United States: No Dire Straits For Workers Involved In Labor Disputes In N.J. As Governor Expands Eligibility For Unemployment Benefits

On Friday, August 10, 2018, New Jersey Governor Phil Murphy signed a bill amending the State's unemployment insurance law to provide benefits to employees in a variety of new and, in some cases, novel circumstances.  Specifically, the new law provides for unemployment insurance benefits to be paid:  (a) when a labor dispute prompting the employee's period of unemployment is caused by an employer's failure or refusal to comply with an agreement or contract with the employee, including a collective bargaining agreement with the employee's union, or the employer's failure or refusal to comply with State or federal laws related to hours, wages or other conditions of work; (b) after 30 days, when unemployment is caused by a strike or other concerted activities by employees; and/or (c) immediately, when the employer of striking workers opts to hire permanent replacement workers, as permitted under the National Labor Relations Act.  The terms "other conditions of work" and "other concerted activities" are left undefined in the new law, thus creating ambiguity about the types of events that could trigger the payment of benefits.  What is clear is that the amendment significantly increases the availability of tax-funded benefits to affected employees, and makes New Jersey's law arguably among the most generous of its kind in the nation.

Unemployment insurance has traditionally functioned as a safety net to workers who are ready, willing and able to work, but nonetheless experience a job loss.  Many states expressly disqualify workers from coverage when they elect to forego available work in support of a collective bargaining objective, while others provide for a lengthy waiting period before strikers can collect.  In the 2009 N.J. Supreme Court decision Lourdes Medical Center of Burlington County v. Board of Review, New Jersey's highest court left open the possibility that strikers might be eligible for unemployment insurance, but only in rare circumstances.

New Jersey's new law means that unemployment insurance could become the rule and not the exception, provided that:  (a) the labor dispute prompting a period of unemployment is caused by the employer's failure or refusal to abide by an agreement with the employee, his or her union, or the law; (b) where a strike is involved, the underlying labor dispute lasts more than 30 days; or (c) in the event of a strike, where the employer decides to avail itself of self-help remedies permitted under federal labor law and hires permanent (rather than temporary) strike replacements in order to run its business.  In such cases, in order to avoid an immediate grant of benefits to striking employees, an employer is required under the law to certify in writing that the replacement workers are not permanent, and that the claimant can return to his or her position at the conclusion of the dispute.  If an employee is ultimately not reinstated at the conclusion of the labor dispute, the employee can be eligible to recoup unemployment benefits that were not paid during the initial 30-day period, and the employer can be penalized $750 per week, per employee, for its failure to provide the requisite notice.  Since these provisions impose significant financial penalties on the use of permanent replacements by employers, a response to strikes that is permitted under the National Labor Relations Act, the law may prompt challenges by employers claiming it is preempted by federal law. 

Clearly enacted as a gift to labor, New Jersey's amended unemployment law could actually serve to prompt or prolong labor disputes, including strikes, as the financial disincentive to workers of foregoing available work is diminished.  From the union perspective, the new law could encourage more aggressive bargaining and strikes, if the union considers the cost of a work stoppage acceptable because it does not necessarily mean a total loss of income for union members.  For employers, the increased availability of benefits pursuant to the new law could increase an employer's experience rating (i.e., the unemployment/disability insurance tax rate charged to employers based on actual use of benefits).  These concerns underscore the need for employers to engage in careful planning as contract expiration and bargaining near.  Indeed, employers facing challenging negotiations are well-advised to engage counsel who can assist with strategic bargaining and labor dispute contingency planning, including an assessment of how New Jersey's new law could factor into the equation.

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