New Jersey health care facilities and home care services agencies considering a change in control must soon be mindful of the requirements of Senate Bill No. 315 (the Act), signed into law by Governor Phil Murphy on August 18, 2022, and effective on November 16, 2022. The Act provides employment security to non-managerial employees that will continue well after a change in control transaction is completed. The Act is available here.

Entities covered under the Act include health care facilities licensed pursuant to N.J.S.A. 26:2H-1 et seq., staffing registries, and home care services agencies as defined under N.J.S.A. 45:11-23.

The Act applies to any “change in control” of a covered health care entity, which is defined to include the sale, assignment, transfer, contribution, or other disposition of all or substantially all of the assets used in a health care entity’s operations or of a controlling interest in the health care entity, such as by consolidation, merger, or reorganization. The Act also applies to any event or sequence of events, including a purchase, sale, or termination of a management contract or lease, that causes the identity of the covered health care entity employer to change. A change in control does not include transactions between New Jersey government entities.

Employees entitled to protections under the Act include employees employed during the 90-day period before the effective date of a change in control and previously discharged employees with agreed-upon recall rights. Employees who are discharged for cause during the 90-day period and managerial employees (defined as employees exempt from overtime under the executive exemption to the New Jersey Wage and Hour Law) are not protected by the Act.

The Act requires a covered health care entity contemplating a change in control to take the following steps at least 30 days before the effective date:

• Notify eligible employees of their rights under the Act.
• Post a summary of eligible employees’ rights in conspicuous locations in the workplace. 
• Provide a list with the name, address, date of hire, phone number, wage rate, and employment classification of each eligible employee to the applicable collective bargaining representatives and the successor entity.

These requirements may result in employee and union interference with otherwise confidential or sensitive transactions. The Act imposes the following requirements on the successor entity following a change in control, which must also be memorialized in a contract between the former employer and the successor entity:

• The successor entity must offer, in writing, employment to non-managerial employees for a four-month “transition period” at the same base rate of pay, paid time off, and total benefits that they received before the change in control, including health care, retirement, and education benefits. Offers of employment must remain open for at least 10 business days.
• During the transition period, the successor entity must offer all available employment positions to eligible employees who had previously held the positions with the former employer until the available employment positions are filled or until no more eligible employees are available.
• If the total number of employment positions is less than the total number of eligible employees at any time during the transition period, the choice of employees to be employed shall be based on seniority and experience.
• Eligible employees who accept employment may be discharged only for cause or as part of a reduction in force (subject to seniority and experience) during the transition period.
• At the conclusion of the transition period, the successor entity must prepare a written performance evaluation for each retained eligible employee, who must then be offered continued employment if the employee’s performance during the transition period was “satisfactory.” The Act does not define satisfactory performance.
• The successor entity must retain, and provide to employees or representatives of employees upon request, a written record of each offer of employment and each evaluation made for at least three years from the date of the offer or evaluation, with each record to include the name, address, date of hire, phone number, wage rate, and employment classification of the employee.

The Act does not apply to actions taken in compliance with a collective bargaining agreement entered into by an exclusive representative of employees of a health care entity. In addition, the Act does not prevent the recognition of a collective bargaining representative or actual collective bargaining with the successor entity during the transition period.

Aggrieved employees may seek relief before the New Jersey Department of Labor and Workforce Development or sue both the former and successor employers for violations. The Act incorporates the onerous remedies available to employees under the New Jersey Wage Payment Law, N.J.S.A. 34:11-4.1 et seq., for pay violations, including recovery of full unpaid wages, paid time off, and the value of benefits; liquidated damages of up to 200 percent; and attorneys’ fees. Improper discharge of an employee or failure to hire or retain in violation of the Act constitutes retaliation. Courts may order injunctive and other equitable relief for violations of the Act, including reinstatement.

One effect of this new law in a unionized setting will be to guarantee that the successor entity will succeed to any union bargaining obligation that the former entity had, and that bargaining with that union will start from the terms of the predecessor’s collective bargaining agreement. 

New Jersey health care entities considering a change in control must also consider how the Act will overlap and interact with the requirements of the federal Worker Adjustment and Retraining Notification Act of 1998 (WARN) and the New Jersey counterpart, the Millville Dallas Airmotive Plant Job Loss Notification Act (commonly known as the New Jersey WARN Act). An amendment to the New Jersey WARN Act, originally intended to be effective on July 19, 2020, has been held in abeyance by Executive Order No. 103 from Governor Murphy relating to the pandemic. The amendment will become operative 90 days after state of emergency declared by Executive Order 103 is lifted. Our prior alert on the amendment can be found here.  

[View source.]