The coronavirus has dealt a serious blow to many industries as people remain in their homes and spending slows.

Businesses are facing declining revenues across the board as travel restrictions remain in place and retail establishments continue to shut down. As a result, many businesses have started to engage in worst-case scenario planning, including the possibility of instituting reductions in force, or layoffs. If this becomes a reality for your business, you should consider the fact that the federal government and many states have enacted laws that require notice periods and possibly severance payments to affected employees in the case of certain large layoffs. These laws are known as WARN Acts, which is an acronym for Worker Adjustment and Retraining Notification Acts. This article will provide a general overview of the NJ WARN Act as an example of the types of state laws that can apply to layoffs, but you should consult your legal advisor if you have any questions or concerns regarding the application of these laws to your particular situation.

New Jersey WARN Act Background

The NJ WARN Act, originally enacted in 2007, was expanded significantly in January 2020 (with a July 19, 2020, effective date). Starting July 19, 2020, the modified law applies to individuals and businesses operating in the state of New Jersey for more than 3 years and employing at least 100 employees regardless of how many hours those employees work per week. If there is a layoff of 50 or more employees (either full-time or part-time) in the state, then the law generally requires 3 things:

  1. At least 90 days advance notice before the employees can be terminated.
  2. The NJ WARN notice must be provided to the affected employees and to their representatives (e.g., a labor union), to the NJ Commissioner of Labor and Workforce Development, and to the chief elected official of the unit of local government. The information required in the notice is fairly detailed and specific, and forms are available on the NJ Department of Labor and Workforce Development website. The name of your business and the number of workers affected, among other things, may become publicly available on the NJ DOL&WD website.
  3. At least one week of severance pay for each year an affected employee has worked with the business, and an additional four weeks of pay if the employer fails to provide timely notice of the layoff. Note the severance requirement was added to the legislation in January 2020 and is believed to be the first such requirement in the nation (previously severance was provided only if the employer failed to provide timely notice of the layoff). It is scheduled to take effect in July 2020.
If you have any questions or would like to know if your organization is now impacted, please
contact a member of our Tax Services Team.

Although there are summaries of the law available on the NJ DOL&WD’s website, you should consult a qualified legal advisor if you have questions because the summaries do not appear to incorporate the most recent changes to the legislation that were made in January 2020.

For a more complete summary of the changes that were made to the New Jersey WARN Act regulations, as well as the current version of the statute that applies until July 19, 2020, please read here.

Clients considering layoffs often seek our assistance with their scenario planning from an accounting, financial statement, and tax perspective. We usually work in conjunction with the client’s internal and external advisors to help craft a plan that works for a particular business and its employees. Please reach out to your Withum advisor if you need accounting or tax advice in regard to your particular situation.

Disclaimer: Please note this is the information that is readily available at this time, it is subject to change so please consult your Withum tax advisor.