?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 Aug. 18, Gov. Phil Murphy signed into law Senate Bill 315, which created broad protections for many employees in the health care sector in the event of a change in control.
The law 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.
The law covers all health care facilities licensed under N.J.S.A. 26:211-1 et seq., which include general hospitals, diagnostic centers, treatment centers, rehabilitation centers, skilled nursing homes, nursing homes, outpatient clinics, home health care agencies and residential health care facilities. It also covers staffing registries and home care services agencies defined under N.J.S.A. 45:11-23.
The phrase “change in control” is defined broadly to include any transaction involving a sale or transfer of all of the assets used in a health care entity’s operations or of a controlling interest in such entity. It also includes any event or sequence of events, such as a purchase, sale, or termination of a management contract or lease, that causes the identity of the employer to change. A change in control does not include a transaction in which both parties involved are government entities.
The law protects all current employees at an affected health care entity during the 90-day period immediately preceding a change in control, except for employees who are exempt from overtime pursuant to the executive exemption under New Jersey wage and hour law, or any employee discharged for cause during the 90-day period. The law also covers former employees of a health care entity who retain recall rights under an agreement with their former employer.
Legal Requirements
The law will take effect on Nov. 16, and it applies to contracts or agreements for changes in control entered into on or after the effective date.
At least 30 days before a change in control, a covered health care entity 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 this law 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 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 10 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.
Aselle Kurmanova is an attorney with Cozen O’Connor in New York City. Debra Steiner Friedman is an attorney with Cozen O’Connor in Philadelphia. ©2022. All rights reserved. Reprinted with permission via Lexology.
