Recent WARN Act Amendments and Their Consequences in NJ

April 18, 2023
by We can Help Law

Explore the Main Issues and Implications of the Latest Law Affecting Notice Requirements, Severe Pay, and Mass Lass Offs in New Jersey

Recent WARN Act Amendments and Consequences in NJ

Before Covid 19, the New Jersey legislature amended the New Jersey Worker Adjustment and Retraining Notification Act (WARN). The state’s version of federal law requires WARN-covered employers intending to lay off over 100 workers when shuttering or transferring operations, to give minimally 60 days’ notice of a closing or layoff. The amended law, which the legislature delayed enacting due to COVID, is more restrictive than the federal law, spelling significant implications for employers and employees alike in the state of NJ.

Catching up With the New Notice Obligations and Severance Requirements for Some Company Layoffs in NJ

SB 3170, which went into effect on April 10, 2023, extends the notice period to 90 days and includes all employees, part-time or full-time, affected by a business’s closing, transfer to a new owner, or mass layoff. When 50 or more employees are affected, the notification requirement kicks in, regardless of whether the 50 employees are a mere fraction of the business’s total workforce. The former law requires the number of employees affected by closure or layoffs to be one-third of the workforce. 

In addition to notice, employers must pay severance pay of one week per full year of employment working for the employer. However, the employer must pay severance under the terms of a collective bargaining agreement if the agreement’s severance pay is higher. And to incentivize compliance with the notice requirement, an employer must pay an additional four weeks of severance for shorter notice.

The Legal Challenge to New Jersey SB 3170 Implementation

Considering the effect on New Jersey-based businesses, the ERISA Industry Committee (ERIC), a trade industry advocate for employers, challenged the new law before April 10, when SB 3170 took effect.  In The ERISA Industry Committee vs. Robert Asaro-Angelo case in the U.S. District Court of New Jersey, both parties brought summary judgment motions. The issue before the court was whether the federal Employment Retirement Income Security Act of 1974 (ERISA) preempts SB 3170. ERIC represents employers who carry health and retirement benefits for at least 10,000 employees. As a lobbyist and advocate, ERIC’s aim is to achieve nationally uniform employee benefits laws under ERISA. ERIC sought injunctive relief from SB 3170, challenging the state law it claims is preempted by the federal ERISA law under the Supremacy Clause of the Constitution. 

The preliminary question and source of the defendant’s summary judgment motion is whether ERIC has standing to sue. A summary judgment motion asks the court to determine that the plaintiff of defendant does not have a material issue of genuine fact and, therefore, the court must dismiss or dispose of the case. In ERIC’s case, the defendant alleges that ERIC has no standing, which means it is not directly affected by the legal dispute in its lawsuit. However, ERIC asserts it has direct and associational standing to challenge SB 3170. 

The Court’s Decision in ERIC vs. Robert Asaro-Angelo 

To have direct standing, ERIC must show that it has suffered specific damages. And while it alleges that it spent innumerable hours and resources educating its members about the effects of the new laws, the judge found such allegations insufficient without specific numbers evidencing losses. In addition, the court noted that ERIC’s job is to inform its members. In other words, ERIC has no verifiable evidence that it suffered a specific injury to have the standing to sue. Moreover, ERIC’s assertion that the law conflicts with its mission to achieve nationally uniform ERISA laws to its members is not an injury for standing purposes (Sierra Club v. Morton See 405 U.S. at 739). The court denied ERIC’s direct standing assertion.

Next, to meet the requirements of associational standing, the District Court noted that the interests of ERIC and the businesses it represents must be aligned, the industries it represents could sue themselves, and the injunctive relief sought does not require an individual member as a plaintiff to the lawsuit. The court further stated that to prove the members ERIC represents have standing themselves; ERIC must allege the specific harm to at least one member. 

Further, since ERIC did not show that revealing its members’ business interests, membership lists, or evidence of injury exposes the members to hostility or other damaging impacts, it cannot assert association privilege that would excuse its requirement for a member to participate in the lawsuit. Thus, ERIC failed to establish associational standing without showing specific injury to at least one of its members. The court then granted the defendant’s summary judgment motion. 

NJ Employers Face Heightened Burdens Amidst Closings and Layoffs

With no practical challenge, the law now places additional planning and financial burdens on businesses that may be in financial distress. The law expands mass layoffs, so more employees qualify for severance pay. When a company needs to lay off employees, they typically cannot afford to pay additional monies for the severance pay required under the law. With the new law, more companies may consider laying off fewer employees at a time to avoid the law’s mandates. The law may force strapped businesses to devise new ways to get around the rules that ultimately hurt employees. 

Projected Scenarios for Future Cases of Large Scale Employee Firings in NJ

New Notice and Severance Pay Obligations for NJ Employers Closing and Laying Off Workers

ERIC will likely appeal the ruling as businesses and employees alike are affected by the dictates of the new law, which increases the likelihood of more lawsuits, costs, and disruptions to business operations. Additionally, employee class action suits for businesses whose policies do not comply with the law precisely may increase, as will declaratory relief actions asking courts to clarify unclear provisions of the law. For example, the law does not define what a whole year of work with the employer means when someone is on sick or family leave for part of the year.

While the law seeks to protect them, employees may be the first to seek advice from an employment law attorney when employers try to evade the law’s severance pay mandate. And for employers, an experienced employment lawyer’s dedicated legal counsel can help plan for an eventual layoff or transfer of operations when businesses must ensure they do not violate the law.

Consult a Monmouth County Employment Lawyer about the Effects of WARN Act Changes on Your Case

Our knowledgeable New Jersey employment lawyers educate ourselves on the latest issues and up-to-the-moment case decisions arising from this law and many others in the realm of employment litigation in Wall, Freehold, Toms River, Brick, Tinton Falls, Jackson, Middletown, Asbury Park, Howell, and areas in and around Monmouth and Ocean County. We can advise employees and employers alike on how to plan and what to expect with how the court decisions are trending. When you need to prepare, initiate, or face litigation in this new employment law landscape, our attorneys can serve as invaluable allies to businesses planning to scale down and to employees whose rights are infringed upon by their employers’ unlawful practices. Contact us today at (732) 303-7857 to speak with a learned and practiced employment lawyer when unsure of your options under NJ laws. We are pleased to provide you with a free consultation.