New Jersey Becomes First State to Mandate Severance Pay

January 31, 2020

New Jersey Governor Phil Murphy (D) signed a first-of-its-kind law that will require employers to pay workers one week of severance pay for each year of service performed in the case of a so-called “mass layoff.”

Senate Bill 3170, effective July 19 of this year, expands employers' obligations regarding severance pay and advance notice in New Jersey.  Previously, employers were merely required to provide notice, along the same lines as federal law (WARN), with severance only being required where there is a failure to provide such notice. 

Key provisions of the bill:

  • The required notice period under state law is increased to 90 days from 60 days.

  • Severance pay now applies regardless of whether the employer gave employees 60 days' notice.  Under the new measure, employers will have to provide employees 90 days' notice, one week of severance pay for every year of service, and four additional weeks of pay if the full 90 days' notice is not given.

  • The new requirements are triggered by the termination of 50 employees located anywhere within the state, rather than at one site, within a 30-day period (or a 90-day period if an employer cannot prove the terminations are for distinct and separate causes).  It includes workers with less than 6 months' service or who work less than 20 hours per week.

Outlook:  Other municipalities will be watching closely to determine how this novel approach plays out.