NJ WARN Act Amendments Take Effect Soon

Changes mandate severance for mass layoffs & business closures.

By Lisa Gingeleskie, Partner, Lindabury, McCormick, Estabrook & Cooper, P.C. On Mar 2, 2023

On Jan. 10, Gov. Phil Murphy signed legislation implementing amendments to the Millville Dallas Airmotive Plant Job Loss Notification Act (“NJ WARN Act”) that were placed on hold during the COVID-19 pandemic. The amendments, which go into effect on April 10, 2023, impose new requirements on employers of 100 or more who implement mass layoffs or plan closures.

Governor Murphy signed an amended NJ WARN Act on Jan. 21, 2020, which was initially scheduled to take effect on July 20, 2020. However, in April 2020, the Governor signed Executive Order 103 declaring COVID-19 a public health emergency and postponing the effective date of NJ WARN Act amendments until 90 days after the conclusion of the state of emergency. Although the COVID-19 state of emergency remains in effect, the Legislature “unlinked” the amended NJ WARN Act from the state of emergency, thus permitting the implementation of the amendments to take effect on April 10, 2023.

What NJ Employers Need to Know about the Amendments

The NJ WARN Act amendments impose significant obligations on New Jersey employers that far exceed the requirements of the original Act and the federal WARN Act. Here are key takeaways that employers need to consider.

• Expanded Applicability: Currently, the NJ WARN Act applies to employers with 100 or more full-time employees. Under the amendments, the Act will now apply to employers with 100 or more employees regardless of their full or part-time status. As a result, many more small businesses will now be covered employers under the Act.
• Notice Obligations: Under the existing NJ WARN Act covered employers are only required to provide 60 days’ notice to affected employees before implementing a “mass” layoff, termination of operations, or transfer of operations. The amendments extend the notice period to 90 days. Critically, an employer who fails to provide 90 days’ notice will be required to provide each affected employee with an additional four weeks of severance, above and beyond the new mandated severance discussed below.
• Mandatory Severance: Under the existing NJ WARN Act, employers are only required to pay severance as a penalty if the employer fails to provide the required notice. Now, New Jersey employers must provide discharged employees with one week of severance pay for each full year of employment, even if the proper advance notice was provided. (Please note that a pending lawsuit is currently challenging this portion of the amendments on the grounds that the mandatory severance requirement is preempted by Federal law.) The rate of severance is calculated as the employee’s regular rate over the last three years of employment or the final regular rate, whichever is higher. In the event the employee is subject to a collective bargaining agreement or employee agreement that addresses severance, the new law requires the employer to pay the greater of the amount set forth in the Act or in the respective agreement.
• Lower Threshold for Mass Layoffs: To constitute a “mass” layoff under the existing NJ WARN Act, the layoff must result in the discharge of at least: (1) 500 employees at the establishment or (2) 50 employees representing at least 33% of the total workforce of the establishment. Under the amendments, NJ WARN Act obligations are triggered by any layoff impacting 50 employees, even if 50 is below the 33% threshold.

Layoffs at All Establishments Now Counted

In addition, the amendments contain language stating that the 50-or-more-employees calculation must include not only those employees working at a New Jersey establishment but those “reporting to” the establishment. Plaintiffs’ attorneys are expected to argue that this means that any remote or field employees reporting into New Jersey locations must count towards the 50 or more employees needed for a triggering event. This open issue will likely need to be resolved through litigation.

The current law only applies to mass layoffs in a single establishment, which may be a single location or group of contiguous locations, including industrial parks. The amendment dispenses with the single facility concept, and “establishment” now collectively includes all the employer’s locations within the state, excluding temporary construction sites. Employers with multiple small facilities scattered throughout the state may now be covered. Thus, for example, a company with operations at five separate locations, with a loss of at least 10 employees (whether full-time or part-time) at each location, arguably may be subject to the notice-and-severance-pay requirements. Whether the legislature intended such a broad definition is another issue that remains unresolved, thereby posing tremendous risk to employers if they are incorrect in their interpretation of the amended Act.

Considering the looming changes brought on by the NJ WARN ACT amendments, employers must keep in mind the expanded coverage of the Act, the longer notice requirements, and the mandatory severance pay obligations when contemplating mass layoffs, plant closures or a transfer of operations outside the state.

ABOUT THE AUTHOR

Lisa Gingeleskie is a partner with Lindabury, McCormick, Estabrook & Cooper, P.C. (www.lindabury.com), based in Westfield, NJ. She concentrates her practice in the areas of labor and employment law as well as ERISA and employee benefits law. She can be reached at [email protected].

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