Effective November 16, 2022,  non-governmental health care entities must offer eligible employees continued employment for at least four months following a change in control without any reduction in their wages and benefits – including paid time off, health care, retirement, and education benefits in accordance with Senate Bill No. 315 (the Law).  Change in control includes sales, transfers, assignments, mergers, and reorganizations and is deemed to “occur on the date of execution of the document effectuating the change.”

An “eligible employee” means any individual employed at the health care entity during the 90 days preceding a change in control or any former employee with recall rights under a collective bargaining agreement. The Law exempts managers, executive employees, or any employee discharged for cause during the 90-day period. “Cause” is not defined in the Law, however.

At least thirty days prior to the change in control, a covered entity contemplating a change in control must provide the successor owner and any collective bargaining representatives with a list of eligible employees’ contact information (i.e., names, addresses, and phone numbers), dates of hire, wage rates, and employment classifications;  provide written notice to eligible employees of their rights under the Law; and post a notice of eligible employees’ rights in the workplace.

Upon a change in control, the successor entity must offer employment to eligible employees for a transition period of at least four months (“transition period”).  All offers of employment must be in writing and remain open for at least ten business days from the date of the offer. If, at the time of the change of control, or during the transition period, the number of employment positions is less than the number of eligible employees, employment decisions must be based on seniority and experience.

Eligible employees who accept employment may be discharged only for cause or as part of a reduction in force during the transition period.  After the transition period, the successor entity must provide each retained eligible employee with a written performance evaluation and offer them continued employment if their performance has been satisfactory. Additionally, the successor entity must maintain each offer of employment and performance evaluation for at least three years from the date of the offer or the evaluation.

The Law requires that any change in control be made pursuant to a written contract between the prior owner and the successor owner setting forth the Law’s requirements. It covers all non-governmental healthcare entities licensed under N.J.S.A. 26:2H-1 et seq., which include, but are not limited to, hospitals, healthcare centers, diagnostic centers, rehabilitation centers, extended care facilities, nursing homes, outpatient clinics, dispensaries, and residential health care facilities. It also covers home health care services agencies as defined under N.J.S.A. 45:11-23 et seq., which include, but are not limited to, assisted living residences and programs, comprehensive personal care homes, and alternate family care sponsor agencies.

In addition, the Law provides a private right of action for employees impacted by its violations. Impacted employees may be entitled to injunctive relief such as immediate reinstatement and will have the same remedies as for unpaid wages, which includes the potential for 200% liquidated damages.  Accordingly, providing severance in the amount of wages that would cover the guaranteed period of employment (or a remaining period of guaranteed employment) would appear not to satisfy an employer’s obligation to retain employees for the required period.

New Jersey health care entities considering a change of control must review these requirements during the due diligence review, and then memorialize them in any contract setting forth the change in control between the former and successor entity.  In addition, New Jersey health care entities must consider the interplay between these new requirements and those set forth under the federal Worker Retraining and Notification Act (“WARN” Act), the New Jersey Millville Dallas Airmotive Plant Job Loss Notification Act, commonly referred to as the New Jersey WARN Act (“NJ WARN Act”), and the pending amendments to the NJ WARN Act, which have been paused due to the pandemic.