Update: A Complete Review of NJ WARN Incorporating Its January 21 and April 14, 2020 Amendments

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Seyfarth Synopsis: On April 14, 2020, NJ Governor Murphy signed into law the second set of amendments this year to New Jersey’s Millville Dallas Airmotive Plant Job Loss Notification Act" ("NJ WARN"). Here, in our fourth update on the topic, we review the cumulative effects of the January 21, 2020 amendments, as further modified by the April 14, 2020 amendments. In short, NJ WARN has changed considerably from its 2007 inception. Effective retroactively to March 9, 2020, NJ WARN now adds a new natural disaster/national emergency mass layoff exclusion that effectively means that COVID-19 mass layoffs going back as far as March 9, 2020, are not covered NJ WARN events requiring notice, and future similar disasters will not be covered. Effective 90 days after the state lifts the pandemic state of emergency, the bulk of NJ WARN’s January 21, 2020 amendments will push state law far past the corresponding federal requirements of the Federal WARN Act (“FED WARN”) with items including 90 days’ notice, all employee coverage, and mandatory severance for displaced employees. Below, are updated details on: the major differences between FED WARN and NJ WARN; how NJ WARN has changed; and some unresolved issues.

NJ WARN became law in 2007 and had not been amended until this year when Governor Phil Murphy signed two significant amendments into law. The most recent amendments adopted on April 14, 2020, have three basic purposes - (1) retroactive to March 9, 2020, to ensure that COVID-19 related layoffs are excluded from coverage under the mass layoff notice and severance provisions that were adopted into law in the January 21, 2020 amendments of NJ Warn and further that COVID-19 layoffs are excluded from the existing notice and other requirements of the 2007 NJ WARN statute; (2) to extend that new natural disaster/national emergency mass layoff exclusion going forward; and (3) to change the effective date of the January 21, 2020 amendment from July 19, 2020 to a new date as yet unknown that is 90 days after the date that the Governor of New Jersey lifts the State of Emergency announced in Executive Order 103 (E.O.103).

For a more detailed perspective of the events leading to and the reactions to the January 21, 2020 amendments, please see our earlier update here in which we urged that action be taken to address the tremendous number of mass layoffs brought about by the COVID-19 crisis and the uncertainty created by the pending amendments.

Generally, the substance of the 2020 amendments to NJ WARN is to transform the statute from a notice statute like FED WARN into a penalty statute that attempts to restate employers’ benefit plans and to hold 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 (we have created a redlined version of the fully amended law showing changes to the 2007 statute that can be found here), the multiple drafting irregularities in the amendments and the potential legal challenges that will follow.

APRIL 14, 2020 AMENDMENTS EFFECTIVE MARCH 9, 2020

To follow are the amendments that have been made effective as of March 9, 2020.

Adding in Natural Disaster Exception: During this COVID-19 crisis, there have been many questions about what triggers notice, what excuses late notice, or what is 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 made a significant swing in the coverage of NJ WARN by adding (retroactive to March 9, 2020) 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.).” Now, this natural disaster/national emergency exemption exists for both a termination of operations and for a mass layoff. That is welcome relief for employers now and going forward, and matches more closely with FED WARN (see the DOL Fact sheet linked above for useful detail on its exceptions). Thus, for the time being and until the effective date of the January 21, 2020 amendments, NJ employers are operating under the 2007 version of NJ WARN with a brand new exclusion that takes COVID-19 related layoffs outside the coverage of the statute and which do not require notice or severance. Employers are urged to consider their FED WARN obligations, however.

Modifying the Effective Date of January 21, 2020 Amendments: the effective date will now be moved from July 19, 2020, to a later date to be determined that will be 90 days after E.O.103 is terminated.

JANUARY 21, 2020 AMENDMENTS EFFECTIVE 90 DAYS AFTER E.O.103 IS LIFTED

To follow are all of the additional changes that will go into effect at a later point this year (90 days after E.O.103 is terminated). These amendments are not effective yet, but they should be considered by employers as business decisions are made about the future plans of all enterprises.

Definition of Employer: There are actually (at least) two definitions of “employer” in the amended statute, which may create some 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 appears in Section 2d of the statute, states that for purposes of potential liability for failing to perform any of the required acts (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 2007 NJ WARN - the secondary definition of “employer” did not exist.

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. It should be noted that this is the general definition and that 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 choices they make concerning their workforce. This differs from certain wage theft laws, which punish knowing violations with potential personal liability, because NJ WARN does not consider the intent or willfulness of the underlying conduct that would create the 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 mistakenly maintained the phrase “in the case of an employer who employs 100 or more employees” in the expanded employee notice requirement. By doing so, NJ has effectively included a layoff of 50 or more employees as a covered event for which severance would be required, but (apparently) does not require notice from an employer that employs between 50 and 99 employees in New Jersey. If this was intended, it would mean that employers with between 50 and 99 employees would have no potential for a severance penalty given that the penalty is linked to failure to give proper notice (which is not required of them). However, these employers of 50 to 99 would still owe regular severance for a qualifying event. It would be difficult to imagine this carve-out was intended and caution is urged from any covered employer.

Differences from 2007 NJ WARN - 60 days’ Notice

Differences from FED WARN - 60 days’ Notice

While FED WARN has exceptions to the notice requirements 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. 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 counts all employees regardless of hours worked or tenure on the job. This means that, contrary to 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. As noted, these changes may put unwanted pressure and focus on hiring and expansion efforts and undercut the effectiveness of the amendments.

Differences from 2007 NJ WARN - Covered only Full-Time Employees; there was a “full-time employee” distinction when calculating the 100 employee coverage threshold and the 50 employee layoff minimum; there was a part-time employee definition excluding employees that worked fewer than 20 hours per week or who were employed fewer than six (6) of the twelve (12) months preceding the date a notice is required.

Differences from 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 100 employee threshold for employers under plant closing and mass layoff analysis.

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 75 or so locations in NJ. Is it the case that a mass layoff has occurred if that employer terminates one (1) employee at 50 of its locations within a 30- day period? What does the term “termination” mean in connection with ordinary day-to-day employment decisions? While termination does not include 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). Moreover, 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 is inevitable that litigation will ensue with such confusing verbiage.

Differences from 2007 NJ WARN - only applied to an employment loss at one establishment during any 30-day period for 500 or more full time employee or for 50 or more of the full time employees representing one third or more of the full time employees at the establishment.

Differences from FED WARN - similarly, this includes only an employment loss at one establishment 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 one third 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. However, there are some issues in the statute with consistency around the word “establishment.” For instance, Section 2c references “single establishment.” It is difficult to understand what that means and whether it was intended. 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” (indicating that it is singular). These references seem to maintain vestiges of the prior “single location” intent of 2007 NJ WARN.

Differences from 2007 NJ WARN - covered a single place of employment and contiguous facilities in immediate proximity to one another.

Differences from FED WARN - 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 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 employer must 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 must 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 2007 NJ WARN - No mandatory severance.

Differences from FED WARN - No mandatory severance.

This severance requirement potentially intrudes upon an area governed by the Employee Retirement Income Security Act (ERISA) and will be subject to a preemption challenge by employers whose 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 - An employer also must pay an additional four (4) weeks of severance pay if it provides the employee shorter advance notice then that required.

Differences from 2007 NJ WARN - Employer required to pay base severance of one (1) week per year of service, but only if less than 60 days’ notice was given.

Differences from FED WARN - No severance penalty, but employers that fail to give 60 days’ notice must pay wages for short notice.

Effective Date: The amendments originally called for an effective date of July 19, 2020, but now that has been changed to 90 days following termination of E.O.103. Many questions remain about what will become effective and when. If, for instance, E.O.103 is terminated on May 1 and the amended language from the January 21, 2020 amendments takes effect on August 1, 2020, what does this actually mean? Under the above example, is it the case that an employer planning a qualifying NJ WARN event where the terminations would happen after August 1, would have to give 90 days’ notice of this event? Or, would only 60 days’ notice apply to such an event? When would the severance requirement kick in? How should an employer address a 30 day period that straddles the effective date? It should be noted that the original version of NJ WARN, which was a notice statute, took effect immediately, meaning that it applied to layoffs that were no less than 60 days after the effective date.

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Thankfully, New Jersey addressed the COVID-19 issues in its latest NJ WARN amendments. However, employers must remain extremely vigilant when reviewing any planned layoffs or closures to come, and must also take NJ WARN into consideration when evaluating how quickly they will grow their workforces. Significant planning and interaction with counsel will be required to avoid the many landmines that await.