New Jersey First in Nation to Require Severance for Mass Layoffs

New Jersey recently became the first state in the country to require larger employers to provide severance pay when conducting mass layoffs

New Jersey recently became the first state in the country to require larger employers to provide severance pay when conducting mass layoffs. The new law was prompted by the bankruptcy of Toys R Us, which resulted in more than 2,000 jobs lost in New Jersey.

The new law, S-3170, amends the Worker Adjustment and Retraining Notification (WARN) Act to increase the minimum number of days of notice that employers of 100 or more full-time employees must give to employees when there is a mass layoff, plant closing, or transfer that will result in 50 or more employees losing their jobs. It also mandates that such employers provide severance pay equal to one week for each year of service, whether or not the employer provides required notice. 

WARN Act Notice Requirements

The New Jersey WARN Act requires employers with 100 or more employees to provide notice prior to laying off 50 or more full-time employees within a 30-day period. The notice requirements specifically apply to mass layoff and the transfer of operations/termination of operations. The new law increases the minimum number of days that covered employers must give to employees from 60 days to 90 days.

As amended by S-3170, a “mass layoff” under the WARN Act is any reduction in workforce 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 for 50 or more of the full or part-time employees at or reporting to the establishment. Previously, the law only counted full-time workers.

The WARN Act also now more broadly defines an “establishment” as a place of employment that has been operated by an employer for a period longer than three years, which may be a single location or a group of locations, including any facilities located in New Jersey. The amendment thus brings retail chains under the purview of the WARN Act.

Under the WARN Act, notice must be provided to the following:

• Each employee to be terminated and any collective bargaining units;
• The chief elected official of the municipality; and
• The Commissioner of Labor and Workforce Development

The statute outlines what information must be provided in the layoff notice. It includes a statement of the reasons for the mass layoff or transfer or termination of operations, as well as a statement of any employee rights with respect to wages, severance pay, benefits, pension or other terms of employment as they relate to the termination, including any rights based on a collective bargaining agreement or other existing employer policy. A form for the notice can be found on the New Jersey Department of Labor and Workforce Development’s website. 

WARN Act Severance Requirements

The WARN Act previously required employers who failed to satisfy the notification requirements to pay severance to impacted employees. S-3170 makes the requirement to provide severance pay apply whether or not the employer provides the required notice. Pursuant to SB 3170:

Severance under this subsection shall be regarded as compensation due to an employee for back pay and losses associated with the termination of the employment relationship, and earned in full upon the termination of the employment relationship, notwithstanding the calculation of the amount of the payment with reference to the employee’s length of service.

Severance is equal to one week of pay for each full year of employment and is in addition to any other severance paid for any reason. Back pay provided by the employer to conform to the WARN law is credited towards meeting this severance pay criteria. S-3170 also requires an additional severance of four weeks of pay if the employers fails to satisfy the 90-day WARN Act notice requirement.

The new law takes effect on July 19, 2020.

If you have questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Sarah Tornetta, or the Scarinci Hollenbeck attorney with whom you work, at 201-806-3364.