NJ Warn Act Signed with Amendments
Earlier this year, Governor Murphy signed into law amendments to the Millville Dallas Airmotive Plant Job Loss Notification Act, more commonly known as NJ WARN or “mini-WARN Act.” The law as amended recently went into effect on April 10, 2023.
While the federal version of the Worker Adjustment and Retraining Notification (WARN) Act has been on the books since the Regan administration, only 13 states (and the City of Philadelphia) have adopted their own versions. The original language of the NJ WARN Act was approved by Governor Murphy three years ago, but its enactment was delayed due to the COVID-19 pandemic and an enduring State of Emergency.
As Amended, NJ WARN has significant differences from the original bill passed in 2020 and important distinctions from its federal counterpart.
Expanded Notice Obligations
Under the 2020 language, the NJ WARN Act before amendment required that employers with 100 or more employees which were planning mass layoffs (50 or more employees) provide the affected employees with 60 days advanced notice.
As enacted after amendment, the Act’s required notice period increased to 90 days.
The definition of a “mass layoffs” was also changed since NJ WARN’s initial passing. The original language only counted full-time employees towards both the 100-employed and 50-laid-off thresholds. After amendment, “mass layoffs” now counts both full-time and part-time employees. “Mass layoffs” also includes transfers, in addition to layoffs and terminations. The enacted definition is significantly broader than the original bill’s language, which required the discharge of either 500 employees or only 50 employees if that represented more than one-third of the employer’s workforce. Neither the 500-employee, nor the one-third-workforce requirements remain part of the law. For example, a layoff of 50 part-time employees out of 10,000 employees will now trigger an employer’s notice obligation under the WARN Act.
Also, the original NJ WARN Act only covered work locations that an employer had been operating for at least 3 years where at least 50 layoffs were made. The amended Act considers together all work locations in the state of New Jersey operated for at least three years. For example, if an employer terminated 2 employees from each of its 25 New Jersey stores, each operated for at least 3 years, the notice requirements in effect under the amended NJ WARN Act would be triggered.
The NJ WARN Act now requires each employee affected by a “mass layoff” receive severance pay based on the length of their employment. The amount of the severance is equal to one week’s pay for each full year of their service to the company, calculated using the greater of the employee’s final rate of regular pay or the average of their pay over the previous 3 years.
Before the 2023 amendments, severance pay was only required when an employer failed to provide the required notice (originally 60 days). As enacted, an employer who fails to give the proper notice (now 90 days) is required to compensate the affected employee with an additional 4 weeks of regular pay on top of the severance payment based on their length of employment.
What’s more, the amended statute specifically defines severance pay as “compensation due to an employee for back pay and losses…” suggesting the payments are to be treated as “wages,” and protected as such under New Jersey wage laws and in bankruptcy proceedings.
The mandatory severance obligations and character of severance payments will almost certainly be the subjects of legal challenges.
Missing Key Exception from Federal Law
While the federal WARN Act provides some exception for faltering businesses, the NJ Warn Act does not. This may place New Jersey business owners in a difficult position if they are attempting to save a company. While trying to secure new financing, employers will need to be conscious of the extended 90-notice requirements, risk losing employees during that period, and potentially plan for significant severance wages if layoffs ultimately become necessary.
The federal WARN Act also has an exception for the sale of businesses, on the theory that in an asset sale the seller actually fires all of its employees even though they are immediately rehired by the buyer. The New Jersey WARN Act is missing an express exception for this theoretical “technical termination trigger.” Many in the tax law community have raised this concern, and the optimists believe New Jersey courts may imply such an exception, but there is no way to predict how the Division of Tax or a Court would rule on a given transaction. One suggestion has been to give WARN notice to employees in advance of a business sale. Another is to negotiate with the buyer to include an obligation to extend equivalent job offers to all employees (status, title, benefits, pay, location) for at least 90 days.
Source: Kulzer & DiPadova, P.A.