Key Day for Measure that Would Give Extra Safeguards to NJ Workers in Mass Layoffs

John Reitmeyer | December 16, 2019 | More Issues
Supporters want more worker protections; business advocates say a bill requiring 90 days’ notice would make NJ business climate ‘even less competitive’
Credit: J Bers/Wikipedia
The measure was in response to several cases where employees, including those at Toys ‘R’ Us, were left with little or no severance pay after their companies abruptly closed down.

State lawmakers are making a final push to enact some of the strongest legislative protections in the country for workers who face the prospect of losing their jobs to a mass layoff or corporate bankruptcy.

Among the new safeguards that would be established under a bill scheduled for a final vote in the Senate today is a requirement that companies in New Jersey provide 90 days’ notice whenever a mass layoff is looming, which would add 30 days to what’s necessary under current law.

The measure, which has also been advancing in the Assembly this month, would force companies in New Jersey to give their laid-off employees a week of severance pay for every year of service. It would apply to companies with more than 100 employees who are preparing for a mass layoff that would impact 50 or more employees.

The new worker-protection policies were put forward by Democratic sponsors last year in response to several recent cases where employees were left with little or no severance pay after their companies were abruptly closed down — with last year’s liquidation of the Wayne-based Toys ‘R’ Us retail chain serving as the primary example. With the current legislative session coming to an end in mid-January, lawmakers are pushing for final adoption of the worker safeguards before then.

“In many of these cases, the companies are pillaged for their resources, equity firms load them down with debt and the top officials walk away with bonuses while the employees are left jobless,” said Sen. Joe Cryan (D-Union) as the bill moved through committee earlier this month.

Sen. Joe Cryan (D-Union)

“The law needs to be upgraded to better protect the rights of the workers,” he said.

But not everyone is in favor of seeing the new safeguards established in New Jersey, including business-lobbying groups, which argue they would make the state a national outlier.

The Toys ‘R’ Us experience

Founded in 1996, Toys ‘R’ Us was once one of the most popular retail chains in the United States. It was purchased in 2005 by a group that included two private equity funds, KKR and Bain Capital. In more recent years, the company faced steep financial problems because of growing competition from online retailers and other pressures. Toys ‘R’ Us announced in March 2018 that it was shutting stores and laying off an estimated 33,000 workers, including many in New Jersey. Employees were told that severance agreements would not be honored. (In the wake of the company’s liquidation, two new Toys ‘R’ Us stores have opened in Paramus and Houston, Texas, in recent weeks under a new corporate owner, New York-based Tru Kids.)

Several former Toys ‘R’ Us employees testified before a legislative committee in the State House earlier this year about what it was like to go through that mass layoff.

“I learned a lesson that hard work doesn’t always pay off when corporate interests are involved,” Joe Ryan, a former employee of a Toys ‘R’ Us store in Mays Landing, told lawmakers during a hearing in February.

New Jersey residents who were laid off from their jobs at Sears department stores, many of which were also closed earlier this year, also shared personal stories with lawmakers.

“I don’t want other people to have to go through what I am going through,” said Bruce Miller of Toms River.

Currently, New Jersey requires companies with more than 100 employees who are preparing for a mass layoff that will impact 50 or more employees to provide 60 days’ notice before instituting the layoffs. That requirement was created in 2007 by what’s known as the Worker Adjustment and Retraining Notification, or WARN Act.

Under the legislation that’s scheduled to go before the full Senate today, the WARN Act’s advanced-notice window would expand to 90 days. The measure would also require that workers be given severance pay equal to one week’s compensation for every year of service with the company. It would slap a penalty of additional severance for companies that run afoul of the advanced-warning requirement.

Making business climate more inhospitable?

In addition, the bill would toughen severance-pay requirements by legally treating such pay as “compensation” that would be “earned in full” by an employee at the time of their termination.

While the measure has the support of pro-worker groups, several business-lobbying organizations have questioned whether the proposed safeguards go too far. They have noted that federal law currently requires 60 days’ notice before a mass layoff, and have said New Jersey would become an outlier nationally if it adopts a provision for 90 days’ notice. They say it would add to what they consider an inhospitable environment for businesses in New Jersey due to things like high corporate taxes.

“If enacted, this proposal would make our business climate even less competitive, as it comes after the enactment of a series of tax increases and other expensive mandates imposed on employers during the past year,” said Mike Wallace, vice president of government affairs for the New Jersey Business & Industry Association. He cited new paid sick leave requirements and the adoption of a $15 minimum wage law as examples.

Sponsors of the bill say their primary concern is protecting New Jersey’s workers.

“In the event of corporate losses and bankruptcies, the first people to think of, the first people to protect, must be the employees,” said Sen. Nellie Pou (D-Passaic).

Pou, Cryan and the other bill sponsors have been working to send the proposed new safeguards to Gov. Phil Murphy’s desk before the current legislative session ends on January 14. If the bill — which would take effect immediately — doesn’t get signed into law by Murphy, it would be a major setback; the legislation would have to be redrafted and introduced again in the next legislative session.