Committee Approves Cryan-Pou ‘Toys R Us Bill’ To Better Protect Workers’ Rights

TRENTON – The Senate Commerce Committee today approved legislation sponsored by Senator Joe Cryan and Senator Nellie Pou to provide additional protections for employees who would lose jobs and severance pay because of corporate bankruptcies.  The bill, S-3170, would increase the pre-notification time and severance pay for business closings, mass layoffs and transfers in the Worker Adjustment and Retraining Notification (WARN) Act.

“The workers should not be victimized by losing their severance pay and by being kept in the dark with delayed layoff notices,” said Senator Cryan (D-Union). “In many of these cases, the companies are pillaged for their resources, equity firms load them down with debt and the top officials walk away with bonuses while the employees are left jobless. The law needs to be upgraded to better protect the rights of the workers.”

The bill would increase the minimum number of days of notice from 60 to 90 that employers of 100 or more full time employees must give to employees when there is a mass layoff, plant closing or transfer that will result in 50 or more employees losing their jobs. The measure would also require severance pay equal to one week for each year of service, whether or not the employer provides required notice. The severance would be “earned in full” upon the termination of employment, according to the bill.

“In the event of corporate losses and bankruptcies, the first people to think of, the first people to protect, must be the employees,” said Senator Pou (D-Passaic). “When Toys R Us went under, they left their employees out in the cold with next to no paycheck or lead time to prepare while the executives divvied up massive bonuses. This is unacceptable and the workers of New Jersey deserve better. They deserve the protections in this bill.”

The legislators acted in response to the rash of business closings and bankruptcies where workers were left jobless and without severance compensation, including Toys R Us, which closed operations at its Wayne headquarters and Flanders distribution center, resulting in 2,028 lost jobs. In this and other cases, the bankrupt companies were purchased by private equity firms that imposed massive layoffs while top executives walked away with millions of dollars in bonuses.

Toys R Us filed for bankruptcy in 2017 with plans to stay in business, but in March 2018, the company’s creditors forced it to go out of business, and the 31,000 remaining employees did not get severance payments. Some top executives at Toys R Us received bonuses as part of the bankruptcy process.

The bill would also:

• require an additional severance of four weeks of pay if the 90-day WARN Act notice requirement is not met by the employer;

• include retail operations where employees are more decentralized across many smaller locations;

• require employers to provide 15 days notice in advance of a bankruptcy filing or any change of control, and prohibit the termination of the employees for 180 days and up to two years thereafter.

The layoff notices filed with the state are required under the WARN Act. The notices must be issued to employees in advance of potential large-scale layoffs and often do not represent the final number of job losses. More than 11,000 workers at 55 companies in New Jersey received notices in 2018 that their jobs were in jeopardy as employers restructured and reduced payrolls, according to records kept by the state Department of Labor.

The committee vote was 3-2.