NJ WARN Act May Apply to Parent and Affiliated Companies

The Millville Dallas Airmotive Plant Job Loss Notification Act (the “New Jersey WARN Act”), may apply not only to the direct employer, but also to parent and affiliated companies if certain factors are present. In DeRosa v. Accredited Home Lenders, Inc., et al., the New Jersey Appellate Division concluded that, “in determining single-employer status under the New Jersey WARN Act, [] courts should apply the five-factor test” applicable to its federal counterpart, the Worker Adjustment and Retraining Notification Act of 1988 (the federal WARN Act). Those factors, set forth at 20 C.F.R. 639.3(a)(2) are:“(i) common ownership, (ii) common directors and/or officers, (iii) de facto exercise of control, (iv) unity of personnel policies emanating from a common source, and (v) the dependency of operations.” The appellate court left open the possibility that other tests may also apply, such as the common law standard for piercing the corporate veil and the integrated enterprise or integrated employer tests.

The New Jersey WARN Act, which was the topic of a 2008 Gibbons Employment & Labor Law Alert, generally requires employers with more than 100 full-time employees to provide its employees with notice or in the alternative, severance pay, in the event of a mass layoff or facility shut down. Under the law, “employer” is defined as “an individual or private business entity which employs the workforce at an establishment.” Since the statutory definition is silent on the issue of whether “employer” includes parent or affiliated entities, the appellate court looked to federal WARN Act regulations and interpretive case law for direction, expressly noting that the federal statute was the model for the more recently enacted New Jersey law. This may be an indication that in the future, New Jersey courts will attempt to conform the state WARN statute with its federal counterpart.

Employers considering a mass layoff or a facility shut down who are unsure of whether the New Jersey WARN Act applies to it under the newly-adopted five-factor test – or any other basis –may contact any attorney in the Gibbons Employment & Labor Law Department.

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