New Jersey Becomes First State with Law Where Mass Layoffs Will Soon Equal Mass Severance Payments

New Jersey became the first state that requires employers to pay severance to workers who are laid-off or terminated through workforce reductions. Gov. Phil Murphy signed Senate Bill 3170 on Jan. 21, 2020. The legislation expands the Millville Dallas Airmotive Plant Job Loss Notification Act (NJ WARN), a law that imposes certain obligations on covered employers before they impose plant closings, transfers, or mass layoffs.

The new legislation is effective July 19, 2020, and has the potential to create significant impact on New Jersey employers.

Who is a covered employer under the NJ WARN Act?

Since its enactment in 2007, employers with 100 or more full-time employees have been required to comply with the requirements of the NJ Worker Adjustment and Retraining Notification Act. The law has not counted those employees with fewer than six months of service or those working fewer than 20 hours per week.

However, the amendments to the law remove the distinction for a “full-time employee” for purposes of calculating the 100-employee coverage threshold and the 50 employees required to trigger a layoff. The law previously focused on the number of terminations at a single location, and this has been eliminated through the amendments of the law.

What are additional changes NJ employers need to be aware of?

Employers with employees performing work in New Jersey and those considering expanding into New Jersey or opening operations in the state should consider the changes imposed under this new law. The changes to the NJ WARN include:

• The NJ WARN prior notice period will increase to 90 days. Currently, under New Jersey state and federal law, covered employers must provide 60 days’ notice prior to a plant closing, transfer, or mass layoff. Under this state law, employers will be required to provide 90 days’ notice in writing to:
  1. Commissioner of Labor and Workforce Development
  2. The chief elected official of the municipality where the establishment is located
  3. Each employee whose employment is to be terminated
  4. Any collective bargaining unit of employees at the establishment

• Severance under NJ WARN is now more than a civil penalty. Currently, NJ WARN requires severance only if the employer fails to provide timely notice to employees about a covered layoff or closing. Under the amended law, employers will be required to pay all terminated employees severance of one week of pay for each year of employment, and if the new full requirement of 90 days’ notice is not provided, the employer must pay an additional four weeks of pay to the employee.

• NJ WARN Severance payments can no longer be waived. Under existing NJ WARN, an employee may waive a NJ WARN severance payment. However, when the law is effective, an employee may only waive a NJ WARN severance payment with approval from the N.J. Commissioner of Labor and Workforce Development or the court.

Next Steps

New Jersey employers should review the new legal requirements. Employers in the Garden State must be mindful of their obligations under state law, as well as obligations under federal law. Additional information is available on the state’s website devoted to Business Closing/Mass Layoff Notification Law.

Paychex can provide support to help your business with its HR needs, including helping keep you up to date on federal and state regulations that affect compliance.