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New Jersey Governor Signs Act Concerning Changes in Control of Health Care Entities

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On August 18, 2022, New Jersey Governor Phil Murphy signed S-315, “An Act concerning changes in control of health care entities” (the Act). The Act implements employment protection for healthcare workers when certain licensed health care facilities, staffing registries, and home care services in New Jersey undergo a change in ownership. The Act first requires that former health care entity employers provide the successor health care entity with information pertaining to employees (i.e., employee names, addresses, dates of hire, phone numbers, wage rates, employment classifications) not less than thirty days before a change in control. The Act also requires former health care entity owners to inform eligible employees of the rights provided by the Act and to post a notice of their rights under the Act in a conspicuous location.

The Act further maintains that no change in control may occur without the execution of a contract or agreement between the prior owner and the successor owner which provides various proscribed assurances for eligible employees.  For example, the contract is required to provide that:

  • If employees are covered by an active collective bargaining agreement the provisions of the collective bargaining agreement remain in effect until the existing expiration date or six months after the sale, whichever is later;
  • Subject to certain requirements, wages and benefits of employees not covered by an active collective bargaining agreement must not be reduced for at least four (4) months after the completion of the sale;
  • With limited exceptions, an eligible employee of the prior owner may not be discharged without cause for at least four (4) months after the completion of the sale;
  • At the end of the transitional period after the completion of the sale, the successor employer must provide a written performance evaluation for each retained eligible employee, and offer the eligible employee continued employment if the employee’s performance during that period was satisfactory; and,
  • The successor employer must retain and, upon request from an eligible employee, provide each offer of employment and each evaluation for not less than three years from the date of the offer or the evaluation.

The Act also creates a right of action for employees impacted by a violation of the Act. When a court finds that a violation of the Act has occurred, the Act grants the court authority to order injunctive relief and to award various financial remedies related to the loss of wages or benefits. The court is also granted the authority to award the eligible employee reasonable attorney fees.

The Act takes effect on November 16, 2022, and applies to contracts or agreements for changes in control of certain health care entities entered into on or after the effective date.

Notably, New Jersey seems to be a leader in the pursuit of implementing protections for employees impacted by a change in ownership of a health care entity, as other states do not appear to have enacted similar laws yet. It is therefore essential for all health care entities that are involved in or are contemplating a change in ownership to be aware of these new requirements as well as the possibility of future changes in this area.

*This post was co-authored by Erin Howard, legal intern at Robinson+Cole. Erin is not admitted to practice law.

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