On August 18, New Jersey Governor Phil Murphy signed into law S315 (22R), which aims to protect employment and wages and benefits during changes in control at health care facilities. When a change in control occurs, the former and “successor” health care employers will now both have new, and very significant, legal obligations. This law has the potential to alter dramatically the landscape of healthcare acquisitions across the Garden State.
The law is effective November 16, 2022 (90 days after enactment).
Continued Employment and Benefits
The law’s most notable obligation is imposed on buyers or other successor employers. Specifically, for a period of four months after the change in control (“transition period”), successor employers must offer continued employment to eligible employees without reducing wages or paid time off, or reducing the total value of benefits (e.g., health care, retirement, and education benefits).
If an employee accepts the employment offer, the successor employer may not terminate the employee without cause during the transition period, unless the layoff is part of a larger reduction in force and the choice of retained employees is based on seniority and experience. Following the transition period, the successor employer must also evaluate all retained employees, and offer to continue their employment if their performance has been satisfactory.
The successor employer must maintain records of each employment offer and performance evaluation for at least three years following the offer or evaluation.
The law also requires a written agreement between the former and successor employers, outlining the new law’s obligations. And it requires the former employer to provide a list of eligible employees to both the successor employer and any collective bargaining representatives at least 30 days prior to the change in control. This list must contain the name, address, date of hire, phone number, wage rate, and employment classification of each eligible employee.
Also at least 30 days prior to the change in control, the former employer must notify each eligible employee of their rights under this law and post a notice of these rights in the workplace.
An “eligible employee” means any individual employed at least 90 days prior to the change in control, and a “health care entity” means any health care facility licensed under P.L. 1971, c. 136, a staffing registry, or a home care services agency.
A “change in control” means a sale, assignment, transfer, contribution, or other disposition of all or substantially all assets used in a health care entity’s operations (including by consolidation, merger, or reorganization). It does not include any change in control in which either the former or successor health care employer is a government entity.
Compliance with this new act creates substantial issues for a unionized successor employer, including imposing upon that health care employer a duty to recognize and bargain with the predecessor’s labor union and to assume the pre-existing collective bargaining agreement, consistent with legal principles established decades ago under the National Labor Relations Act.
But because these union-related obligations arise under the NLRA, there are arguments that the new NJ law is preempted. However, that question requires additional analysis beyond the scope of this alert.
Employees have a private right of action for unpaid wages if the successor employer fails to continue paying wages and other benefits at the previous rate, or for retaliation if the employer fails to make an employment offer to an eligible employee. Affected employees are entitled to all available remedies, including immediate reinstatement and damages for unpaid wages.
In light of these potential penalties, New Jersey health care facilities contemplating a consolidation, reorganization, or transfer of control must take this new law into account and should consult with experienced labor counsel before moving ahead with a transaction.