Effective January 1, 2023, the state minimum wage will increase from $13 an hour to $14.13 an hour, due to 2019 legislation signed by Governor Phil Murphy that raises the wage floor to $15 an hour by 2024.

Known for jug handles, Bon Jovi, beautiful beaches and, unfortunately, Snooki, New Jersey, year after year, is also slowly becoming one of the most employee-friendly states in the country. With amendments to the state’s WARN act, minimum wage increases, cannabis testing rules, new posting requirements and pending legislation limiting noncompetes, restricting nondisparagement clauses and effectively altering the state’s staffing industry, 2022 was no exception. Employers must be aware of these significant changes, lest they risk significant liability.

Minimum Wage Increase

Effective January 1, 2023, the state minimum wage will increase from $13 an hour to $14.13 an hour, due to 2019 legislation signed by Governor Phil Murphy that raises the wage floor to $15 an hour by 2024. After July 1, 2024, the minimum wage will increase according to the rate of inflation as provided by the consumer price index.

While the $14.13 minimum wage applies to most employees, there are certain exceptions. Seasonal and small employers will have to pay $12.93 an hour, up from $11.90. Seasonal employers are those whose businesses operate only during the summer months or that pay 75 percent or more of their wages during a continuous four-month period; small employers are those that employ five or fewer employees. These employers will have to increase their wages to $15 an hour by 2026. Agricultural workers will be entitled to $12.01 an hour (up from $11.05), and direct care staff in long-term care facilities must be paid a minimum of $17.13 an hour, a raise of $1.13 an hour. By 2027, agricultural workers must be paid $15 an hour. Finally, tipped workers’ cash wages will increase to $5.27 an hour, and employers will be entitled to claim a tip credit of $8.87 (up from $7.87). Where a tipped employee’s minimum cash wage and the actual tips received total less than $14.13, the employer will have to pay the difference. Additional details are available in our prior Alert.

Cannabis Regulatory Commission Issues Interim Guidance on Drug Testing

On September 9, 2022, the New Jersey Cannabis Regulatory Commission (CRC) issued interim guidance for drug testing employees for cannabis. The guidance followed enactment of the Cannabis Regulatory, Enforcement Assistance and Marketplace Modernization Act (CREAMMA), which imposes certain obligations and restrictions on New Jersey employers regarding drug testing, including precluding employers from taking adverse employment actions against employees and/or job applicants solely due to a positive drug test for cannabinoid metabolites and prohibiting discrimination against employees for lawful, off-duty cannabis use.

Although employers can continue to require prospective employees to undergo a pre-employment drug test for cannabis, the practical effect of CREAMMA makes it difficult to use such information when determining whether to hire the applicant. Typically, an applicant is offered employment contingent on satisfactory completion of a background check and drug screening. Under CREAMMA, it would be unlawful for an employer to rescind a job offer “solely due to” a positive drug test for cannabis. If an employer continues to test for cannabis during pre-employment screenings and wants to avoid running afoul of CREAMMA, the employer must show that a rescinded employment offer after a positive drug test for cannabis was based on additional information and not solely due to the positive test result. Hiring someone who uses cannabis lawfully and recreationally does not prevent the employer from otherwise enforcing drug-free workplace policies.

Similarly, the CRC’s recent guidance pertaining to drug testing existing employees does not change an employer’s right to maintain a drug-free workplace. Employers can continue to prohibit employees from working under the influence of recreational marijuana and can ban use of cannabis on company property. However, when it comes to testing an employee for impairment while on duty, employers should not rely on the results of a positive drug test for cannabinoid metabolites alone as grounds to terminate or discipline an employee suspected of being under the influence while at work. Rather, a positive test combined with documentation of physical signs/evidence of impairment during an employee’s work hours may be sufficient to support an adverse employment action. The CRC’s guidance requires that employers designate a staff member or third party “sufficiently trained to determine impairment and qualified to complete the Reasonable Suspicion Observation Report.” In the recent guidance, the CRC recommends establishment of a standard operating procedure for completion of the report, including identification of an interim staff member designated to determine whether the employee is “reasonably suspected of being impaired” who should complete the report with the manager or supervisor of the employee suspected of impairment. Additional details are available in our prior Alert.

Changes to New Jersey Posting Requirements

On August 1, 2022, the New Jersey Division on Civil Rights (DCR) published regulations that change the content of certain required notifications New Jersey employers must provide to employees. All New Jersey employers―including those with just one employee working in the state―are required to post the new Law Against Discrimination (LAD) poster that describes workers’ rights under the LAD, the state statute that prohibits employment discrimination, harassment and retaliation on the basis of specific protected classes and protected activities. All New Jersey employers subject to the New Jersey Family Leave Act (FLA)―i.e., those with at least one employee in New Jersey and at least 30 employees located anywhere in the world―are required to post the new FLA poster describing rights under the FLA, which provides eligible employees with the right to take up to 12 weeks of leave in a 24-month period to care for (1) a newborn or a child placed for foster care or adoption, and/or (2) a family member with a serious health condition. The regulations make clear that employers may opt to display the LAD and FLA posters virtually via use of an intranet or internet site where they customarily post notices, so long as the site is for use by and accessible to all employees. New Jersey employers may be subject to fines of up to $10,000 for failure to display the required posters. Additional details are available in our prior Alert.

Overhaul of the State's WARN Act

In January 2020, in the earliest stages of the COVID-19 pandemic, Governor Phil Murphy signed into law Senate Bill 3170, which significantly amends the Millville Dallas Airmotive Plant Job Loss Notification Act (NJ WARN Act), New Jersey’s state law counterpart to the federal WARN Act. Originally set to take effect in July 2020, the amendments will remain in abeyance until 90 days after the termination of Executive Order No. 103, which declared a state of emergency arising from the COVID-19 pandemic (or until the Legislature says otherwise as it is attempting to do via S3162, introduced in the Senate on October 3, 2022).

Although the effective date of the NJ WARN Act amendments remains uncertain at this moment, New Jersey employers contemplating mass layoffs, terminations of operations or transfers of operations need to be aware of the dramatically different landscape they will face once the amendments take effect. In lengthening the required notice period, expanding the scope of coverage and mandating severance pay even when adequate notice is given, the amendments make the NJ WARN Act among the nation’s broadest and most expensive to implement. The amendments widen the gap between the federal WARN Act and the NJ WARN Act, making compliance with both laws a more challenging proposition.

Among numerous changes, the most noteworthy are:

1. The 100-employee threshold for coverage applies regardless of whether the employees are employed full time or part time;
2. A mass layoff triggering notice occurs if an employer terminates, within any 30-day period, 50 or more employees regardless of their full-time or part-time status and regardless of whether they work at or merely report to any establishment;
3. “Establishment” is amended to include multiple locations within New Jersey, regardless of how far apart they are;
4. The notice period increased from 60 days (the length of time required under the federal WARN Act) to 90 days;
5. Employers must pay affected workers one week of severance pay for each full year of service even when the employers give the required 90 days’ notice;
6. Additional severance pay is required when employers fail to give 90 days’ notice of a triggering event; and
7. Employers cannot require a release in exchange for the mandated severance pay.

These amendments to the NJ WARN Act significantly expand the law’s reach, and employers will more easily fall within the purview of the NJ WARN Act when implementing mass layoffs, terminations of operations or transfers of operations. Unlike the federal WARN Act, the NJ WARN Act does not contain the faltering company or unforeseeable business circumstances exceptions that afford employers relief under federal law. Additional details are available in our prior Alert.

A Number of Pending Bills Could Drastically Effect New Jersey Employment Law

Restrictive Covenants

Assembly Bill 3715 aims to limit the scope and enforceability of restrictive covenants in New Jersey employment contracts, including exempting certain classes of workers entirely―i.e., nonexempt employees, seasonal or temporary employees, employees laid off or terminated without a misconduct determination, independent contractors and employees who have worked less than one year.

Temporary Workers

Senate Bill 511, known as the “Temporary Workers’ Bill of Rights,” would transform the staffing industry and regulate working conditions for the approximately 127,000 temporary workers in New Jersey, requiring, among other things, that temporary workers receive the same salary and benefits that employers offer traditional staff.

Nondisparagement

Assembly Bill 4521, advanced by the New Jersey Assembly in response to a decision of the state Superior Court Appellate Division, would ban nondisparagement provisions in employment agreements, closing a loophole in prior legislation that only barred nondisclosure provisions.

What This Means for Employers

Given the new requirements for employers in 2023 and beyond, New Jersey employers are encouraged to consult with counsel, review their payroll practices, prepare for the new NJ WARN Act requirements and cannabis testing rules, ensure compliance with posting and notice obligations law, and stay updated on the various pending legislation that limit noncompetes, restrict nondisparagements and provide certain protections to New Jersey temporary workers.

For More Information

If you have any questions about this Alert or have specific questions and concerns related to your operations, please contact Michael R. Futterman, Kathleen O'Malley, Patrice E. LeTourneau, any of the attorneys in our Employment, Labor, Benefits and Immigration or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.