New Jersey’s Mandatory Severance Pay Requirements

Rich Higgins, CPA
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February 10, 2020

New Jersey is the first state in the nation to mandate that companies with at least 100 employees provide 90 days’ notice for layoffs or operation transfers that would mean at least 50 full time workers are let go within a period of 30 days. That is an increase from 60 days for lay-offs of that size as required by the Worker Adjustment and Retraining Notification Act (WARN Act) of 2007. The new law requires notification if 50 or more employees are laid off from one or multiple locations. The WARN Act required notification of a lay-off at only one location. 

The bill ( S3170 ) also requires companies to pay each worker one week of severance for every year of employment. Businesses that fail to comply with the 90-day layoff notice would be liable for an additional four weeks of severance pay.

The rate of severance pay is the average regular rate of compensation received during the employee's last three years of employment with the employer or the final regular rate of compensation paid to the employee, whichever rate is higher. An employer may not request the employee to waive the right to the severance payment unless it is approved by the Commissioner of Labor and Workforce Development or a court. 

Governor Phil Murphy signed the bill on January 21, 2020, in response Toys R Us and other large companies who laid-off a large number of workers. The new rules take effect in six months on July 19, 2020. 

S3170 includes other protections for workers. Severance pay is considered “compensation” that would be “earned in full” at the time of the employee’s termination. The measure also lays out requirements for “successor employers” who may take ownership of the company, such as protections against pay cuts during a 180-day transition period. In addition, successor employers must notify workers at least 15-days prior that they will be taking over the company. 

Feel free to contact any member of our team with questions at 610-828-1900 (PA) or 732-341-3893 (NJ). You can contact Rich Higgins, CPA, managing principal- New Jersey office, at Richard.Higgins@MCC-CPAs.com or me at Marty.McCarthy@MCC-CPAs.com . We are always here to answer your questions.  

Martin C. McCarthy, CPA, CCIFP
Managing Partner 
McCarthy & Company, PC 

Disclaimer: This alert is for informational purposes only and does not constitute professional advice. Information contained in this communication is not intended or written to be used as tax advice, and cannot be used by the recipient to avoid penalties that may be imposed under the Internal Revenue Code. We strongly advise you to seek professional assistance with respect to your specific issue(s).