New Protections for New Jersey Health Care Employees After a Change in Control of Their Employer

Effective as of November 16, 2022, certain health care entities must continue to employ certain employees for a period of four months following a change in control of such entity.

On August 18, 2022, New Jersey Governor Phil Murphy signed Public Law 2022, Chapter 101 (the “Act”) into law. The Act is now effective in full force.

The Act applies to private equity transactions, physician-to-hospital sales, and physician-to-physician transactions, amongst others. As defined, a change in control is any “sale assignment, transfer, contribution or other disposition of all or substantially all of the assets used in a health care entity’s operations; or any sale, assignment, transfer, contribution or other disposition of a controlling interest in a health care entity”.

Under the Act, in addition to guaranteeing employment to employees following a change in control, certain health care entities must guarantee employees fringe benefits, including but not limited to paid time off (“PTO”), health care insurance and retirement contributions.

The Act applies to all non-governmental licensed healthcare entities pursuant to N.J.S.A. 26:2H-1. This includes, but is not limited to clinics, rehabilitation centers, nursing homes, outpatient clinics, and residential health care facilities.

Employees protected under the Act are any of those employed at the health care entity during the 90-day period preceding the change in control. The Act makes an exception for any employees discharged “for cause” before the change in control.

Although traditionally a part of any due diligence process, the Act mandates that a selling health care entity provide the purchasing entity with a list of all employees, including:

  • Names;
  • Addresses;
  • Dates of hire;
  • Phone numbers;
  • Wage rates; and
  • Employment classification.

In addition to disclosing the above information, the healthcare entities contemplating a change in control must provide written notice to eligible employees advising them of their rights and post such notice conspicuously in the workplace.

If violated, health care entities may be subject to retaliation from employees. Under the statutory cause of action, a court will have express authority to order injunctive relief to reinstate such employees.

How Frier Levitt Can Help:

If you are a health care entity contemplating a change in control, in addition to assisting with your transaction, Frier Levitt can ensure that all employment related manners in a change of control are compliant with the Act. This can include identifying which employees must be retained, making any required disclosures to the purchaser under the Act, preparing mandatory correspondence to employees, and securing other compliance measures. Contact us for more information or assistance with ensuring your practice is compliant with the new protections for health care employees in New Jersey.

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