tuned to see whether the State issues any guidance to clarify this and other questions under the new law before it takes effect in April.
While reviewing these new rules, employers should also remember that there are certain kinds of terminations that are not covered by the Amended WARN Act, including: where employees have been separated due to voluntary departure or retirement; discharge or suspension for misconduct; seasonal employment layoffs; or where the employer offers to transfer the employee to an alternative work location in the State that is within 50 miles of their original place of employment and involves the same employment or a position subject to the same terms and benefits of employment.
- Covered Employer and Impacted Establishment
Like the original law, the Amended WARN Act applies to “any individual or private business entity which employs the workforce at any establishment.” However, under the revised law, the definition of “establishment” has changed from a single place of employment, or group of contiguous locations in close proximity to one another, to any place of employment that has been in operation for at least three years, including any facilities located in New Jersey. This means that if, for example, an employer lays off 20 employees working in the same office, and 30 employees who work remotely in the State, those collective terminations may trigger WARN notice obligations if they meet the other requirements under the statute.
The Amended WARN Act will now also require severance payments to all impacted employees, even if proper notice is provided. Employers used to only be liable for severance if they failed to provide the required notice under the law. The new Amended WARN Act has done away with this rule.
Instead, the Act requires all employers to provide impacted employees with severance pay equal to one week of pay for each full year of employment. There is no cap on this severance payment based on years of service. So, a 20-year employee will receive 20 weeks’ worth of severance following separation event covered by this new law. Severance under this provision is calculated by determining the average regular rate of compensation received during the employee’s last three years of employment, or the final regular rate that the employee received, whichever is highest.
The law views severance as payments due to employees as back pay and loss associated with the employment termination. This means that severance under the Act must be paid in addition to any severance that an employee may be entitled to receive under a collective bargaining agreement, or any other agreement in effect at the time of separation.
Separately, if the employer fails to give proper notice of the separation, the employee is entitled to an additional four weeks of severance pay as a penalty for the late notice.
The new law also makes clear that employers cannot rely on employment agreements to escape paying severance under this statute. The State will not recognize any employee’s waiver or release of their rights to severance payments required by the Amended 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 who are considering issuing agreements that contain a waiver and release of claims under the Amended WARN Act should also determine whether additional payments or consideration may be required in exchange for the release.
- WARN Notice Period Increased to 90 Days
New Jersey WARN used to closely align with the Federal WARN in that covered employers had to provide written notice of a covered termination event 60 days in advance of termination. Now, however, employers with 100 or more employees (including full-time, part-time, seasonal, etc.) must provide at least 90 days’ notice before the first covered termination occurs. This increased notice requirement applies not only to impacted employees, but also to notice given to the Commissioner of the New Jersey Department of Labor and Workforce Development, the chief elected official of the municipality where the establishment is located, and collective bargaining unit representative for impacted units at the establishment.
The Amended WARN Act also provides that an “employer” that is responsible (and who can be held accountable) for providing this notice and the severance payments above, includes not only the direct employer entity, but also those acting directly or indirectly in the interest of an employer in relationship to an employee, including any person who, directly or indirectly, owns and operates the employer, or makes the decision responsible for the employment action that gives rise to a mass layoff subject to notification. This means that managers and other decision makers can be held personally liable under the Act, even if they do not own or control the employer’s business operations.
Next Steps for Employers to Consider
There is no question that employers and employees alike are facing uncertain economic times. Employers facing tough employment decisions such as a mass layoff, or termination or transfer of operations, should carefully consider the Amended New Jersey WARN Act in order to remain in compliance with the law and avoid potential legal exposure. Covered employers must consider the 90-day notice period, and contemplate terminations impacting all classifications of employees (including full-time and part-time employees), regardless of years of service. Employers should also consider the financial impact of the new mandatory severance payments that must be issued to all covered employees.
