New Jersey Expands WARN Act Plus Misclassification Penalties

Author: David B. Weisenfeld, XpertHR Legal Editor

February 6, 2020

New Jersey's broadly expanded Worker Adjustment and Retraining Notification (WARN) Act highlighted a busy month of employment law activity in the Garden State. Gov. Phil Murphy signed amendments to the New Jersey WARN Act in late January, governing mass layoffs, transfers and plant closings.

Effective July 19, 2020, the Act provides a host of new employee protections by:

  • Increasing the notice period from 60 days to 90 days;
  • Requiring severance pay of one week per year of service for all affected employees;
  • Requiring an additional four weeks of pay if the employer fails to provide full WARN notice;
  • Prohibiting any waiver of the right to severance pay absent state or court approval; and
  • Broadening the definition of "mass layoff" to cover all reductions in force that cause the termination of 50 or more employees (either full-time or part-time).

Several high-profile business closings and bankruptcies led to the push for the law, most notably Toys "R" Us closing its New Jersey headquarters and distribution center in 2019, which resulted in more than 2,000 jobs lost.

Ballard Spahr employment attorney Steven Suflas views New Jersey's amended WARN Act as a massive overreach. Speaking with XpertHR, he said of the severance pay requirement, "That is a substantial economic penalty. No employer undergoes a mass layoff because they are flush with cash."

Independent Contractor Penalties

Gov. Murphy also recently signed a few laws that take aim at worker misclassification. AB 5839 gives the New Jersey Department of Labor and Workforce Development the power to impose penalties against businesses for intentionally misclassifying workers.

New Jersey applies the strict "ABC" test for deciding if a worker is properly classified as an independent contractor. Effective April 1, 2020, employers caught misclassifying workers will be subject to fines that are no April Fool's joke, including:

  • Up to $250 per misclassified employee for a first offense;
  • Up to $1,000 per misclassified for subsequent violations; and
  • Paying up to 5% of a worker's gross earnings over the previous year-long period.

Also effective April 1, any New Jersey employer that enters into an agreement with a labor contractor to provide it with workers may face joint liability for any violations of state wage or tax laws, including for misclassification.

In addition, any company owner, director, officer or manager may be held individually liable for any role they play in misclassifying workers.

"I litigate a lot of these cases, and I don't think the New Jersey Department of Labor has ever met an independent contractor," said Suflas, who suggested that New Jersey is going even further than California's recent crackdown on misclassification because California has a number of exceptions.

New Jersey law also will soon prohibit employers from retaliating against any worker for making an inquiry or complaint about possible misclassification, with potential fines ranging from $100 to $1,000. Terminated employees will be entitled to reinstatement, back pay and legal fees.

Finally, New Jersey will require workplace postings regarding employee misclassification effective April 1, including among other things:

  • The prohibition against misclassification;
  • The benefits and remedies to which a misclassified employee is entitled; and
  • How a worker may contact the New Jersey Department of Labor and Workforce Development to provide information or file a complaint.