New Jersey healthcare organizations must add new hire protections to their due diligence checklists | Cozen O’Connor

Healthcare organizations, home health agencies and staffing registries considering a transaction in New Jersey should be aware of the new obligations to certain employees. On August 18, 2022, Governor Murphy signed into law New Jersey Senate Bill 315 (the Act), which created broad protections for many health care workers in the event of a change in control. The law requires that any change in control be made pursuant to a contract or agreement between the parties that preserves the wages, benefits and employment status of eligible employees.

Health Entities Covered

The law covers health care facilities licensed under NJSA 26:211-1 and so on., which include, among others, general hospitals, diagnostic centers, treatment centers, rehabilitation centers, skilled nursing homes, nursing homes, outpatient clinics, home health agencies, and residential health facilities. The act also covers personnel registries and home care service agencies as defined in NJSA 45:11-23. If a health care facility is part of a larger facility that contains nonhealth care facilities or units, only the portion of the facility that is licensed under NJSA 26:211-1 is considered a “health care facility” for purposes of the Act.

Covered Transactions

“Change in Control” is broadly defined to include any transaction involving the sale, disposition or transfer of all or substantially all of the assets used in the operations of a healthcare entity, or of a controlling interest in such entity, and any event or sequence of events, including the purchase, sale, or termination of a management contract or lease, which results in a change in the identity of the employer of the health care entity. “Change in Control” does not include a change in control transaction in which both parties involved are governmental entities.

Covered Employees

The Act provides protection for all current employees employed by an affected health care facility during the 90 days immediately preceding a change in control; different from

  1. employees who are exempt from overtime under the executive exemption under the New Jersey Wage and Hour Law; and
  2. any employee terminated for cause during the 90 days.

The law also covers former employees of a health care facility who retain their rights to withdraw under an agreement with their former health care facility employer.

Effective date

The Act takes effect on November 16, 2022 (Effective Date) and applies to contracts or change-of-control agreements entered into on or after the Effective Date.

Necessary actions

Under the Act, at least 30 days before a change in control, a covered health care organization undergoing a change in control must provide the receiving health care organization and any applicable collective bargaining representative with a list containing name, address, date of hire , telephone number, wage rate, and employment classification of each eligible employee. The covered health care facility must also inform all eligible employees of their rights under the law and post a notice of those rights in a conspicuous place.

Successor healthcare organizations must offer continued employment to all eligible employees for a transition period of at least four months following the change in control, without any reduction in wages, paid time off or the total value of their benefits (including health care, retirement , and education benefits). Offers must be in writing and remain open for at least ten business days. Assume that the total number of available positions in the health care organization is less than the total number of eligible employees. In this case, employees should be offered positions based on seniority and experience.

Retained employees may not be terminated during the transition period unless released for cause or due to staff reductions (with employees being retained based on seniority and experience). Laid-off employees must be offered all positions they previously held if those positions are reinstated during the transition period.

At the end of the transition period, each retained eligible employee must undergo a performance evaluation, which must be recorded in writing. If the employee’s performance is satisfactory, the employee should be offered continued employment. It should be noted that the law does not define “for reason” or “satisfactorily”.

Any action taken pursuant to a collective bargaining agreement is not considered a violation of the law, and the law allows a health insurance receiver to recognize an employee collective bargaining representative and/or negotiate with the collective bargaining representative during the transition period .

Successor health entities must retain written records of each job offer and performance evaluation for a minimum of three years from the date of the offer or performance evaluation. They must also retain the employee’s name, address, date of hire, telephone number, rate of pay and employment classification. These records must be made available to the employee or the employee’s representative upon request.

Penalties for non-compliance

If applicable, aggrieved employees may pursue a claim against their former and/or foster employers by filing a private complaint in court or by seeking assistance from the New Jersey Department of Labor. Remedies may include recovery of unpaid wages and benefits, penalties, attorneys’ fees and administrative penalties, and injunctive relief (including reinstatement).

This new law requires covered healthcare employers to be proactive in assessing staffing requirements in the event of a change in control. It may also require covered health care employers to reconsider the timing of when they notify employees of an impending change of control and the impact of such communications on the transaction.

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