Last week, the State of New Jersey passed a law delaying the effective date of the State’s heightened WARN Act protections for 90 days after the expiration of Governor Murphy’s stay-at-home order. This is a significant development for both employers and employees in New Jersey, as the updated NJ WARN Act contains much more stringent requirements than both the federal WARN Act and the prior NJ WARN Act.
The Federal WARN Act
The Worker Adjustment and Retraining Notification (“WARN”) Act requires employer to provide notice to employees in advance of any closings or layoffs. The federal WARN Act covers employers with 100 or more full time workers and requires 60 days written notice in advance of either a closing, which is defined as the discontinuance of a facility or operating unit that results in the layoffs of 50 or more employees, or a mass layoff, which is generally defined as the layoff of either 500 or more workers or 33% of an employer’s total active workforce at a single site. While there are some exceptions not discussed here, the general rule is that 60 days written notice is required before any large-scale layoffs.
Notable given the present circumstances, there are exceptions for faltering companies, unforeseeable business circumstances, and natural disasters. The faltering business exception applies when the employer believes that providing WARN notice would interfere with the acquisition of capital or business that might allow the employer to avoid the expected layoffs. In other words, an employer can avoid providing the required notice if it might scare away opportunities to potentially save the jobs at issue. The other exceptions—unforeseeable business circumstances and natural disaster, are more fact specific circumstances. Notably, however, these exceptions only permit the employer to shorten the notification period, not to forego their notice obligations entirely.
While none of these exceptions have been tested in the face of the COVID-19 crisis, I expect to see these exceptions cited in any WARN Act litigation. Notably, notice is always required as soon as practicably possible even in the face of these exceptions.
The penalties for violating the WARN Act are stiff. They include back pay and benefits for each day of violation to each aggrieved employee and $500 in civil penalties for each day the employer failed to provide notice to the applicable local government. There is an individual private right of action under the WARN Act.
The New Jersey WARN Act
New Jersey imposes its own WARN Act obligations on top of the federal Act. The current WARN Act largely mirrors the federal Act, in that it applies to employers with 100 or more full-time employees and requires 60 days’ notice. However, a key difference between the New Jersey Act and the federal Act is that the New Jersey Act does not contain the “faltering business” and “unforeseen business circumstances” exceptions. However, there is an exception under the New Jersey Act for declared national emergencies, certainly including the current COVID-19 crisis. However, this exception only applies to a complete termination of operations, not mass layoffs.
The New Jersey WARN Act was recently revised to include much tougher requirements on employers, set to take effect on July 19, 2020. Among other things, this amended WARN Act will require a WARN notice to be issued anytime there is a layoff of 50 or more employees, regardless of the percentage of the workforce those 50 employees comprise. Also, this includes employees terminated not only at a single site, but across the entire state of New Jersey. There will be a 90-day look back period to determine if the 50-employee threshold is met. The updated Act will also expand the notice period from 60 days to 90 days.
Most important, the updated Act requires severance pay. Whereas the federal Act and the prior New Jersey Act only provided severance pay in the event that employees received less than 60 days’ notice, the updated New Jersey Act provides employees a week of severance pay for each year they had worked with the employer. Additionally, in the event the employer fails to provide timely notice, employees are entitled to an additional four weeks of severance pay. Such severance pay is calculated as the higher of the average of the employee’s compensation over their last three years with the employer, or their final rate of compensation. Full severance pay is due upon termination of the employee, i.e., when the employee receives their final paycheck.
The updated New Jersey Act would affect all employers of 100 or more employees, regardless of whether those are full-time or part-time employees. Also, claims under the updated New Jersey WARN Act are not waivable, except by approval by a court or state administrative agency. Employers will not be able to force waivers of WARN Act claims through severance packages.
Needless to say, these are rigorous new requirements that certainly would have been invoked during the tumult of the current public health crisis. Indeed, the decision by the State to hold off on their enactment represents a serious development for employers and employees, and a recognition that businesses need breathing room in the current circumstance. However, at some point in our post-COVID 19 future this will become the law. Employers should begin preparing for this sea change now and employees should be aware of their rights going forward, especially in light of the lingering economic uncertainty that lies ahead.
These are troubling economic times and unemployment rates have reached levels unseen since the Great Depression. If you are an employer preparing for layoffs in the face of COVID-19, or if you are an employee curious about your rights under the federal and state WARN Acts, please contact us for a free consultation or by phone at 848.202.9323. We would be happy to schedule a consultation to discuss your rights and obligations under both Acts.
The above is general information only and not to be relied upon as legal advice. It does not create an attorney client relationship nor should it be relied upon as advice in lieu of consultation with an attorney.