November 2022: New Jersey Health Care Entities Should Add New Employee Protections to Their Due Diligence Checklists

Update Applicable to: 
All employers with healthcare employees in the state of New Jersey.

What happened?
On August 18, 2022, Governor Murphy signed into law Senate Bill 315 (SB 315), which created broad protections for many employees in the healthcare sector in the event of a change in control.

What are the details? 
Effective November 16, 2022, SB 315 will require any changes in control to be made pursuant to a contract or agreement between the parties that preserves the wages, benefits, and employment status of eligible employees.

Covered Health Care Entities
The Act covers health care facilities licensed pursuant to N.J.S.A. 26:211-1 et seq., which include, among others, general hospitals, diagnostic centers, treatment centers, rehabilitation centers, skilled nursing homes, nursing homes, outpatient clinics, home health care agencies, and residential health care facilities. The Act also covers staffing registries and home care services agencies as defined under N.J.S.A. 45:11-23. If a healthcare entity is part of a larger facility that contains non-healthcare entities or divisions, only the portion of the facility which is licensed pursuant to N.J.S.A. 26:211-1 shall be considered a “healthcare entity” for purposes of the Act.

Covered Transactions
“Change in control” is defined broadly to include any transaction involving a sale, disposition, or transfer of all or substantially all of the assets used in a healthcare entity’s operations or of a controlling interest in such entity, as well as any event or sequence of events, including a purchase, sale, or termination of a management contract or lease, that causes the identity of the health care entity employer to change. A “change in control” does not include a change in control transaction in which both parties involved are government entities.

Covered Employees
The Act provides protection for all current employees employed at an affected healthcare entity during the 90 days immediately preceding a change in control; other than

1. employees who are exempt from overtime pursuant to the executive exemption under New Jersey wage and hour law; and
2. any employee discharged for cause during the 90 days.

The Act also covers former employees of a healthcare entity who retain recall rights under an agreement with their former healthcare entity employer.

Penalties for Non-Compliance
As applicable, aggrieved employees may pursue an action against their former and/or successor employers by filing a private action in court or seeking relief with the New Jersey Department of Labor. Remedies may include recovery of unpaid wages and benefits, liquidated damages, attorneys’ fees, administrative penalties, and injunctive relief (including reinstatement).

For more information, please see the links below:

Senate Bill 315 (SB 315)

Article 1 – Article 2

What do employers need to do?
Employers should review the links provided above and make adjustments to their policies that involve alerting their employee of any changes to their wages, benefits, and status.