Health care entities, home health care agencies, and staffing registries considering a transaction in New Jersey will need to keep in mind new obligations to certain employees. On August 18, 2022, Governor Murphy signed into law New Jersey Senate Bill No. 315 (the “Act”), which created broad protections for many employees in the health care sector in the event of a change in control. The Act requires any change 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 under 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 defined under N.J.S.A. 45:11-23.

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 health care 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 protects all current employees employed at an affected health care entity during the 90-day period immediately preceding a change in control; other than (i) employees who are exempt from overtime pursuant to the executive exemption under New Jersey wage and hour law; and (ii) any employee discharged for cause during the 90-day period. The Act also covers former employees of a health care entity who retain recall rights under an agreement with their former health care entity employer.

Effective Date: The Act goes into effect on November 16, 2022 (“Effective Date”) and applies to contracts or agreements for changes in control entered into on or after the Effective Date.

Actions Required:  Under the Act, at least 30 days before a change in control, a covered health care entity changing control must provide the successor health care entity and any applicable collective bargaining representative a list containing the name, address, date of hire, phone number, wage rate, and employment classification of each eligible employee. The covered health care entity also must inform all eligible employees of their rights provided by the Act and post a notice of these rights in a conspicuous location.

Successor health care entities must offer continued employment to all eligible employees for a transitional period of at least four (4) months following the change in control without any reduction in wages, paid time off, or the total value of their benefits. The offers must be in writing and remain open for at least ten business days. If the total number of available positions with the successor health care entity is less than the total number of eligible employees, employees must be offered positions based on seniority and experience.

Retained employees may not be terminated during the transitional period unless they are discharged for cause or as a result of a reduction in force (with employees being retained based on seniority and experience). Laid-off employees must be offered any positions they previously held if those positions are restored during the transitional period.

At the end of the transitional period, each retained eligible employee must undergo a performance evaluation, 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 Act.