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New Jersey could soon become the nation’s first state to mandate severance for employees in mass layoffs

The ‘Toys R Us bill’ requires larger employers to give one week of pay per year of service and a longer period of notice

A view of the exterior of a Toys R Us store in 2017 in Luton, England. In New Jersey, a “Toys R Us bill” — proposed in response to retail layoffs that left thousands of workers without jobs and lower-than-promised severance payments — could become the first state law to mandate severance payments to employees. (Leon Neal/Getty Images)
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New Jersey state lawmakers approved a bill Monday that would compel employers to give more notice and pay severance to laid-off workers, after a public backlash against the treatment of workers who lost their jobs in the retail apocalypse.

The bill, which has been called the “Toys R Us bill” for workers of the retail chain that filed for bankruptcy in 2017, requires larger employers to pay workers one week of severance for each year of service. It also gives employees 90 days’ notice, rather than just 60 days, in the event of a mass layoff. It was approved 55-21.

“When businesses go bankrupt or close, far too often, workers are given little notice or severance pay. We saw this happen right here in New Jersey last year when Toys R Us filed for bankruptcy," lawmaker Annette Quijano (D), a primary sponsor of the bill, said in a statement. "Employees deserve to be treated fairly, especially when they are forced to leave a job due to circumstances beyond their control.”

The bill, which only applies to employers with 100 or more full- or part-time workers laying off 50 or more people, was approved by the state’s Senate in December. It now goes to the desk of Gov. Phil Murphy (D).

“We think this bill is a clear message that folks in New Jersey are holding businesses accountable,” said Terrysa Guerra, political director at United For Respect, an advocacy group that has worked with state lawmakers on the bill. She said the organization is exploring working with lawmakers on similar legislation in California, New York and Michigan.

Beth Hink, a former store manager for Payless ShoeSource in New Jersey, said she received only three days of severance following 19 years’ employment after the company filed for Chapter 11 bankruptcy protection in February. Payless did not immediately respond to requests for comment.

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“The retail apocalypse is not going away,” said Hink, who said she is still looking for work. “It’s not going to give [people] another job, and it’s not going to take away that stress, but it might give them a little peace of mind.”

Employment lawyers say the bill could have broad consequences.

For one, it could undercut employers’ ability to require a “release of claims,” or an agreement in exchange for severance pay that employees will not sue, said Alvaro Hasani, an employment attorney with Fisher Phillips. While that has typically been standard, “what’s unclear is whether that can be a continuing practice given the law,” Hasani said. “Under the [bill], the severance is characterized as wages owed, so you can’t bargain” on them, Hasani said.

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Maxine Neuhauser, an attorney with Epstein Becker Green in Newark, said nonprofit employers could be in a bind if they suddenly lose out on government grants or funding. “My nonprofit clients are really concerned,” she said. “These are not folks who are being driven into bankruptcy by private equity companies. These are organizations trying to do good work.” Neuhauser said there are also questions about how the bill would interplay with bankruptcy law.

Christina Renna, CEO of the Chamber of Commerce Southern New Jersey, said local business leaders opposed the bill, despite a number of alterations since it was first introduced. “This is an example of a piece of legislation that was a reaction to a really unacceptable situation,” she said. “It’s going to make New Jersey an outlier.”

Yet some employment lawyers say the bill has a chance of getting picked up elsewhere. “A lot of these employee protective laws are gaining traction,” said Neuhauser, pointing to paid sick leave and bans on salary history questions that have spread across several states. “They start to snowball. Do I think a law here has potential for being enacted in another state? My answer would be sure.”

Read also:

‘How can they walk away with millions and leave workers with zero?’: Toys R Us workers say they deserve severance

An Obama-era rule to collect worker pay data is headed for the chopping block

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