On April 10, 2023, The Long-Delayed (and Seriously Impactful) Amendments to NJ WARN Take Effect - This is What That Means

Seyfarth Synopsis: On January 10, 2023, NJ Governor Phil Murphy signed into law a change in the effective date of the January 21, 2020 Amendments to New Jersey’s Millville Dallas Airmotive Plant Job Loss Notification Act" ("NJ WARN").  Those long-delayed January 21, 2020 Amendments to NJ WARN will become effective on the 90th day following January 10, 2023 (in other words, April 10, 2023).  By way of background, on January 21, 2020 and April 14, 2020, New Jersey amended NJ WARN. The January 21, 2020 Amendments have been on hold due to a declared state of emergency in NJ that has lasted nearly three years.  Now those January 21, 2020 Amendments will combine with the previously effective April 14, 2020 Amendments to create a NJ WARN statute that has changed considerably from its 2007 inception. Below are updated details on the major differences between federal WARN (“FED WARN”) and NJ WARN and how NJ WARN has changed.

NJ WARN became effective in 2007 and had not been amended until 2020 when NJ Governor Phil Murphy signed into law the January 21, 2020 Amendments and the April 14, 2020 Amendments.  

The April 14, 2020 amendments had three basic purposes - (1) they  ensured that COVID-19 related layoffs after March 9, 2020 were excluded from coverage under the mass layoff notice and severance provisions of NJ WARN (past or present); (2) they implemented a new natural disaster/national emergency mass layoff exclusion; and (3) they changed the effective date of the January 21, 2020 Amendments from July 19, 2020 to an undetermined future date.

On January 10, 2023, NJ Governor Phil Murphy signed legislation which establish the effective date of the January 21, 2020 Amendments as occurring “on the 90th day next following” January 10, 2023 (see here).   Thus, the complete 2020 NJ WARN Amendments will go into effect on or about April 10, 2023.  Attached for your convenience is a redlined version of the NJ WARN statute showing all adopted amendments to the Act (1/21/2020, 4/14/2020, & 1/10/2023).

This is a highly problematic development for NJ employers especially in the face of potential recessionary fears. It appears that NJ employers will have a brief window (notices given on or before February 8) to plan and execute covered mass layoffs or closures to be concluded by April 9, 2023 with only 60 days’ notice and no severance under the existing NJ WARN requirements.[1]

The impact of the 2020 amendments to NJ WARN is to transform the statute from a notice statute like FED WARN into a penalty statute that potentially restates employers’ benefit plans and/or holds executives personally liable for certain events. Below, we examine the amendments, including the differences from FED WARN (the Department of Labor’s fact sheet on FED WARN can be found here), the changes from the original NJ WARN, and some seemingly unresolved issues under the amendments.

APRIL 14, 2020 AMENDMENTS EFFECTIVE MARCH 9, 2020

The following amendments were made effective as of March 9, 2020.

Adding a Natural Disaster Exception: During the COVID-19 crisis, there were numerous questions about what events trigger notice, what excuses late notice, or whether COVID-related losses are exempt from notice under FED WARN and NJ WARN. There were also many questions about the potential impact of the previously adopted January 21, 2020 amendments. The April 14, 2020 amendments included a significant addition to  NJ WARN  (retroactive to March 9, 2020) by creating a new exemption from the statute for mass layoffs caused by “a fire, flood, natural disaster, national emergency, act of war, civil disorder or industrial sabotage, decertification from participation in the Medicare and Medicaid programs as provided under Titles XVIII and XIX of the federal "Social Security Act," Pub.L. 74-271 (42 U.S.C. s.1395 et seq.) or license revocation pursuant to P.L.1971, c.136 (C.26:2H-1 et al.).”  This natural disaster/national emergency exemption was made applicable to both a termination of operations and for a mass layoff.

JANUARY 21, 2020 AMENDMENTS EFFECTIVE 90 DAYS AFTER JANUARY 10, 2023

The following are the additional changes to NJ WARN that will go into effect on April 10, 2023.

Definition of Employer: There actually are at least two definitions of “employer” in the amended statute, which may create  confusion. The first definition remains unchanged and states that an “employer” is “an individual or private business entity which employs the workforce at an establishment.” The second definition of “employer,” which is new and which appears in Section 2d of the statute, states that for purposes of potential liability for failing to perform any of the required acts (e.g., give notice, pay base or penalty severance, or notify the response team), an “employer” includes:

“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, and includes any person who,

• • directly or indirectly, owns and operates the nominal employer,
  • or owns a corporate subsidiary that, directly or indirectly, 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.”

Differences from FED WARN - limited to any business enterprise with 100 or more employees, excluding part time; or 100 or more employees, including part time, who work a combined total of at least 4,000 regular hours per week. This is the general definition --  there have been some efforts to stretch coverage through actions seeking to pierce the corporate veil, or by asserting joint employer liability under the criteria in 20 CFR 639.3(a)(2).

This amendment appears to impose potential liability upon executives, owners, and decision-makers for determinations they make concerning their workforce. This differs from certain wage theft laws, which punish only knowing violations with potential personal liability, because NJ WARN does not consider the intent or willfulness of the underlying conduct in assessing   liability. Thus, decision-makers must now consider NJ WARN when planning business expansion and workforce expansion or contraction issues because if for some reason the corporation cannot pay a future severance requirement, the decision-makers may have to backstop that obligation.

Timing of Layoff Notice: This was increased from 60 days and is now 90 days prior to the qualifying NJ WARN event in question. However, New Jersey appears to have applied this notice requirement only “in the case of an employer who employs 100 or more employees.” It is subject to interpretation as to whether the new law applies to only those employers with 100 or more employees, or whether it may also apply to smaller employees with 50 to 99 employees that experience a triggering event. 

Differences from FED WARN - FED WARN still requires only 60 days’ Notice.  Additionally, while FED WARN has notice reduction provisions  for “faltering” businesses and “unforeseen business circumstances,” NJ WARN does not. Instead, NJ WARN has a more limited exception to the 60-day (soon to be 90-day) notice requirement if a layoff that was expected to be for six months or less is extended beyond six (6) months because of business circumstances that are not reasonably foreseeable. (FED WARN also has a similar “midstream” unforeseeable circumstances provision). As noted above, NJ WARN has adopted a new exemption (effective March 9, 2020) from coverage for events that would otherwise qualify as “mass layoffs,” but which were caused by certain natural disasters/national emergencies.

Which Employees Are Covered: The new statute will now count all employees regardless of hours worked or time having worked for the employer. This means that -- different from the employee coverage since the 2007 statute was adopted -- part-timers and employees that have worked less than six (6) of the preceding twelve (12) months are counted toward all threshold numbers.

Differences from FED WARN - FED WARN excludes part-time and “new” (i.e., those who have worked less than six (6) of the preceding twelve (12) months prior to when the notice is due) employees from the 50 employment loss threshold  under plant closing and mass layoff analysis.  Note that if there is a covered FED WARN event by counting only “full time” employment losses, the new and part-time employees also will be entitled to notice.

Employee Threshold for Mass Layoff - A reduction in force which is not the result of a transfer or termination of operations and which results in the termination of employment at an establishment during any 30-day period (or during a 90 day aggregation period under certain circumstances) for 50 or more of the employees at or reporting to the “establishment” (as defined below). Note - both “transfer of operations” and “termination of operations” are defined terms, the definition of which remains unchanged from the existing law.  This amendment extends coverage to even smaller employers. Previously, the mass layoff had to involve 500 employees or no less than 50 of 150 total employees (while maintaining a 1/3 impact requirement).

This change also has further implications for large employers because of the new definition of “establishment” - see below. Think of an employer with 50 or more locations in NJ. It seems that it is soon to be the case that a mass layoff has occurred if that employer terminates/lays off one (1) employee at each of its 50 plus locations within a 30- day period.  While the statute states that this would not include any job loss resulting from a “discharge or suspension for misconduct of the employee,” it is not clear that the term misconduct includes poor performance (though for purposes of a mass layoff statute it obviously should). Employers should also keep in mind that there are carve outs for the layoff of “a seasonal employee” and where an employee is offered a transfer within the state and less than 50 miles away.

In sum, it is unclear whether regular workforce changes such as these were even contemplated by the legislature, but one would imagine that New Jersey was not intending to regulate ordinary employee turnover. Having said that, no interpretative regulations are expected and it seems possible that litigation will ensue with such confusing verbiage.

Differences from FED WARN - FED WARN includes only an employment loss at a “single site of employment” during any 30 day period for 1) at least 500 full-time employees, or 2) 50 or more full time employees (not counting new or part-time employees) which is at least 33% of the full-time employees.

Employment Site - “Establishment" means a place of employment which has been operated by an employer for a period longer than three years, but shall not include a temporary construction site. The “establishment” may be a single location or a group of locations, including any/all facilities located in New Jersey.[2] Previously, NJ WARN covered only a single place of employment and contiguous facilities in immediate proximity to one another.

Differences from FED WARN - FED WARN applies to a single site of employment, or one or more facilities or operating units within a single site of employment (with some limited exceptions).

This amendment appears to target larger employers (like retailers, pharmacy or grocery operators) with multiple locations that may not employ a sufficient number of employees at just one site to create coverage under the statute. As noted above, this language would put the multi-store retailer at risk for single terminations/layoffs accumulated at its many locations over a 30-day period (or aggregated 90-day period).

Mandatory Severance - For a transfer of operations or a termination of operations resulting in the termination of 50 or more employees in a period of not more than 30 days or for a mass layoff as defined, the new NJ WARN Amendments require the employer to pay as compensation to each terminated employee severance equal to one (1) week of pay for each full year of employment. The rate of severance pay is the average regular rate of pay in the last three (3) years of employment, or the employee’s final regular rate of pay, whichever rate is higher. Additionally, employers are required to pay the highest severance from any collective bargaining agreement covering displaced employees or from any policy or from NJ WARN. There is, however, a credit to the severance requirements for any short-notice back pay required under federal WARN.

Differences from FED WARN - FED WARN has no mandatory severance.

This severance requirement potentially intrudes upon an area governed by the Employee Retirement Income Security Act (ERISA) and likely will be subject to a preemption challenge by employers whose severance plans are impacted. Moreover, even if these provisions were not preempted, there is the potential for employers to simply plan around the employment losses and stage them appropriately to escape the applicable 30 day or 90 day period. However, those entities (and their executives) that are terminating operations are clearly covered by the statute and should plan to comply or challenge the viability of the statutes.

Severance Penalty - The Amendments further modify NJ WARN to require the employer to also pay an additional four (4) weeks of severance pay if the employer provides the employee shorter advance notice then that required.

Differences from FED WARN - Under FED WARN there is no severance penalty, but employers that fail to give 60 days’ notice must pay wages and benefits amounts for each day required notice is less than 60 days.

Effective Date: The January 21, 2020 amendments originally called for an effective date in 2020, but after lengthy delays their implementation is now scheduled for  April 10, 2023.  It seems likely that this means that any qualifying event taking place on or after April 10, 2023 will require  90 days of notice and mandatory severance.  Having said that, it also would also appear  likely that any layoff or other qualifying event that is both (a) noticed prior to February 9, 2023 and (b) effective and completed by no later than April 9, 2023, will be subject to the 2007 NJ WARN requirements and not these new amendments. 

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It is highly recommended that you consult with your Seyfarth labor and employment counsel regarding the topics covered in this update.

 

[1] An argument also can  be made that because the Effective Date will not occur until April 10, 2023, the 90-day notice requirement only commences at that time, i.e., as to employment losses thereafter.  Taking such a position carries significant risk, however, and various commentators are taking the position that any covered layoffs or closures occurring after April 10, 2023 are subject to the new requirements. 

[2] It is worth noting that there are some issues in this updated version of NJ WARN regarding the consistent use of the word “establishment.” For instance, Section 2c references “single establishment.” It is difficult to understand what that means and whether it was intended given the new meaning of the word establishment. Also, in Section 3c, there is a provision referencing employment opportunities at “any other establishment” and further requiring the notice include the location of “the other establishment.” This seemingly indicates that the word “establishment” is singular. In sum, these references apparently maintain vestiges of the prior “single location” intent of 2007 NJ WARN even though the Amendments were supposed to eliminate that.