New Jersey Law Expands Striking Workers’ Eligibility for Unemployment Benefits and Imposes Penalties for Hiring Permanent Replacements

On August 10, 2018, New Jersey Governor Phil Murphy signed legislation allowing striking workers to collect unemployment benefits under several new and potentially expansive circumstances. The new law applies to all New Jersey employers and any claim for unemployment benefits for a period of unemployment commencing on or after July 1, 2018.

For the first time in New Jersey history, the law imposes potential monetary penalties when employers hire permanent replacements for strikers. New Jersey now joins states such as New York that make it easier for striking workers to obtain unemployment benefits and penalize employers that continue operations during a strike with permanent replacement workers. Hiring permanent replacements is a lawful response to employee strike activity under federal labor law.

Under prior New Jersey law, a striking worker was eligible to receive unemployment benefits under the state’s unemployment compensation law (UCL) only if:

1. the worker was not financing, participating, or directly interested in the labor dispute which caused the work stoppage; and
2. the worker did not belong to a group or class of workers at the job site who were financing, participating, or directly interested in the dispute immediately before the commencement of the work stoppage.

Senate Bill No. 1046, the legislation signed into law by Governor Murphy, amends the UCL and provides that a striking worker may be eligible for unemployment benefits in the following circumstances:

• when the labor dispute prompting the employee’s unemployment is caused by an employer’s failure or refusal to comply with an agreement, contract, or collective bargaining agreement, or a state or federal law pertaining to hours, wages, or “other conditions of work”;
• when unemployment is caused by a strike or “other concerted activities” by employees (the striking employee may collect unemployment benefits after a 30-day waiting period);
• when the employer engages in a lockout in support of its bargaining position; or
• when the employer hires permanent replacement workers for striking employees. (If the employer does not allow strikers to return to work, the 30-day waiting period does not apply.)

Another significant change in the law is that a replacement worker is presumed to be permanent unless the employer certifies in writing that the striking worker will be permitted to return to his or her prior position upon the conclusion of the labor dispute. An employer that fails to provide such written notice can be penalized $750 per week, per employee.

Notably, because the legislation does not define the terms “other conditions of work” and “other concerted activities,” it is unclear what kinds of events could trigger the payment of benefits under the new law.

Finally, the true impact of the law remains to be seen, as employers must wait for answers to several pressing questions:

1. Will employees, who will now receive unemployment benefits, be more inclined to strike?
2. Will New Jersey sink deeper into debt and will taxes need to be raised on employers and employees to pay for the new expanded unemployment benefits?
3. Will strikes last longer because of more employees receiving unemployment insurance benefits?
4. Will employers be less likely to hire permanent replacements for strikers?
5. Will the New Jersey business community see this as the proverbial “last straw” and consider relocating to states that do not subsidize strikers and do not punish employers for hiring permanent replacements for strikers?

The answers to these questions will determine whether the new law benefits New Jersey as a whole or constitutes a self-inflicted wound to the state’s economy.