On January 18, 2022, Governor Philip D. Murphy signed NJ A6246 / S4295, which significantly restricts the business discretion of successor hotels. The New Jersey Senate and General Assembly passed this bill by an overwhelming majority on the final day of the previous legislative session.

In a nutshell, this bill requires successor hotels to offer their predecessor’s employees continued employment for at least 90 days (absent termination for “cause” – an undefined term) and to make any reduction of the workforce only in order of least “seniority and experience.” It further requires re-hire based on seniority where positions are restored during the retention period. The bill requires the successor to keep a record of each offer of employment and to provide each offered employee a written performance review at the end of the 90-day period. If performance is satisfactory, the successor is required to offer the employee continued employment.

By way of background, January 10, 2022 was the last day of the 2021 legislative session and the final day of the “lame duck” session (when new legislators have been elected, but before they take office). This lame duck session was particularly noteworthy for the loss suffered by outgoing Senate President Stephen M. Sweeney in the November elections.1 The impending exit of this influential figure is believed to have sparked a rush by legislators to pass a series of employee-friendly bills, including A6246.

Definitions and Noteworthy Provisions

“Hotel” is defined broadly in the legislation as “a hotel, apartment hotel, motel, inn, tourist camp, tourist cabin, tourist home, rooming or boarding house, club, or similar establishment where sleeping accommodations are supplied for pay to transient or permanent guests.” Because there are no size or revenue requirements in the definition, this bill could potentially affect employers ranging from large hotel chains to small home rental companies. Similarly, “hotel employer” is defined broadly as “any person who owns, controls or operates a hotel, and includes any person or contractor who, in a managerial, supervisory or confidential capacity, employs one or more hotel service employees.”

The bill provides significant job protection for employees in the event of a change in control by the hotel. Specifically, a successor hotel employer “shall, during, the hotel service employee retention period, offer each eligible hotel service employee employment for no less than 90 working days under the terms and conditions established by the successor hotel employer, with no reduction of wages or benefits. . . ” absent a termination for “cause” or a reduction in force, which can be performed only in order of reverse “seniority and experience.” When positions are restored, employees must be rehired in seniority order.

Of importance, “cause” is not defined in the bill, leaving significant room for disputes about whether a termination was permissible under the bill. The bill creates a cause of action allowing “[a] hotel service employee who has been discharged or not retained in violation [of certain parts of the bill]” to bring an action in court to recover: (i) back pay, (ii) liquidated damages, (iii) the “costs of benefits the successor hotel service employer would have incurred for the employee under the employee’s benefit plan,” and (iv) attorney’s fees.

The bill also places administrative burdens on hotels. Among other things, it (i) requires a successor hotel employer to retain written verification of each offer of employment made for no less than three years from the date the offer is made; and (ii) requires the successor hotel employer—at the end of the hotel service employee retention period—to perform “a written performance evaluation for each hotel service employee retained. . . .” An employee whose performance is “satisfactory” must be offered “continued employment under the terms and conditions established by the successor hotel employer.” Once again, the term “satisfactory” is not defined and is open to interpretation and dispute, exposing the hotel employer to potentially significant liability and penalties.

The legislation also imposes burdensome conditions on hotels whenever their services are “disrupted.” The bill defines “service disruption” as a situation in which a certain specified condition “substantially affect[s] or is likely to substantially affect a guest’s use of a room or utilization of a hotel service.” Such conditions include (i) certain construction work, (ii) “the unavailability, for a period of 24 hours or more, of any advertised hotel amenity,” (iii) “the unavailability, for a period of 24 hours or more, of any advertised room appliances or technology,” and (iv) “the unavailability of any advertised or legal required accessibility feature.” When such service disruptions occur, the legislation requires that a hotel operator provide, “in all modifiable mediums in which the hotel advertises, solicits customers, or through which customers can book or reserve rooms or services, notification of the service disruption to each third-party vendor and each guest who is seeking, or has entered into, a reservation, booking, or agreement with the hotel operator or a third-party vendor for the use or occupancy of a room.” The legislation also specifies requirements for such notification including what and how it must describe.

The bill further prescribes that certain conditions shall be presumed to substantially affect a guest’s use of a room or utilization of a hotel service. Those instances are: (i) “conditions of which the hotel operator is aware, indicating the presence in the hotel of any infestation by bed bugs, lice or other insects, rodents or other vermin capable of spreading disease or being carried, including on one’s person, if the infestation has not been fully treated by a licensed exterminator within 24 hours of identifying it”; (ii) “the unavailability for a period of 24 hours or more, of any utility, including, but not limited to, gas, water, or electricity when the unavailability affects only the location of the hotel”; (iii) “or any strike, lockout or picketing activity, or other demonstration or event for a calendar day or more at or near the hotel.”

In the event of any service disruption—presumptive or otherwise—guests of the room or hotel service may terminate their reservation without any fee, penalty, or other charge for the cancellation. The hotel is not permitted to retain any deposit for such a canceled reservation.

Looking Ahead

Passed despite opposition by the hotel industry, the bill will soon impose myriad new logistical challenges for those involved in hotel transactions throughout the state. The bill also greatly impacts the franchise industry and is sure to have a significant economic impact on a market sector that has been decimated by COVID-19.

The new requirements will reduce the flexibility of successor hotel employers to manage their workforce by limiting terminations within the first 90 days to those for “cause,” restricting reductions in force to those with the least “seniority and experience,” and requiring those employees to be “rehired” first (without limits on how long employers must wait for such employees to accept or return to their employment).

Due to these new challenges, hotel employers are strongly advised to consult with counsel to work through questions that might arise should this bill be signed into law. Littler’s WPI will continue to track the legislation and similar bills that arise throughout other jurisdictions across the country.