Client Alert: New Jersey WARN Act Mandates Severance Pay

The following alert was prepared for Payfactors by Stacy Barrow and Steve Weatherhead. Mr. Barrow and Mr. Weatherhead are partners at Marathas Barrow Weatherhead Lent LLP, a premier employee benefits, executive compensation and employment law firm. They can be reached at sbarrow@marbarlaw.com or sweatherhead@marbarlaw.com.


New Jersey recently amended its “mini‐WARN” act to become the first state in the country
requiring covered employers to provide severance — in addition to substantial notice — in the event of a plant closing or mass layoff.

The key components of the amended law, which goes into effect on July 19, 2020, are as follows:

  • Previously, only employers with 100 or more full‐time employees were covered. Under the new law, employers will have to count both full and part‐time employees when determining whether they meet the threshold.
  • The amended Act will be triggered by a termination or transfer of operations during any 30‐day period resulting in the termination of 50 or more employees, or a mass layoff resulting in an employment loss affecting 50 or more employees at any “establishment” during any 30‐day period.
  • An “establishment” now includes all of the employer’s locations within the state of New Jersey. Employers now will have to aggregate all terminations in the state to determine whether the Act is triggered.
  • The notice period for a triggering event has been increased from 60 to 90 days.
  • Under the current law, employers are required to provide severance pay only if they fail to provide notice. Under the amended law, employers ‐‐ in addition to providing the required notice ‐‐ will be required to pay affected employees severance in an amount equal to one week of pay for every full year of employment. There is no cap on severance pay.
  • Employers failing to provide 90 days’ notice will be required to pay an additional four weeks of severance pay to each affected employee.
  • The severance pay is considered wages and must be included as part of each affected employee’s final wages.
  • If an employer wishes to obtain a release from employees, the employer will have to offer more than what is required under the NJ WARN Act to provide adequate consideration.

 

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