BILL NUMBER: S2595
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;
requiring employers to pay severance to employees when there is a plant
closing, relocation, or mass layoff; and to repeal certain provisions of
such law relating thereto
 
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;
requiring employers to pay severance to employees when there is a plant
closing, relocation, or mass layoff; and to repeal certain provisions of
such law relating thereto
 
PURPOSE OR GENERAL IDEA OF BILL:ò
To strengthen protections during mass layoffs and require 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 repeals section § 860-b(3) of the labor law which provides an
exemption for calamity, war, or terrorism.
Section 3 conforms certain provisions to recognize the change from the
definition of "plant closing" to "facility closing."
Section 4 eliminates the faltering business, unforeseeability, and
natural disaster exceptions to the notice requirements and associated
liability and penalties for violations. Separate provision is made for
liability relief in section 7 in the event of a natural disaster.
Section 5 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
three months which are extended to more than three months.
Section 6 conforms certain provisions to recognize the change from the
definition of "plant closing" to "facility closing."
Section 7 amends the section heading of section 860-g to include refer-
ence to severance.
Section 8:
(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) adds a limited opportunity for employers affected by natural disas-
ters to apply to the department of labor to prove that a violation of
the WARN Act was the direct result of 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;
(d) 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
(e) 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 fails 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 four-week severance
liability in the event of a violation is offset by any back pay that is
paid to employees pursuant to the New York WARN Act or the federal WARN
Act.
Section 9 is a severability clause.
Section 10 sets the effective date.
 
JUSTIFICATION:
Recently, tech companies, including Google, Amazon, Facebook, and Micro-
soft have laid off more than 150,000 workers.' While these layoffs have
been limited to one sector of the economy, they may portent broader job
losses in the future. Layoffs in the tech sector -- coupled with years
of economic instability during the COVID-19 pandemic -- have brought
into sharp focus the need for immediate, pragmatic, and long-term
actions to ensure workers are supported by strong economic safeguards.
Layoffs are emotionally taxing and financially painful events for work-
ers and their families, and can also have significant impacts on the
State, local communities, and other businesses that feel the economic
ripple effects. 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 continue to face difficult times from
the effects of the pandemic and a number of economic challenges, this
financial runway has never been more important. To hold employers to
account when they do not comply with the WARN Act, the statute imposes
penalties and liability for back pay.
Notwithstanding worker protections in the current statute, many mass
layoffs nonetheless result in violations for which employees are not
properly compensated. For instance, current law allows parties with
financial interests in a business 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 effec-
tively 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. In a rare but welcome victory, the workers ultimately
won and received their back pay, but that result was held up for nearly
two years by legal wrangling arising out of the shortcomings of the
current WARN Act statute, and many of them suffered further financial
distress due to the compounding effects of the pandemic while waiting
for that compensation.
Frustrations with current law such as these were made worse by COVID-19
and the associated economic difficulties, which 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 acted 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. Many workers in the tech sector have bene-
fited from generous severance packages. For example, Google will pay at
least 16 weeks of severance, with an additional two weeks of pay for
each additional year of employment at Google, to all 12,000 workers
being laid off.' While these funds do not erase the sting of job loss,
they will give tech workers a cushion as they find a new job. All work-
ers deserve severance pay when they lose their jobs as part of a mass
layoff. This bill would provide these workers a modicum of financial
protection, in addition to notice requirements, as they navigate job
loss.
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 responsible 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 work-
ers are suddenly laid off, a welcome respite for an unemployment assist-
ance program that has been stretched to the breaking point.
The economic reverberations of the COVID-19 pandemic and the resulting
unprecedented unemployment underscored the fragility of many workers'
financial situations. Layoffs in the tech sector have only confirmed
that vulnerability. The shortcomings in current shed light on the need
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
the COVID-19 pandemic recedes.
What follows is a more in-depth description of notable policy changes in
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 forgoes 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 AND LACK OF FORESEEABILITY
EXCEPTIONS; REFORMING THE NATURAL DISASTER EXCEPTION.
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. In
neither case is the harm to the worker reduced. Such provisions encour-
age 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 great-
est disadvantage, and for that reason these exceptions should be
removed.
Understanding that certain natural disasters are sudden and unavoidable,
but that there should be a nexus of causation between the disaster and
layoffs in order for relief from liability to apply, the blanket natural
disaster exception has been replaced by a process for employers to apply
to the Department of Labor for relief from liability due to violations
directly caused by a natural disaster.
4. REVISE THE DEFINITION OF "EMPLOYER" TO INCLUDE BUSINESS AFFILIAT S
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 a mass layoff is by reducing it to a twenty-em-
ployee test. Currently, a