A bill aimed at protecting workers' rights by giving employees affected by corporate bankruptcies and closures more prelayoff notification time and severance pay cleared the Senate on Monday.

Lawmakers in the upper chamber passed S-3170, nicknamed the "Toys 'R' Us Bill" since its sponsors say the bankrupt retail chain was an impetus for it, by a 27-13 vote during the final voting session of this year.

The Assembly has yet to schedule its Assembly counterpart, A-5145, for a full floor vote, though a floor amendment to the bill received the lower house's approval in a vote, also on Monday.

S-3170 would increase the minimum number of days of notice from 60 to 90 that employers of 100 or more full-time employees must give to employees when there is a mass layoff, plant closing or transfer that will result in 50 or more employees losing their jobs, according to a release outlining the bill.

Layoff notices filed with the state are required under the Worker Adjustment and Retraining Notification Act, or WARN. The notices must be issued to employees in advance of potential large-scale layoffs and often do not represent the final number of job losses.

The measure also would require severance pay equal to one week for each year of service, regardless of whether the employer provides required notice. The severance would be "earned in full" upon the termination of employment, according to the bill.

Primary sponsors Sen. Joe Cryan, D-Union, and Sen. Nellie Pou, D-Passaic, said they drafted the measure in response to the recent spate of business closings and bankruptcies, in particular retailer Toys "R" Us, which closed operations at its Wayne headquarters and Flanders distribution center, resulting in 2,028 lost jobs. Mired in heavy debt caused by a buyout in 2005 and pounded by competition from Amazon, Target and Walmart, among others, Toys "R" Us declared bankruptcy in July 2019. News reports had the company owing more than $5 billion.

"Companies have exploited bankruptcy laws to protect their profits while workers lose their jobs and severance pay," Cryan said in a statement after the Senate vote Monday. "Employees shouldn't be left in the dark as companies are pillaged for their resources after equity firms load them down with debt and the top officials walk away with bonuses. The law needs to be upgraded to better protect the rights of the workers."

"In this and other cases, the bankrupt companies were purchased by private equity firms that imposed massive layoffs while top executives walked away with millions of dollars in bonuses," Cryan added.

S-3170 also would:

  • Require additional severance of four weeks of pay, if an employer fails to meet the 90-day notice requirement;
  • Include retail operations where employees are more decentralized across many smaller locations; and
  • Extend to all employees instead of only full-time staff.

"In the event of corporate losses and bankruptcies, the first people to think of, the first people to protect, must be the employees," said Pou in a statement. "When Toys R Us went under, they left their employees out in the cold with next to no paycheck or lead time to prepare while the executives divvied up massive bonuses."

S-3170 passed the Senate Budget Committee by a 9-4 vote on Dec. 5, while A-5145 was reported out of the Assembly Labor Committee with amendments on Dec. 9 by a 6-2-1 vote.