New law would require more severance pay from employers during mass layoffs in New Jersey

Closed businesses for COVID-19 pandemic outbreak, closure sign on retail store window banner background. Government shutdown of restaurants, shopping stores, non essential services.

TRENTON, NJ – Running a business in New Jersey is hard, but during hard times, such as forced government closures as a result of future possible health emergencies, shutting a failing business down is about to get even harder, and more expensive.

According to legislation sponsored by Senator Joe Cryan and Senator Fred Madden that was approved today by the Senate, the landmark worker protection law requiring advanced notice and severance pay in the event of mass layoffs would take effect immediately.

As a result of the Covid public health crisis and the resulting disruptions in the job market, the original law, authored by Senator Cryan and Senator Nellie Pou, was put on hold by Governor Murphy in January of 2020.

As a result of mass layoffs, New Jersey was the first state to enact a law guaranteeing severance pay.

“Now that the public health crisis is subsiding, it is time to put these worker protections into place,” said Senator Cryan (D-Union). “Companies and hedge funds have exploited bankruptcy laws to protect their profits while workers lose their jobs, their paychecks and often get cheated out of severance pay. The workers were left in the dark as companies were pillaged for their resources. The law will be upgraded to better protect the rights of the workers.”

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The worker protection law increases the pre-notification time and requires severance pay for business closings, mass layoffs and transfers under the Worker Adjustment and Retraining Notification (WARN) Act.

“When companies fall on hard times, and are going through significant layoffs, it is necessary to ensure severance for hard working employees,” said Senator Madden (D-Camden/Gloucester). “With growing fears of additional mass layoffs, especially within the tech industry, this legislation is more crucial now more than ever to ensure that workers are given the adequate notice and support.”

When a mass layoff, plant closure or transfer will result in 50 or more employees losing their jobs, employers of 100 or more full-time employees must provide 90 days’ advance notice from the law. Furthermore, the law requires one week’s worth of severance pay for every year of service of employees.

In response to a number of business closures and bankruptcies which left employees jobless and without severance compensation, the original law was enacted. Private equity firms purchased bankrupt companies, imposing massive layoffs while the top executives received millions of dollars in bonuses.

The bill, S-3162, was approved by the Senate with a vote of 30-3.