BILL NUMBER: S4845

SPONSOR: MAYER
 
TITLE OF BILL:

An act to amend the labor law, in relation to removing the exclusion of
part-time employees from certain definitions relating to employment and
expanding the definition of employer; removing certain exclusions for
employer notice requirements for the closing of a facility; removing the
discretionary reduction of penalties for employers for certain acts or
omissions concerning notice requirements for mass layoffs, relocations
or employment loss; removing the maximum time period for determining
back pay and other liabilities for certain employees who experience
employment loss; allowing the attorney general to take certain action to
assist certain employees in receiving back pay and other liabilities;
and requiring employers to pay severance to employees when there is a
plant closing, relocation, or mass layoff

 
PURPOSE OR GENERAL IDEA OF BILL:

To support workers in the economic rebuilding to follow the COVID-19
pandemic by strengthening protections during mass layoffs and requiring
              

severance for all workers subject to mass layoffs.

 
SUMMARY OF PROVISIONS:

Section 1 amends the definitions section to:

(a) define the term "affiliate";

(b) define the term "associate";

(c) define the term "beneficial owner";

(d) define the term "control";

(e) change the definition of "employment loss" to include workers who
resign in anticipation of a facility closing, relocation or mass layoff;

(f) change the definition of "employer" to include affiliates of the
employer;

(g) define the term "exchange act";

(h) change the definition of "mass layoff" to include employees not
physically stationed at the facility and reduce the employee threshold
test to twenty or more employees;

(i) strike the definition of "part-time employee";

(j) define the term "person"; and

(k) change the definition of "plant closing" by re-titling it "facility
closing", to reduce the employee threshold test to twenty or more
employees, and to eliminate the part-time employee exception.

Section 2 conforms certain provisions to recognize the change from the
definition of "plant closing" to "facility closing."

Section 3 eliminates the faltering business, unforeseeability, and
natural disaster exceptions to the notice requirements and associated
liability and penalties for violations.

Section 4 amends section 860-d to require that an employer specify an
expected date of recall at the outset of the layoff in order to rely on
the unforeseeability exception with respect to mass layoffs of less than
six months which are extended to more than six months.

Section 5 conforms certain provisions to recognize the change from the
definition of "plant closing" to "facility closing."

Section 6 amends the section heading of section 860-g to include refer-
ence to severance.

Section 7:

(a) removes the sixty-day cap on the number of days of back pay for
which an employer is liable when there is a WARN Act violation;

(b) excludes from the list of payments which reduce an employer's back
pay liability any payments from an employer to a third party or trustee
(such as health benefits or pension benefits);

(c) strikes current paragraph 6 of section 860-g of the labor law, which
allows the commissioner of the Department of Labor to reduce an employ-
er's back pay liability to its workers upon application by the employer
to prove that the violation was in good faith and that the employer had
reasonable grounds for believing that its actions or omissions did not
constitute a violation;

(d) adds a limited opportunity for employers affected by the COVID-19
pandemic and natural disasters to apply to the department of labor to
prove that a violation of the WARN Act was the direct result of the
COVID-19 pandemic or a natural disaster, and provides that, if the
department of labor agrees, the department of labor may, in its
discretion, reduce the amount of liability resulting from the violation;

(e) provides that the attorney general may enforce provisions of the
WARN Act that establish an employer's liability to employees when there
is a WARN Act violation; and

(f) requires that an employer that must give notice under the WARN Act
shall pay severance to its employees at a rate of one week of pay for
each year of employment, plus an additional four weeks of severance if
the employer failed to give timely notice to its employees, provided
that, if the employer is otherwise required to pay severance to an
employee for any other reason, the employee will receive the greater of:
the amount provided for by this provision, or the amount of severance
otherwise required to be paid, but not both.  The severance obligations
are offset by any back pay that is paid to employees pursuant to the
federal WARN Act.

Section 8 sets the effective date.

 
JUSTIFICATION:


The ongoing COVID-19 pandemic and the economic downturn that continues
to throttle the nation and the State has brought into sharp focus the
need for immediate, pragmatic, and long-term actions to ensure workers
are supported by strong economic safeguards, even during states of emer-
gency and tumultuous financial situations. Moreover, the present crises
underscore that New York's private sector workers, especially those who
provide essential services in health care, transportation, food
services, agriculture, and retail, among other industries, are vitally
important to the functioning of our society.  Each day during the ongo-
ing pandemic and economic downturn, New York's essential workers are
putting their lives on the line to deliver important life-sustaining
services to their fellow New Yorkers and Americans across the country.

Perhaps the most painful financial consequence of the pandemic has been
the catastrophic loss of jobs. Layoffs and business closures are
emotionally taxing and financially painful events for individuals and
their families, and can also have significant impacts on the State,
local communities, and other businesses that feel the economic ripple
effects. These consequences are made even more dire when layoffs are
announced suddenly, as occurred when the State imposed major COVID-19
lockdown measures, leaving affected parties without sufficient time to
react and adjust. The State assumes some of the burden in many cases,
including by providing unemployment assistance and other social services
support, but in some circumstances, the employer should assume financial
responsibility for its layoffs.

Recognizing the challenges posed by surprise job losses, the New York
State Worker Adjustment and Retraining Notification (WARN) Act requires
employers with 50 or more employees who plan a mass layoff, facility
shutdown, or relocation to provide 90 calendar days' advance written
notice to affected employees, appropriate labor representatives, the New
York Department of Labor, and certain other relevant government entities
prior to such employment loss. This buffer time period allows workers to
find alternate employment and take other steps to protect themselves
from the imminent financial challenges associated with being laid off.
At a time when workers are reeling from the effects of the pandemic and
the economic fallout, this financial runway has never been more impor-
tant. To hold employers to account when they do not comply with the WARN
Act, the statute imposes penalties and liability to the affected workers
for back pay. In the case of the pandemic, such advance notice was not
always possible, and certain allowances should be made, but the salience
of sudden, widespread job losses to this legislation and the need for
the WARN Act generally cannot be ignored.

Notwithstanding worker protections in the current statute, many mass
layoffs not directly caused by the pandemic nonetheless result in
violations for which employees are not properly compensated. For
instance, current law allows parties with financial interests in a busi-
ness to use corporate shields or other sophisticated legal tactics to
avoid some of the obligations of the WARN Act that fall on the employer,
even if those financial actors effectively exercise control over the
business.

Such brazen activity has been well-documented over the years in the
private equity industry, but a telling, recent, pre-pandemic example is
the case of the Doral Arrowwood Resort, located in the Village of Rye
Brook. The hotel informed its approximately 275 employees on Christmas
Eve of 2019 that it would be shutting down on January 12, 2020, just 19
days later. These employees, many of whom worked there for decades, were
faced with the prospect of being unemployed and without income in short
order, putting most of them at significant personal financial risk.
Although they were due back pay under the WARN Act, the complicated
nature of the legal proceedings regarding the ownership of the hotel,
and the loopholes and exceptions present in the current statute, allowed
numerous opportunities for the lenders and other financial investors to
challenge workers' WARN Act protections. While the intricate ownership
and lending structure was being sorted out in a foreclosure proceeding,
the employees were forced to the sidelines, uncertain if they would
receive anything. As of the introduction of this bill more than a year
later, they still have not been paid what they are due, and many of them
have suffered further financial distress due to the compounding effects
of the pandemic.

Frustrations with current law such as these are made worse by COVID-19
and the associated economic downturn, which have created new opportu-
nities for employers to take advantage of a variety of loopholes in the
law to engage in malfeasance and assert spurious justifications to evade
compliance with the WARN Act. For example, these statutory escape hatch-
es exempt employers from the notice requirements by asserting that a
mass layoff was "not reasonably foreseeable." While this was undoubtedly
the case for many businesses when the disaster emergency was first
declared, the pandemic and depressed economy also act as cover for
employers to layoff workers without sufficient notice and escape their
financial obligations to them.

This bill, similar to reforms signed into law in New Jersey in 2020,
constitutes comprehensive reform to protect private sector workers in
mass layoff situations, and ensures augmented stability and accountabil-
ity as we rebuild our economy. As a centerpiece, this legislation would
require that severance be paid to every laid off worker when there is a
qualifying employment loss under the WARN Act.  Severance payments would
be equal to one week of pay for each year of service, a recognition of
the value of worker loyalty. Additional progressive, worker-centric
changes include broadening the definition of liable employers, closing
easily-exploited loopholes, and empowering the State to take a more
active enforcement role. These changes position this legislation as a
powerful backstop to ensure more certain and equitable remedies for
workers' lost employment and to hold culpable corporate actors responsi-
ble in mass layoff situations. These policy changes would also have the
ancillary benefit of alleviating some of the financial burden placed on
the State when large numbers of workers are suddenly laid off, a welcome
respite for an unemployment assistance program that has been stretched
to the breaking point.

The economic reverberations of the COVID-19 pandemic and the resulting
unprecedented unemployment only underscore the fragility of many work-
ers' financial situations. The shortcomings in current law leave room
for the State to provide more stability for workers in a moment when
they most need assurances of economic security, and this bill is part of
the paradigm shift which is necessary to better protect our workers as
we emerge from the worst of COVID19 and its attendant consequences.

What follows is a more in-depth description of notable policy changes to
be effected by this legislation:

1. Guaranteed severance.
When a worker decides to continue an employment relationship with a
single employer for a long period of time, that worker foregoes other
opportunities: other jobs, other skills, and other experiences. This can
significantly jeopardize their prospects for any other employment. They
may be seen by new prospective employers as lacking a bright future,
unable to be retrained for a new job, or dismissed in the job market as
"past their prime." A worker that loyally sticks with an employer year
after year makes a sacrifice that should be respected and recognized by
the employer.

Too often, however, this does not happen, especially in the corporate
takeover context. Private equity's "financialization" approach to busi-
ness frequently involves taking control of companies only to then effect
layoffs and closures that are financially engineered to result in inves-
tor profits at workers' expense. Imposing a severance requirement will
have both a deterrent effect on financially engineered layoffs, and
provide additional compensation to workers who suffer job losses as a
result.

Regardless of the context, business closures and mass layoffs necessar-
ily entail widespread and enormous disruption of workers' lives and
livelihoods. Because traditional unemployment assistance only pays a
portion of a worker's typical wages, it does not function as a true
income replacement for workers who, through no fault of their own, lose
the job that allows them to meet their expenses. For those who struggle
to put food on the table and make rent even before being laid off, full
severance pay can be the difference when it comes to surviving until new
employment can be found.

2. Eliminating Department of Labor discretion to reduce employer back
pay liability.

Current law allows an employer the opportunity to prove to the Depart-
ment of Labor that a WARN Act violation was in good faith and that the
employer had reasonable grounds for believing that its actions or omis-
sions did not constitute a violation. If the Department of Labor is
convinced that such an argument has merit, it may reduce the liability
of the employer to its workers.

This provision is contrary to the goal of protecting workers embodied by
the WARN Act and should be removed. Whether the violation was in good
faith or bad faith, the workers still suffer the same harm and therefore
should still receive the same compensation.

The bill does leave intact this exception with respect to fines by the
Department of Labor for violations, as these fines are separate and
apart from an employer's liability to its employees for back pay.

3. Eliminating the faltering business, lack of foreseeability, and
natural disaster exceptions; adding a limited ability for employers to
apply for liability relief in the case of violations directly caused by
the COVID-19 pandemic or natural disasters.

In the context of the WARN Act, a business should not be exempt from
liability for back pay in the case of a facility closing because the
business was faltering and trying to find funding at the time when
notice was required. The same applies for unforeseeable events, includ-
ing natural disasters. In neither case is the harm to the worker
reduced. Such provisions encourage disproportionate distribution of
remaining resources to investors and other financially interested
parties, despite the fact that such parties are more likely to be able
to bear the financial impact of an unfavorable business situation. The
workers likely have only this one job, which is often their sole source
of income. When weighing these competing interests, it is proper to
support those who are at the greatest disadvantage, and for that reason
these exceptions should be removed.

On the other hand, the consequences of the COVID-19 outbreak have made
clear that a pandemic can devastate a business without warning. Given
the state-ordered closures of many businesses and the economy-wide
financial fallout, certain mass layoffs caused by the pandemic stem from
causes so far from the control of the employer as to make compliance
impossible. Accordingly, this bill gives employers the opportunity to
apply to the Department of Labor for relief from liability due to
violations directly caused by the COVID-19 pandemic.  Understanding that
the same may be true for certain natural disasters, but that there
should be a nexus of causation between the disaster and the layoffs, the
blanket natural disaster exception has likewise been replaced by the
same process available to employers with respect to layoffs directly
caused by COVID-19.

4. Revise the definition of "employer" to include business affiliates
and controlling investors and lenders.

Liability in WARN Act situations falls on the employer. Accordingly,
strategic financial actors sometimes seek to escape WARN Act liability
by setting up corporate shields in a variety of multiple-entity owner-
ship structures, exerting financial pressure without formally establish-
ing management control, shifting significant debt to the business, and
other financial or legal maneuvers to avoid being categorized as the
"employer" under the WARN Act. By expanding this definition to include
those entities that exert indirect control or make decisions that ulti-
mately lead to the mass layoff, relocation, or facility closing, this
legislation deters some of the tactics used to escape the legal obli-
gation to pay workers when there is a violation.

5. Extend the reach of the WARN Act.

Currently, the WARN Act only applies to employers that have 50 full-time
employees, or in the alternate, employees working, in the aggregate, at
least 2,000 hours per week. Whether an employee is part-time or full-
time, and how many total hours of employee work done for an employer
does not change the basic premise that an employee has an employment
relationship with the employer, and it may be the only job they have.
This bill recognizes this circumstance in the context of the WARN Act by
capturing those employers who would otherwise have WARN Act duties but
for the fact that their 50 or more employees do not collectively work 50
forty-hour weeks. By broadening the definition of "employee," and by
lowering the threshold for applicability, the WARN Act will cover many
more businesses than it does now, and thereby protect many more workers.

In addition, changes to the definition of "mass layoff" simplify the
determination for what is a mass layoff by reducing it to a twenty-em-
ployee test. Currently, a mass layoff involves a situation in which a
facility does not close down, but (i) at least 33% of the workforce
(which must constitute 25 or more employees) is laid off, or (ii) 250 or
more employees are laid off. For example, an employer of 70 employees
could lay off 24 employees--more than one-third of its workforce--and
yet not satisfy the test of a mass layoff. Perhaps more dramatic is a
situation in which a very large employer (750 employees or more) could
lay off up to 249 employees without such situation constituting a mass
layoff.

As a final matter, this bill clarifies that many workers that are not
necessarily stationed at a particular job site nonetheless have their
employment tied to its operations, and may lose their job as a conse-
quence.

6. Extend the maximum period of liability to the full 90-day notice
period.

Although the New York State WARN Act requires employers to provide at
least 90 days of notice prior to a mass layoff, relocation, or employ-
ment loss, an employer's back pay liability to its workers for a
violation is currently limited to only 60 days. As a result, workers
receive the same back pay whether the notice is 60 days late or 90 days
late. This results in a perverse situation in which an employer has much
less incentive to give any notice at all if it plans a mass layoff,
relocation, or employment loss within 30 days.  The civil penalty of
$500 per day for 30 days ($15,000 total) is a pittance to many employ-
ers, even those in enough financial trouble to consider a workforce
reduction.

Of more practical importance to the workers in many situations is the
fact that they are suddenly without a paycheck, and therefore without a
means to make rent, feed their families, or pay their medical bills. In
this context, while an additional 30 days of violation means little
financially to the employer under current law, those 30 days are crit-
ical to a worker who needs to immediately find a new job, especially
because this issue only occurs in circumstances in which notice is given
less than 30 days from the date on which the worker will be laid off.
With such limited time to find new employment, every day counts.

By extending the number of days of back pay for which an employer is
liable to the full 90-day notice period, this bill will eliminate the
current mismatch of incentives by linking the employer's financial
liability for back pay to the full period of violation, thereby encour-
aging employers to give as much notice as possible at a time when it is
arguably most crucial to their workers.

7. Explicit Attorney General enforcement of back pay liability.

One of the most significant barriers to workers receiving the back pay
they are due in WARN Act situations is that the employer is in financial
trouble, and a number of more organized claimants with greater resources
(e.g. banks) are also vying for what value remains in the business.
Currently, while the workers, labor representatives, and local munici-
palities can bring an action and the Department of Labor can use admin-
istrative proceedings to address the issue of back pay, the Attorney
General does not have express authority to step in to enforce the law to
protect workers. Because the scales are tilted against the workers in
this way, the state should be given all the tools it needs to move expe-
ditiously in order to enforce workers' rights to back pay.

 
PRIOR LEGISLATIVE HISTORY:

The current bill combines elements of S8562 of 2020 and S8377 of 2020,
both of which were referred to Labor.

 
FISCAL IMPLICATIONS:

Potential savings from reduced unemployment assistance claims.

 
EFFECTIVE DATE:
This act shall take effect immediately.