Lawsuit targeting new severance pay law is dismissed by judge

A federal judge dismissed a trade group’s attempt to halt the implementation of a new law that increases how much big businesses must pay in severance to laid-off workers and expands the amount of notice workers must receive ahead of mass layoffs. 

The lawsuit, by the Erisa Industry Committee, a Washington, D.C.-based lobbyist for large companies, claimed the new law adds to business’ administrative burdens and is preempted by federal law. The group sued the state Department of Labor over the law in 2020. 

The law went into effect Monday and expands the state’s WARN Act. It requires businesses with 100 or more full-time employees laying off 50 or more workers to pay one week of severance for every year the worker was employed. Workers must also be notified 90 days before the layoff, up from the previous 60 days. Severance must also be paid to both full- and part-time workers. 

The law was recently in the news after Bed Bath & Beyond laid off nearly 1,300 workers days before it went into effect. The company, based in Union, did not say whether the law influenced the timing of its decision.

U.S. District Court Judge Zahid Quaraishi issued his order dismissing the suit Tuesday, writing in an opinion that the Erisa Industry Committee failed to identify any member that will suffer harm and failed to show that any members in New Jersey will be impacted by the law. He called the assumption that businesses will be adversely affected “merely speculative.” 

New Jersey Department of Labor Commissioner Robert Asaro-Angelo, in a statement to the New Jersey Monitor, said the ruling upholds a law that is “clearly good for New Jersey workers and our economy, as a whole.”

“This legal decision solidifies that it is not — and never has been — too much to ask large-scale employers to provide sufficient notice of termination and severance to its workers. This is one more example of how our state’s gold-standard worker protection laws are providing a just, worker-first approach to supporting New Jersey families,” he said.

Andy Banducci, senior vice president at the Erisa Industry Committee, said the group is extremely disappointed with the decision and believes the dismissal fails to address the core legal challenge to the amended WARN Act. 

“This decision leaves New Jersey employers in a difficult position of having to choose to comply with the amended law or to litigate an issue that is important to employers and employees alike,” he said.

Banducci said the organization is considering appealing the decision and will continue to fight “overreaching state and local laws … that attempt to control federally regulated employee benefit plans.” 

The law was originally signed by Gov. Phil Murphy in February 2020 but delayed due to the pandemic, then signed again on Jan. 10, making the law effective April 10. The bill was proposed after Toys R Us declared bankruptcy in 2018 and closed 735 stores without paying severance to more than 31,000 workers, including more than 2,000 in New Jersey.