Legal warning

With the public health emergency lifted, employers face tighter layoff notice requirements

Daniel J. Munoz//June 14, 2021//

Legal warning

With the public health emergency lifted, employers face tighter layoff notice requirements

Daniel J. Munoz//June 14, 2021//

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Several major expansions to the state’s version of the Worker Adjustment and Retraining Notification Act — called the Millville-Dallas Airmotive Plant Job Loss Notification Act — were supposed to go into effect early in 2020 and would have tightened the requirements for companies carrying out mass layoffs. Gov. Phil Murphy signed a measure at the onset of the pandemic that delayed the implementation of the law until 90 days after he lifts the COVID-19 public health emergency, which he did on June 4.

The law lengthens the notice period for layoffs from 60 to 90 days, and employers are on the hook for one week of severance pay for every year an outgoing employee worked for a company. In addition, the definition of “mass lay-off” will be much looser, lowering the threshold from 500 employees to 50 employees, and would include part-time workers in the total.

Under the current law, businesses have to send out a layoff notification if they’re letting go of more than 50 workers and those terminations account for at least a third of the workforce. The new version also expands the definition of an “establishment” to include all of a business’s locations within New Jersey.

Todd Vachon; faculty director, Labor Education Action Research Network; Rutgers University.

Todd Vachon, the faculty coordinator for the Labor Education Action Research Network at Rutgers University, said the law becoming effective would represent a “big win for workers,” in that “workers have a better chance of landing on their feet and hopefully finding alternative employment arrangements before reaching the economic floor.

“For some, it may change the calculus about whether or not to close up shop,” he continued. “The mandated payout to displaced workers would also likely mean less funds available for the often-lavish severance packages that top managers receive during these closures.”

Business groups criticized the measure, even before the pandemic. Food retailers could be hit hard if they need to make a strategic closure or move of any of their locations, said Mary Ellen Peppard, assistant vice president for government affairs at the NJ Food Council – a trade group for retailers like grocery stores.

Mary Ellen Peppard, assistant vice president for government affairs, NJ Food Council

“When [businesses] are unable to keep individual stores afloat, they will close some of their locations in order to protect the overall solvency of their company and remain in business,” she said in an email. “They want to avoid bankruptcy, which would result in every employee losing his or her job.

“[S]tores which issued the required notification struggle to keep their doors open for months with fewer employees and diminished sales,” she continued. “This new law would require them to pay additional severance at a time when they can least afford these costs.”

The new requirements could be “extraordinarily problematic for businesses” as they navigate the tail end of the pandemic and ensuing economic recovery, warned Christina Renna, president and chief executive officer of the Chamber of Commerce Southern New Jersey.

Chamber of Commerce of Southern New Jersey President and Chief Executive Officer Christina Renna.

A legal challenge is moving forward in federal court, filed by the ERISA Industry Committee – or ERIC. It lists New Jersey Labor Commissioner Robert Asaro-Angelo as the sole defendant. The state Labor Department declined to comment on the legal matter, as did the New Jersey Attorney General’s Office.

The Washington, D.C.-based group acts as a nationwide trade organization for employer health and retirement plans. In the suit, filed in August, ERIC argues that New Jersey’s amendments to the WARN Act violate the Employee Retirement Income Security Act of 1974, a federal law setting the standards for employee benefit plans. On May 20 U.S District Judge Brian Martinotti rejected the state’s motion to dismiss the case.

ERISA Industry Committee (ERIC) President and Chief Executive Officer Annette Guarisco Fildes
Guarisco Fildes

“ERIC does not oppose WARN statutes or the protections that they provide, but states must comply with federal law and ERISA preemption,” ERIC President and Chief Executive Officer Annette Guarisco Fildes said in a May 19 statement. “ERIC firmly believes the amendments to the New Jersey WARN Act are clear violations of the law.”

She continued that “[s]ates must not be allowed to mandate companies create a benefit plan in violation of federal law.”

The original measure was colloquially referred to as the “Toys R Us” bill when it was passing through the statehouse in 2019.

Lawmakers like Sen. Joseph Cryan, D-20th District, and advocacy groups like United for Respect said that the bill was a response to mass layoffs at retail outlet Toys R Us.

More than 1,000 New Jersey workers lost their jobs when the chain filed for bankruptcy in 2017. Many of them, organized as United for Respect, said they were let go with little notice and no severance. Public pressure eventually forced the private equity firms that owned the retail chain to set up a $20 million severance fund for affected employees.

“Elected officials have a responsibility to stop these corporations from destroying people’s lives and guaranteed severance is the first step to protect working families being impacted by an increasingly volatile economy,” Bruce Miller, an organizer with UFR, said in a statement. “That is why we organized and helped pass the guaranteed severance pay law.”

He suggested that had the law gone into effect during the pandemic, then many workers would have had a stable source of income and health insurance. “At the very least, if their companies did close down, they would have had some financial cushion to keep them afloat while they landed another job.”

Cryan agreed, saying that he felt “companies used some of the pandemic response to either lay off or cost-cut. … It sure looked like there were cases, especially companies that took some of the federal money then didn’t rehire everybody back.”

Layoffs skyrocketed between February and March last year, when the strictest COVID-19 business closures went into effect.

“I absolutely believe that there are companies that took advantage of the pandemic to do things that the spirit of the bill was intended to avoid, so it’s been a frustrating process,” Cryan added.

Layoffs continue

Across New Jersey, industries such as casinos, entertainment, arts and culture, airlines, retail, restaurants and hotels laid off most of their workers, either from mandated brick and mortar shutdowns, or reductions in patronage amid the pandemic.

Tropicana laid off 2,704 employees, according to an April 2020 notice in the WARN Act database maintained by the state Labor Department. AC Ocean Walk, which owns Ocean Casino Resort in Atlantic City, filed a notice that they would lay off 2,948 employees. MGM International, which owns Borgata Hotel Casino, announced plans to lay off 2,295 employees.

United Airlines, which maintains a hub at Newark Liberty International Airport, furloughed thousands of workers after the federal COVID-19 relief package lapsed, and with it a requirement that airlines that received federal relief not cut their workforce before Oct. 1 last year.

Kings Super Markets said in November that it planned to lay off 380 employees at five of its retail locations and its corporate office in Parsippany. The company is being sold to ACME Markets.

Major retailers such as Century 21, Neiman Marcus and Lord & Taylor announced last year that they were each letting go of hundreds of employees. HMSHost, which operates food and beverage shops in the state’s highway rest areas, said they were parting ways with hundreds of employees. Mondelez Global, which owns the Nabisco factory in Bergen County, announced in March that it was letting go of nearly 600 employees and shutting down the plant.

In many cases, employers rehired workers as economic conditions improved or when the federal government came through with more relief. Still, United Airlines said it is considering a proposal that would entail the termination of more than 1,200 catering staff at Newark Airport. Those workers would be subcontracted under United’s proposal, and the plans drew the ire of labor rights groups and lawmakers because the company received roughly $7.7 billion in pandemic federal relief.

“We did not give this money to the airlines so they can profit or they can give the CEOs bonuses while the people at the bottom get screwed,” said U.S. Rep. Albio Sires, a Democrat, during a May 4 Zoom news conference hosted by Unite Here, the union representing many of those workers. “That money was intended to protect the American workers.”

Kevin Brown, director, New Jersey State of 32BJ SEIU.

Airline officials maintained that the plans are not final, and that no arrangement has been made with any third-party vendor. If the company opts for a third-party vendor, it would prioritize existing employees, United said.

Still Kevin Brown, head of the union 32BJ SEIU, which represents thousands of service workers at Newark Airport, said he felt that the WARN Act would have at the very least given airport workers extra time to land on their feet during last year’s worsening recession.

[T]his would have prevented many of the lay-offs that went on at the airport, but I don’t think it would have completely stopped them,” he said in a statement. “Workers could have held on to their jobs a bit longer and continue providing for their families without having to go on unemployment or depend on social services.”