We write to alert you to a new State law that impacts eligible employees’ rights to notice of any employment loss resulting from an applicable plant closing, a transfer of operations, or a mass layoff. As you may know, previously, when conducting a layoff or plant closing, employers in New Jersey had to consider whether their actions implicated the federal Worker Adjustment and Retraining Notification Act (“federal WARN Act”).

Now, as a result of the Millville Dallas Airmotive Plant Job Loss Notification Act (the “NJ WARN Act”), signed into law by Governor Jon Corzine on December 20, 2007, and effective immediately, New Jersey employers now have additional and more far reaching obligations to consider. The NJ WARN Act provides greater protection to employees than the current federal WARN Act, and, because of the immediate effective date, it is unclear what impact the NJ WARN Act has on already announced downsizings that have not yet been implemented.

The Federal WARN Act

The federal WARN Act protects employees of large companies by requiring covered employers to provide 60-days advance notice of plant closings and mass layoffs, which some courts have interpreted as permitting the employer to pay the employees 60-days pay in lieu of notice. This 60-day advance notice serves to provide employees some transition time to adjust to the prospective loss of employment, to seek and obtain alternative jobs and, if necessary, to enter skill training or retraining that will allow these employees to successfully compete in the job market. Under the federal WARN Act, covered employers also are required to provide advance written notice of the layoff or plant closing to union representatives (when applicable), the highest ranking elected official in the municipality where the employer is located, and to a unit within the state department of labor.

Not all plant closings and layoffs are subject to the federal WARN Act, and certain employment thresholds must be reached before the federal WARN Act applies. The federal WARN Act applies only to those businesses that employ (i) 100 or more employees, exclusive of part-time employees or (ii) 100 or more employees, including part-time employees, who work in the aggregate 4,000 or more hours per week, exclusive of overtime. The federal WARN Act also contains six exemptions and provides for a reduction in the notification period in particular circumstances.

The NJ WARN Act

The NJ WARN Act enhances the obligations of covered New Jersey employers when conducting mass layoffs or plant closings.

Significantly, the law:

  • Requires employers in certain circumstances where the NJ WARN Act is violated to pay severance equal to one week of pay for each full year of employment. Under the federal law, an employer who did not give 60-days notice would have to provide an employee 60 days of pay and may be subject to other fines and penalties. Under the NJ WARN Act, in addition to these fines and penalties, an employer who does not give its employees 60 days notice must also pay its employees severance equal to one week of pay for each full year of employment. The rate of severance pay will be the average regular rate of compensation received during the employee’s last three years of employment with the employer or the final regular rate of compensation paid to the employee, whichever rate is higher. The severance pay will be in addition to any severance pay provided by the employer pursuant to a collective bargaining agreement or for any other reason, except that back pay provided pursuant to the federal WARN Act will be credited toward meeting the severance pay requirement of the NJ WARN Act;
  • Applies to an establishment that has been in operation for three years or more and which employs 100 or more full-time employees, in which case the establishment must give advance notice of a transfer of operations, plant closing or a mass layoff (as each of those terms are defined in the Act) if (i) during any continuous period of not more than 30 days, there is a termination of employment of 50 or more full-time employees or (ii) during any 90-day period, there is a termination of employment for two or more groups at a single establishment, when each group has less than the 50 employees, but the aggregate for all of the groups exceeds 50 employees, unless the employer demonstrates that the cause of the termination for each group is separate and distinct from the causes of the termination for the other groups;
  • Broadens the definition of establishment to include a single location or a group of contiguous locations, including groups of facilities which form an office or industrial park or separate facilities just across the street from each other; and
  • Creates a new exception for a layoff of more than six months, which at its outset, was announced to be a layoff of six months or less, if the extension is caused by business circumstances not reasonably foreseeable at the time of the initial layoff and notice is given at the time it becomes reasonably foreseeable that the extension beyond six months will be required.
  • Eliminates many of the exceptions otherwise permissible under the federal WARN Act.

Most notably, as set forth above, the penalties for violations under the NJ WARN Act are more significant than under the federal law. In addition, because the NJ WARN Act became effective immediately it is not clear whether the Act would apply to a mass layoff announced before the Act’s enactment, but which was not to be implemented until afterward. By way of hypothetical example, if a covered employer gave notice to its employees on December 1, 2007 that it was planning to conduct a mass layoff on January 15, 2008, it is unclear whether the employer would be in violation of the NJ WARN Act, even though the state law was not in effect on December 1st. This 45 day notice would constitute a violation under the federal WARN Act because the notice is short by 15 days. The penalties under these two statutes would differ greatly if both were deemed to apply to this hypothetical. For instance, in this hypothetical scenario, if an affected employee had been employed by the company for 20 full years and had received an annual salary of $52,000, she would be entitled to $20,000 of severance pay ($1,000/per week multiplied by 20 full years of employment) if the NJ WARN Act were deemed to apply. By contrast, under the federal WARN Act the penalties would likely be $2,137.05 ($142.47/per day multiplied by 15 days of violation). Therefore, failure to comply with the New Jersey law may expose employers to enhanced monetary penalties.

We also note that New Jersey now requires additional information be included in the written notices that must be provided to (a) the Commissioner of the Labor and Workforce Development; (b) the chief elected official of the municipality where the establishment is located; (c) each employee whose employment is to be terminated; and (d) any collective bargaining units of employees at the establishment. The Commissioner of Labor and Workforce Development is charged with making a form available to employers for such notices not later than 90 days after December 20th, but there is no indication as to when these forms will be available.

Another important distinction between the NJ WARN Act and the federal WARN Act is the specific exceptions to providing advance notice. As mentioned above, the federal WARN Act provides six exceptions to both plant closings and mass layoffs. The exceptions under the NJ WARN Act, however, are less comprehensive. Thus, again, there could be multiple instances in which an employer could be in compliance with the federal law and still have violated the NJ WARN Act.

Finally, you should note that the NJ WARN Act became effective immediately on December 20, 2007, and does not explicitly grandfather in those companies which already have given notice to their employees under the federal WARN Act or for which a mass layoff or plant closing was imminent. As such, employers seemingly in compliance under the federal WARN Act with respect to future plans for a transfer of operations, a plant closing or a mass layoff may need to be prepared to fully comply with the NJ WARN Act, unless this ambiguity in the NJ WARN Act is clarified.