N.J. may require company severance in mass layoffs

Companies that lay off more than 50 workers in New Jersey may soon have to pay them severance, with the Garden State poised to adopt what’s dubbed the “Toys R Us” bill that advocates say would be the first of its kind in the nation.

Approved by the New Jersey Senate in December, the state Assembly on Monday is expected to vote on the legislation, which would require that companies give workers a week’s pay for every year worked, and extend the employee notice period for mass firings to 90 days from 60 days.

Assuming the measure is approved by state legislators, it could be signed into law as soon as Tuesday by New Jersey Governor Phil Murphy, a Democrat who campaigned as a pro-labor advocate and last year signed legislation raising the state’s minimum wage to $15 an hour by 2024. 

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Given the state’s present political makeup, New Jersey is now among a handful of states viewed as fertile ground for enacting additional pro-labor legislation, according to Rebecca Kolins Givan, an associate professor in the Rutgers School of Management and Labor Relations. 

“The current governor forged his identity on being helpful to working families,” Givan told CBS MoneyWatch. “You can say the current legislature and the governor make a potentially successful venue for enhancing workers’ rights at the state level, and it’s become a particular focus because federal protections are so minimal, and there’s little hope of that changing anytime soon.”

The New Jersey legislation was drafted in response to a spate of business closings and bankruptcies, with Toys R Us in particular drawing fire for laying off tens of thousands of workers with little or no compensation after declaring bankruptcy in September 2018. The retailer’s demise had it closing 740 stores in the U.S., including its New Jersey headquarters and distribution center.  

Retailers expected to shutter 12,000 stores this year

The Toys R Us closure led to protests and a public relations campaign that succeeded in getting two of the private-equity firms that took over the retailer in a leveraged buyout in 20015 to create a $20 million financial assistance fund for workers in November.  

As things stand, there is no law in the country mandating that companies guarantee severance pay to employees affected by bankruptcy, according to United for Respect, which helped organize former Toys R Us workers and advocated for the measure. 

“Companies have exploited bankruptcy laws to protect their profits while workers lose their jobs and severance pay,” according to state Senator Joseph Cryan, a Democrat who sponsored the bill. “Employees shouldn’t be left in the dark as companies are pillaged for their resources after equity firms load them down with debt and the top officials walk away with bonuses. The law needs to be upgraded to better protect the rights of the workers.”

The bill “could help me in the future,” said former Payless ShoeSource employee Beth Hink, who traveled from Neptune, New Jersey, to Trenton, the state capital, to lobby lawmakers to pass the bill.

“It’s really important for New Jersey to lead the way and show other states that it is possible, that standing with working families is always your best bet in supporting a healthy economy,” said Hink, who received three days pay as severance when she lost her job as a store manager in May after working for the bankrupt retailer for almost 20 years. 

Conversely, business groups decried the proposal as offering further impetus to companies to steer clear of New Jersey.

“If enacted, this proposal would make our business climate even less competitive,” New Jersey Business & Industry Association. said in a statement. “It would come after the enactment of a series of tax increases and other expensive mandates imposed on employers during the past year, including a higher corporate business tax, higher state income tax, new paid sick leave requirements and the signing of a $15 minimum wage.

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