Files lawsuit to prevent violations of ERISA by recent amendments to the NJ WARN Act
Washington, DC – The ERISA Industry Committee (ERIC) filed a lawsuit in the United States District Court for the District of New Jersey, asking the court to uphold federal preemption under the Employee Retirement Income Security Act of 1974 (ERISA) and seeking an injunction to stop recent amendments (S.B. 3170) to the Millville Dallas Airmotive Plant Job Loss Notification Act (New Jersey WARN Act), from being implemented. ERIC brought the lawsuit on behalf of large employers in New Jersey because S.B. 3170 imposes a series of requirements that collectively force employers to create an ongoing administrative system that under federal law is considered an employee benefit plan, which Congress forbids states to create.
“ERIC does not oppose WARN statutes or the protections that they provide. This lawsuit is not about WARN notices but about a state mandating companies to create a benefit plan in violation of federal law,” said Annette Guarisco Fildes, President and CEO, ERIC. “ERIC recognizes that the State is trying to support its residents, but the State cannot impose mandates on employers in violation of federal law. The federal ERISA law ensures that employers with workers in many states are regulated by a single set of rules at the federal level regarding their benefit plans. Representing large employers, ERIC fights against state mandates to ensure that ERISA’s federal preemption is respected and protected.”
ERISA is the federal law that provides a nationally uniform set of rules and regulations for private employers that offer employee benefit plans. Because the establishment of a benefit plan is voluntary under ERISA, it preempts state and local laws that mandate the creation of benefit plans. The recent amendments made to the New Jersey WARN Act by S.B 3170 violate ERISA by imposing a series of requirements that, in the aggregate, force employers to create a statewide tracking mechanism that equates to an “ongoing administrative scheme” that is a benefit plan, which violates the preemption provisions of ERISA.
Prior to the amendments, the New Jersey WARN Act defined a “mass” layoff as 500 or more employees at a single facility, or 50 or more full-time employees if they comprise at least 33 percent of the full-time workforce at a facility. The amendments made by S.B. 3170 would reduce the WARN threshold of affected employees from 500 to 50 – regardless of the size of the company – and aggregate all of an employer’s facilities in New Jersey to determine if the 50-employee threshold is met. That means aggregating every store, laboratory, financial center, hospital, warehouse, office site, factory, port, fulfillment facility, or any other worksite that an employer operates in New Jersey.
Employers do not track workforce terminations by individual worksite as sites are often managed independently of each other. Independent management is especially common for companies with multiple brands under a larger corporate umbrella or when a company has facilities that focus on a single step in the overall production of a product, or if the company operates sites with diverse functions, such as offices, stores, plants, etc. all in the same state. Because New Jersey WARN requires that determinations as to why an employee is no longer employed at a facility be made on a continuous 30-day basis, employers would have to set up a system that continuously tracks employee terminations across all of their different facilities and then determine, for each employee termination, if that termination meets the New Jersey WARN requirement. This determination includes whether the termination is due to retirement, voluntary termination, fired for cause, seasonal employment, or rehired at another facility. Considering that the 50 largest employers in New Jersey each employ over 2,000 people, these companies would have to monitor their workforces daily to determine if just 2.5 percent, or less, of their workforce has ceased employment during any 30-day period. The 50 largest employers retain between 40,000 and 2,000 workers and have numerous sites all across the state.
Under the NJ Warn Act in effect before the amendments were adopted, employers do not have to create such an administrative process because each facility is aware of the number of terminations at that individual facility, and can simply determine the number that occurred at a single site within 30 days. However, to comply with the law as amended, employers must set up an administrative system that (1) tracks all employees at all company worksites in New Jersey, (2) continually monitors terminations, and (3) makes ongoing determinations about the reasons for the terminations. The courts and Congress have repeatedly held that this type of on-going administrative system equates to the creation of a benefit plan under ERISA and that states are preempted from mandating the establishment of a benefit plan on private employers.
“New Jersey’s violation of federal law is not inconsequential as it imposes significant burdens with far-reaching real-world implications. Every time a state attempts to add requirements that obstruct ERISA, it threatens the protections that ERISA provides to millions of employees and families across the country. For over a decade, companies with employees in New Jersey have complied with the state’s WARN Act. The new amendments go far beyond what was previously required in New Jersey and far beyond the requirements of the federal WARN Act and the 19 other state ‘mini-WARN’ laws across the country, and importantly mandate the creation of an administrative scheme that violates federal law,” said Guarisco Fildes.
ERIC urges the court to uphold ERISA, acknowledge the overreach by the State in the creation of S.B. 3170, and send a clear message that no state can enact laws that directly or indirectly require a private employer to create a benefit plan governed by federal law.
Click here to read ERIC’s complaint.
Click here for ERIC’s FAQ on the complaint.