New Protections for Employees of Certain New Jersey Healthcare Entities | Cozen O’Connor

Healthcare agencies, home health care agencies, and personnel records considering a New Jersey transaction will need to keep in mind the new obligations to certain employees. On August 18, 2022, Governor Murphy signed Act No. 315 of the New Jersey Senate (the “Act”), which created extensive protections for many health care employees in the event of a change of control. The law requires that any changes in control be made under a contract or agreement between the parties that preserves the wages, benefits, and employment status of eligible employees.

Covered health organizations: The law covers health care facilities licensed under NJSA 26: 211-1 et seq., which include, among others, general hospitals, diagnostic centers, care centers, rehabilitation centers, qualified nursing homes, nursing homes, clinics, home health care agencies and residential health facilities. The law also covers personnel records and home care service agencies defined in NJSA 45: 11-23.

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

Covered employees: The law protects all current employees employed by an affected health entity during the 90-day period immediately preceding a change of control; other than (i) employees who are exempt from overtime under the executive exemption under the New Jersey Wage and Hours Act; and (ii) any employee dismissed for just cause during the 90 day period. The law also covers former employees of a health institution who retain withdrawal rights under an agreement with their former employer of the health institution.

Effective date: The law enters into force on November 16, 2022 (“Effective Date”) and applies to contracts or agreements for control changes entered into on or after the Effective Date.

Actions required: Under the law, at least 30 days prior to a change of control, a covered health care institution that changes control must provide the successor health care institution and any applicable collective bargaining representative with a list containing name, address, date of hiring , telephone number, salary rate and employment classification of each eligible employee. The Covered Healthcare Organization must also inform all eligible employees of their statutory rights and post a notice of those rights in a prominent place.

Subsequent health agencies must offer continued employment to all eligible employees for a transitional period of at least four (4) months after the change of control without any reduction in wages, paid leave or the total value of their benefits. Offers must be in writing and remain open for at least ten working days. If the total number of positions available at the successor healthcare institution is less than the total number of eligible employees, employees should be offered positions based on seniority and experience.

Retained employees cannot be fired during the transition period unless they are fired for just cause or as a result of a staff reduction (with retention of employees based on seniority and experience). The dismissed employees must be offered the positions they previously held if those positions are reinstated during the transitional period.

At the end of the transitional period, each retained eligible employee must undergo a performance appraisal, the results of which must be recorded in writing. If the employee’s performance is satisfactory, the employee must be offered continued employment. Please see here for the full text of the law.

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