New Jersey enacts employee protections after change of control of healthcare facility | Saul Ewing LLP

Effective November 16, 2022, New Jersey will impose additional requirements when a “healthcare business” is sold or undergoes a change of control. The changes are a result of the passage of S-315 on August 18, 2021.

What you need to know:

  • New Jersey enacted a law that imposes additional requirements when a “healthcare business” is sold or undergoes a change of control.
  • The new law affects any “healthcare facility”: a licensed healthcare facility, staff registry or home care agency that undergoes a “change of control”.
  • The new law provides additional protections for healthcare facility workers for four months after the change of control, and buyers and sellers must understand the requirements of the law.

The new law is significant in that it creates new legal burdens and responsibilities for a seller and a buyer, including a notice to the affected tariff body(s). This is a departure from current employment norms and typical arm’s length M&A transactions, and the new law will provide additional short-term protections for employees of the affected ‘health care unit’.

Who is affected by the new law?

Under the new law, a “healthcare facility” is a licensed health care facility, staff registry, or home care agency. The definition is broad and applies to any licensed hospital, clinic, ambulatory health agency, assisted living facility, nursing home, or assisted living program where control is changed.

The law applies to sales, transfers, and other agreements that change control of a healthcare facility, including consolidations, mergers, and reorganizations.

What does the new law require from the seller?

At least 30 days prior to the change of control, the “former healthcare facility employer” must provide a list of information to the “subsequent healthcare facility employer” AND any collective bargaining agent for the workers. This includes: name, address, hire date, phone number, pay rate, and employment classification of each eligible employee employed by the affected healthcare facility. The former employer of the healthcare facility must also notify all eligible workers of their rights under this new law and post a notice describing their rights under the new law in a conspicuous place or places accessible to all workers, and for health succession, employers of the care facility AND each tariff representative provide a list with name, address, hire date, telephone number, wage rate and employment classification for the “eligible employees”.

Who is an “authorized employee” for the purposes of the law?

An “Eligible Employee” means any person employed by an Affected Healthcare Facility during the 90-day period immediately prior to a Change of Control of a Healthcare Facility; or any person formerly employed by the healthcare facility who retains a right of withdrawal by virtue of an agreement with the healthcare facility’s employer.

The law specifically provides that “eligible employees” are not officers or individuals who have been fired for cause during the 90-day re-enrolment period.

What are the obligations of the acquiring company in the first four months after the change of control?

The crux of the new law is that each successor company must offer all eligible employees employment for a period of at least four months, with no reduction in wages, paid time off, or the total value of benefits. This is subject to several exceptions and other requirements.

Firstly, each offer only has to be held for a period of at least 10 days. If an employee does not accept employment during this time, they will not fall under the protections of the new law.

In addition, all jobs at the successor company must be offered to eligible employees until all positions are filled or no positions remain. This effectively means that eligible employees must be given preference over new hires at least during the four-month transition period.

Finally, the new law offers a bit of respite by acknowledging that there may be situations where the total number of open positions may be less than the total number of eligible employees. This could possibly be due to an acquiring party trying to reduce headcount to increase efficiency or reduce costs. In this situation, the acquiring company can continue to hire only eligible employees during the transition period, but can choose between eligible employees on a “seniority and experience” basis. The new law says nothing about what factors can be used to determine an employee’s “experience” for the purposes of this selection, such as: B. Level of education or training.

Workers who are made redundant during the transition period due to job losses must be offered their previous job if the job is reinstated later during the transition period.

What must the acquiring legal entity do after the first four months?

While the focus of the new law seems to be on retaining employees for the first four months, the requirements for the acquiring company go further. Specifically, at the end of the four-month transition period, the employer must complete a written performance evaluation for each retained eligible employee and offer continued employment if their performance has been satisfactory.

Employers must also keep a written record of each job offer and each written evaluation, prepared for at least three years from the date of the offer or evaluation, and make it available to the employee or his representative upon request. The record must include the employee’s name, address, hire date, phone number, pay rate, and classification.

This requirement in the new law departs significantly from the traditional concept that employment is generally considered “arbitrary,” meaning employees can be terminated at any time, with or without cause. The new law is silent on what obligations an employer has after this initial assessment period and whether the employer must demonstrate poor performance to justify a future termination.

What are the consequences of breaking the law?

The new law provides a private right of action for workers to allow the worker to reclaim wages or other benefits that have been denied to them. The new law expressly includes the remedies set out under NJ Stat. § 34:11-4.10, which provide for recovery of penalties and attorneys’ fees (in addition to arrears of wages). As such, any breach of the new law could have serious financial repercussions and expose an acquiring company to significant liability if the requirements are not met.

This new law will affect transactions involving these healthcare organizations and the transaction documents associated with those transactions. Potential buyers and sellers must comply with the new law or face potentially significant consequences.