New NJ law to guarantee severance in mass layoffs
The new legislation may drive companies to try to make things work differently, rather than simply shedding workers.
Phil Murphy, governor of New Jersey, is expected to sign a bill just passed by the New Jersey legislature that would guarantee severance pay to employees in mass layoffs.
The Nation reports that the measure is a response to two years of employer bankruptcies that resulted in the termination of thousands of workers. Fifteen hundred Toys “R” Us workers in New Jersey were cut adrift in 2017 with no severance; employees at Payless Shoe Source and Sears were likewise left without a financial lifeline.
Related: Severance benefits on the rise
Toys “R” Us and Sears employees fought for some recompense, with varying degrees of success; the former got a $20 million hardship fund—far less than they’d sought, but still something—from the company’s private equity owners, KKR and Bain, while the latter at least temporarily convinced hedge fund boss Eddie Lampert of ESL Investments, Inc. to promise up to $43 million to laid-off workers. Lampert, however, tried to bail on the arrangement later.
The new law would instead require that workers at all companies—not just retailers—employing 50 or more people to pay workers at least a week’s wages for every year of work when they lay off at least 50 people. It’s the brainchild of New Jersey State Senator Joseph Cryan, who said in the report that he was “just tired of the little guy getting screwed.”
The bill has other provisions, too, says The Nation: it would require more notice for employees before layoffs actually occur, as well as job protection for a certain period of time, and preferential status for severance pay in the bankruptcy process.
And financial owners like Eddie Lampert’s hedge fund and KKR will also be on the hook, since they’ll be held responsible as joint employers to pay severance claims.
The new legislation could even pressure companies to try to make things work differently, rather than simply shedding workers. Eileen Appelbaum, co-director of the Center for Economic and Policy Research, commented “that it is currently ‘virtually costless’ to fire employees as part of a bankruptcy process or when a financial company like a private equity firm buys a company and wants to boost profits. ‘Squeezing labor is the fastest way to increase cash flow,’ she explained.”
Appelbaum went on to say in the report that New Jersey’s new law could “cause companies to think twice about whether laying off workers is their go-to solution for every problem that they face,” since it would actually cost companies money to fire those workers—perhaps pressuring companies into finding ways to avoid closing stores and factories and keep people on the job.
Says Cryan, “Finally, workers are added to the bottom-line equation when corporations look at future business. Workers’ performance and workers’ dedication to the company were secondary. Now hopefully with this bill they’ll be moved more to the forefront.”
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