New Mini-WARN Statute In New Jersey Imposes Greater Requirements On Employers Than The Federal WARN Act And Could Lead To Additional Severance Obligations

Saturday, March 1, 2008 - 01:00

New Jersey employers with 100 or more employees now have another law to contend with when implementing layoffs - the Millville Dallas Airmotive Plant Job Loss Notification Act. The law went into effect on December 20, 2007, and requires employers to provide advance notice to employees who are terminated in a mass layoff or in a shutdown of operations, if certain triggering numerical thresholds are reached. While the notice period is similar to that required under the federal WARN Act, as discussed below, New Jersey's new law contains a number of provisions that differ from and impose obligations far beyond that imposed by federal law, including:

• a draconian penalty provision which could result in one week of severance pay for every year of employment for full-time employees, on top of any other severance pay that may already be provided, if an employer falls even one day short of the required notification period;

• no exception for layoffs or shutdowns caused by business circumstances that were unforeseeable at the time notice would have been required;

• no exception for employers seeking financing or additional business to keep operations going;

• no express exception for strikes or lockouts;

• notice may need to be given directly to bargaining unit employees, as well as their unions;

• notice may need to be given to all employees to be terminated 60 days before the first employee is terminated;

• notice may need to be given to employees terminated for performance reasons, if the terminations occur in the same 30-day time period as a mass layoff or shutdown;

• employees who refuse a transfer over state lines will be counted as "terminated," regardless of commuting distance;

• additional information must be included in the notice and a mandatory notice form will soon be issued;

• employers must allow the state's response team to come on the work site to meet with employees during "worktime."

Similar to the federal WARN Act, the New Jersey statute requires an employer to give 60 days' notice prior to any mass layoff, if, in any 30-day period at a single place of employment: (1) at least 500 full-time workers or one-third of the workforce with a minimum of 50 full-time employees experience a loss of employment; or (2) at least 50 employees are terminated in a transfer or termination of operations. Like the WARN Act, the New Jersey law also requires notice if the total number of layoffs or terminations resulting from the same action or cause will reach those levels in any 90-day period at a single worksite. Both statutes define a loss employment as including only those layoffs which exceed six months and excluding voluntary retirement or resignation.

The New Jersey statute directs employers to notify "each employee whose employment is to be terminated" and any collective bargaining units representing the employees, as well as the Commissioner of the Department of Labor and Workforce Development and the top elected official of the local government where the terminations are to occur. This is similar to WARN, except that with respect to represented employees, federal law requires only that notice be given to their representative - not to the employees directly.

The full extent of the new law's notice requirements, however, is unclear. It appears that all employees who will suffer a loss of employment may have to be given notice under the New Jersey statute if their termination is interpreted to occur "in connection with" the shutdown of operations or the mass layoff. This may include employees who are terminated outside of the 90-day window and part-time employees if those terminations are "in connection with" the shutdown or mass layoff, which could be difficult to predict in some circumstances. It likely does not include employees in other states, as it is doubtful that New Jersey law was intended to or could require notice to employees outside of New Jersey.

It is also unclear how the language requiring notice "before the first termination of employment occurs" will be interpreted, i.e., whether all employees to be terminated must receive notice 60 days before the first termination, which may be virtually unworkable in some phased layoffs. The WARN Act only requires that employees receive notice 60 days before the date their own employment is terminated.

While there remain open questions as to who must be provided the 60 days notice, the law is clear as to what information needs to be included in the notice. The New Jersey law provides that the notice include: the reason for the termination; the number of employees being terminated in connection with the layoff or shutdown; the dates of the layoffs or shutdown; the date each termination of employment will occur; a statement regarding "employee rights with respect to wages, severance pay, benefits, pensions or other terms of employment as they relate to the termination"; a statement of any employment available elsewhere in the employer's business and information as to the pay, benefits and terms and conditions of employment there; a disclosure of any severance pay that is owed to the employee because of a violation of the notice provision of the New Jersey law; and a statement specifically explaining what information the employees are entitled to receive from the state's response team. These information requirements are significantly more detailed than the notice required under the WARN Act.

Another way in which the New Jersey law is more onerous than the WARN Act is that it does not allow for certain exceptional situations where notice might be impossible. Specifically, the WARN Act allows an employer to give less than 60 days' notice where: (1) the closing or mass layoff is due to business circumstances that were not reasonably foreseeable at the time that notice would have been required; or (2) the employer is seeking capital or business which, if obtained, would obviate the need for a closing, but which would be jeopardized by providing notice (known as the "faltering business" exception; it applies only to shutdowns and not mass layoffs). The New Jersey law, however, contains no such provisions to allow for less than the full notice period in such exigent circumstances.

The state statute does permit a lesser notification period where a termination of operations was necessitated by fire, flood, natural disaster, national emergency, war, civil disorder, national sabotage, or certain decertifications from Medicare/Medicaid or license revocations - but, unlike the WARN Act, that does not apply to a mass layoff where there is no termination of operations.

Under the WARN Act, an employee who is offered a transfer to another job within a reasonable commuting distance is not considered to have lost his or her employment in the shutdown or layoff, even if the employee rejects the offer. The job offered is not required to be the same, but it cannot amount to a "constructive discharge." In contrast, under the New Jersey statute, an employee will not be considered to have been "terminated" if the employer offered the employee the same or an equivalent position in New Jersey, within 50 miles of the previous worksite. Thus, under the new New Jersey law, an employee who refuses a transfer across state lines will be counted as a "termination," regardless of how close the new location may be. (Under both statutes, if the employee accepts an offer to transfer, that employee will not count toward the calculation for the notice requirement regardless of the location or "equivalence" of the new job.)

The WARN Act expressly addresses who is responsible for providing notice where a layoff or shutdown occurs in connection with the sale of a business. The seller is responsible for providing notice for any closing or mass layoff that takes place up to the effective date and time of the sale; thereafter the buyer is responsible. New Jersey's statute does not mention the subject. To avoid issues, buyers and sellers should include a provision in the sales contract concerning their respective obligations.

Another unique aspect of the New Jersey statute is the extent to which it empowers the state Department of Labor and Workforce Development to make efforts to avert the layoffs. Not only must an employer provide the state response team with as much "work-time access" as the team may deem necessary to accomplish its responsibilities, but it also may be asked to meet with the team to discuss public programs such as economic development incentive and workforce development programs, which could delay or prevent a transfer or termination of operations.

The penalty provisions of the New Jersey and the WARN Act are dramatically different. Under WARN, an employer is liable for back pay and benefits for each day of violation, to a maximum of 60 days. The New Jersey statute, however, provides that any full-time employee who does not get the full 60 days' notice is entitled to severance pay of one week for every full year of service. Thus, under WARN, an employer who provides only 59 days' notice would be liable for only one day of pay and benefits for the one missed day of advance notice. Under the New Jersey law, however, an employer who misses the 60-day notice requirement by even one day is potentially liable for the full severance pay penalty, just as if no notice had been given at all. The New Jersey "all-or-nothing" approach is extreme and could result in a huge windfall for employees with lengthy service, merely because a relatively few days' notice is omitted.

New Jersey's law is made even more onerous by virtue of the fact that the severance due cannot be offset against other severance benefits being provided by the employer pursuant to a severance plan or policy or collective bargaining agreement. Under the WARN Act, employers may offset or reduce severance pay by any WARN Act obligations. In stark contrast, any severance due under the New Jersey statute must be in addition to any severance pay provided under a severance policy or plan or collective bargaining agreement or "for any other reason." Moreover, there is no provision in the new law that would permit an employer to obtain a release in exchange for the statutorily mandated severance pay. Thus, an employer who owes severance under the New Jersey law and who also wants a release of claims must provide additional compensation as consideration for a release.

In sum, New Jersey employers contemplating mass layoffs must carefully determine whether the state law is triggered well in advance of the date of the contemplated layoffs to allow sufficient time to send notice and avoid significant monetary obligations to impacted employees.

Katharine H. Parker is a Partner in Proskauer Rose LLP's Labor and Employment Department. She has extensive experience litigating employment disputes of all types. Wanda L. Ellert, Senior Counsel in Proskauer Rose LLP's Labor and Employment Law Department, is located in the Firm's New Jersey office. She has practiced labor and employment law for over 20 years and received her Juris Doctor degree from Harvard Law School. She has represented management in all facets of labor and equal employment opportunity law.

Please email the authors at kparker@proskauer.com or at wellert@proskauer.com with questions about this article.