Layoffs Have Started...in a big way! Know the WARN ACT.
Worker Adjustment and Retraining Notification Act (WARN Act)
The Federal Worker Adjustment and Retraining Notification Act (WARN Act) provides protection to employees, their families, and communities by requiring employers to provide notification in advance of plant closings and mass layoffs. Advance notice to employees and their families provides some transition time to adjust to the prospective loss of employment, to seek and obtain alternative jobs, and to enter skill-training classes that will allow employees to successfully compete in the job market.
The WARN Act regulations establish basic definitions and rules for giving notice and implementing the provisions of the act. However, notice is still encouraged where not required. An employer who is not required to comply with the WARN Act notice requirements should, to the extent possible, provide notice to its employees about a proposal to close a plant or permanently reduce its workforce. Although the WARN Act requirements only offer a minimum notice requirement, employers are encouraged to voluntarily provide longer periods of advance notice. WARN Act, 29 U.S.C.A. § 2101 – 2109. WARN Act regulations, 20 C.F.R. 639.1 – 639.10. COVID-19
The U.S. Department of Labor (DOL) issued Frequently Asked Questions for COVID 19, confirming that the WARN Act will continue to apply during the COVID-19 pandemic. Covered employers invoking the existing exceptions for faltering companies, unforeseen business circumstances, and natural disasters must give as much notice as possible. The DOL stated that it will not provide individual guidance to employers, and its general guidance does not replace the advice of an attorney. Definitions
The WARN Act requires employers to provide notification in advance of plant closing and mass layoffs. A plant closing is the permanent or temporary shutdown of a single site of employment or one or more facilities or operating units within a single site of employment if the shutdown results in an employment loss during any 30-day period at the single site of employment for 50 or more employees, excluding any part-time employees. An employment loss is:
An employment termination, other than a discharge for cause, voluntary departure, or retirement.
A layoff exceeding six months.
A reduction in hours of work of individual employees of more than 50 percent during each month of any six-month period.
Where a termination or a layoff is involved, an employment loss does not occur when an employee is reassigned or transferred to employer-sponsored programs, such as retraining or job search activities, as long as the reassignment does not constitute a constructive discharge or other involuntary termination. An employee is not considered to have experienced an employment loss if the closing or layoff is the result of the relocation or consolidation of part or all of the employer’s business and, prior to the closing or layoff, the employer offers either:
To transfer the employee to a different site of employment within a reasonable commuting distance with no more than a six-month break in employment; or
To transfer the employee to any other site of employment regardless of distance with no more than a six-month break in employment, and the employee accepts within 30 days of the offer or of the closing or layoff—whichever is later.
A relocation or consolidation of part or all of an employer’s business is that some definable business—whether customer orders, product lines, or operations—is transferred to a different site of employment and that transfer results in a plant closing or mass layoff. A shutdown is an employment action that results in the effective cessation of production or the work performed by a unit, even if a few employees remain. A temporary shutdown triggers the notice requirement only if there are a sufficient number of terminations, layoffs exceeding six months, or reductions in hours of work.
A mass layoff is a reduction in force that is not the result of a plant closing and results in an employment loss at the single site of employment during any 30-day period for:
At least 33 percent of the active employees, excluding part-time employees.
At least 50 employees, excluding part-time employees.
Where 500 or more employees (excluding part-time employees) are affected, the 33 percent requirement does not apply, and notice is required if the other criteria are met. Plant closings involve employment loss that results from the shutdown of one or more distinct units within a single site or the entire site. A mass layoff involves employment loss, regardless of whether one or more units are shut down at the site. Additionally, employees, other than part-time employees, who are exempt from WARN notice requirements are nonetheless counted as employees for purposes of determining coverage as an employer. For example, if an employer closes a temporary project on which 10 permanent and 40 temporary employees are employed, a covered plant closing has occurred although only 10 employees are entitled to notice. A single site of employment refers to either a single location or a group of contiguous locations. A single site of employment may also apply to truly unusual organizational situations where the aforementioned criteria do not reasonably apply. The application of this definition with the intent to evade the purpose of the act to provide notice is not acceptable. Foreign sites of employment are not covered under the WARN Act. However, U.S. workers at foreign sites of employment are counted to determine whether an employer is covered as an employer by the act. Covered Employers The WARN Act covers employers that either:
Employ 100 or more employees, excluding part-time employees; or
Employ 100 or more employees who work at least a combined 4,000 hours per week, including part-time employees but excluding overtime hours.
Employers also include:
Nonprofit organizations of the requisite size.
Public and quasi-public entities that engage in business, are separately organized from the regular government, have their own governing bodies, and have independent authority to manage their own personnel and assets.
Employers with one or more sites of employment under common ownership or control. For example, a major automaker has dozens of automobile plants throughout the country; each plan is a site of employment but the automaker is the only employer.
Regular federal, state, local, and federally recognized Indian tribal governments are not covered by the act. Covered Employees The WARN Act covers all affected employees and supervisors. Affected employees are those who may reasonably be expected to experience an employment loss as a consequence of a proposed plant closing or mass layoff by their employer. This includes individually identifiable employees who will likely lose their jobs because of bumping rights or other factors, to the extent that such individual employees reasonably can be identified at the time notice is required to be given. Affected employees include managerial and supervisory employees, but not business partners. Bumping rights exist in a seniority system, where the rights of workers with greater seniority whose jobs are abolished then replace (bump) workers with less seniority so that the worker who ultimately loses their job is not the worker whose job was abolished.
Consultant or contract employees who have a separate employment relationship with another employer and are paid by that other employer or who are self-employed are not affected employees of the business to which they are assigned. In addition, for purposes of determining whether coverage thresholds are met, either incumbent workers in jobs being eliminated or, if known 60 days in advance, the actual employees who suffer an employment loss may be counted.
Employees on temporary layoff or on a leave of absence who have a reasonable expectation of recall are also counted as employees for purposes of the WARN Act. An employee has a reasonable expectation of recall upon the understanding that, through notification or through industry practice, their employment has been temporarily interrupted and that they will be recalled to the same or to a similar job.
Part-time employees are employees who are employed for an average of fewer than 20 hours per week or who were employed for fewer than 6 of the 12 months preceding the date on which notice is required, including employees who work full-time. The period used for calculating whether an employee has worked an average of fewer than 20 hours per week is the shorter of the actual time the employee has been employed or the most recent 90 days. Additionally, part-time employees include seasonal employees. Notice Requirements
The notice must be given at least 60 calendar days prior to any planned plant closing or mass layoff. When all employees are not terminated on the same date, the date of the first individual termination within the statutory 30-day or 90-day period triggers the 60-day notice requirement. An employee’s last day of employment is considered the date of that employee’s layoff. The first and each subsequent group of terminees are entitled to a full 60 days’ notice.
Aggregation In order for an employer to decide whether issuing notice is required, the employer should examine both of the following time periods:
Look ahead 30 days and behind 30 days to determine whether employment actions both taken and planned will, in the aggregate for any 30-day period, reach the minimum numbers for a plant closing or a mass layoff and thus trigger the notice requirement.
Look ahead 90 days and behind 90 days to determine whether employment actions both taken and planned, each of which separately is not of sufficient size to trigger WARN coverage, will, in the aggregate for any 90-day period, reach the minimum numbers for a plant closing or a mass layoff and thus trigger the notice requirement. However, an employer is not required to give notice if the employer demonstrates that the separate employment losses are the result of separate and distinct actions and causes, and are not an attempt to evade the requirements of the WARN Act.
Service of Notice Employers must not order a plant closing or mass layoff until the end of a 60-day period after the employer serves written notice of such an order to the following:
Each representative of the affected employees as of the time of the notice or, if there is no such representative at that time, to each affected employee.
The state or entity designated by the state to carry out rapid response activities and the chief elected official of the unit of local government within which such closing or layoff is to occur. Rapid response activities encompass the activities necessary to plan and deliver services to enable dislocated workers to transition to new employment as quickly as possible, following either a permanent closure or mass layoff or a natural or other disaster resulting in a mass job dislocation.
If there is more than one such unit, the unit of local government that the employer must notify is the unit of local government to which the employer pays the highest taxes for the year preceding the year for which the determination is made.
Notice may be served by any reasonable method of delivery to the required parties. Such service must be designed to ensure receipt of notice at least 60 days before separation is acceptable (for example, first-class mail or personal delivery with optional signed receipt). In the case of notification directly to affected employees, insertion of notice into pay envelopes is another viable option. However, a ticketed notice does not meet the requirements of the WARN Act. A ticketed notice is a preprinted notice regularly included in each employee’s paycheck or pay envelope.
Reduction of Notification Period An employer may order a plant closing or mass layoff before the conclusion of the 60-day period if either of the following applies:
The closing or mass layoff is caused by business circumstances that were not reasonably foreseeable as of the time that notice would have been required.
As of the time that notice would have been required the employer was actively seeking capital or business, which, if obtained, would have enabled the employer to avoid or postpone the shutdown and the employer reasonably and in good faith believed that giving the notice required would have precluded the employer from obtaining the needed capital or business.
Extension of Layoff Period A layoff of more than six months, which, at its outset, was announced to be a layoff of six months or less, must be treated as an employment loss unless either of the following applies:
The extension beyond six months is caused by business circumstances (including unforeseeable changes in price or cost) not reasonably foreseeable at the time of the initial layoff.
Notice is given at the time it becomes reasonably foreseeable that an extension beyond six months will be required.
Additional Notice Due to Postponement
Additional notice is required when the date or schedule dates of a planned plant closing or mass layoff is extended beyond the date or the ending date of any 14-day period announced in the original notice as follows:
If the postponement is for less than 60 days, the additional notice should be given as soon as possible to the affected employees and should include reference to the earlier notice, the date (or 14-day period) to which the planned action is postponed, and the reasons for the postponement. The notice should be given in a manner that will provide the information to all affected employees.
If the postponement is for 60 days or more, the additional notice should be treated as new notice subject to the applicable WARN Act provisions.
Rolling notice, in the sense of routine periodic notice, given whether or not a plant closing or mass layoff is impending, and with the intent to evade the purpose of the act rather than give specific notice as required by the WARN Act, is not acceptable.
Contents of a WARN Act Notice All notices must be specific. The information provided in a WARN Act notice must be based on the best information available to the employer at the time the notice is served. When referenced, the term date refers to a specific date or to a 14-day period during which a separation(s) is expected to occur. If separations are planned according to a schedule, the schedule should indicate the specific dates on which, or the beginning date of each 14-day period during which, any separation(s) is expected to occur. Where a 14-day period is used, notice must be given at least 60 days in advance of the first day of the period.
The required elements of notice differ according to whether the notice is for the affected employees, employee representatives, or representatives of state and local governments. However, all notices may include additional information useful to the employees such as information on available dislocated worker assistance and, if the planned action is expected to be temporary, the estimated duration if known. Notice for Affected Employees
The notice to each affected employee who does not have a representative must be written in language that is understandable to the employee and must contain the following:
A statement as to whether the planned action is permanent or temporary and whether the entire plant will be closed.
The expected date when the plant closing or mass layoff will commence and the expected date when the individual employee will be separated.
An indication of whether or not bumping rights exist.
The name and phone number of the company official to contact for further information.
Notice for Employee Representatives The notice to each representative of affected employees must contain the following:
The name and address of the employment site where the plant closing or mass layoff will occur, and the name and telephone number of a company official to contact for further information.
A statement as to whether the planned action is permanent or temporary.
A statement as to whether the entire plant will be closed.
The expected date of the first separation and the anticipated schedule for separations.
The job titles of positions to be affected and the names of employees currently holding affected jobs.
The notice may include additional information useful to the employees, such as information on available dislocated worker assistance and, if the action is expected to be temporary, the estimated duration if known. Notice for State and Local Governments
The notices separately provided to the state dislocated worker unit and to the chief elected official of the unit of local government must contain all of the following information:
The name and address of the employment site where the plant closing or mass layoff will occur, and the name and telephone number of the company official to contact for information.
A statement about whether the action is temporary or permanent and whether the entire plant will close.
The expected date of the first separation, and the anticipated schedule for making separations.
The job titles of positions to be affected, and the number of affected employees in each job classification.
An indication as to whether bumping rights exist.
The name of each union representing affected employees, and the name and address of the chief elected office of each union.
Alternatively, this notice may be abbreviated as long as more specific information is maintained on-site and made available to governmental representatives upon request. If this information is not available when requested, it will be deemed a failure to give the required notice.
Additional Provisions Where voluntary notice has been given more than 60 days in advance, but does not contain all of the required elements, the employer must ensure that all of the information required is provided in writing to the applicable parties at least 60 days in advance of a covered employment action. Notice may be given conditional upon the occurrence or nonoccurrence of an event, such as the renewal of a major contract, only when the event is definite and the consequences of the event’s occurrence or nonoccurrence will necessarily, in the normal course of business, lead to a covered plant closing or mass layoff less than 60 days after the event. For example, if the nonrenewal of a major contract will lead to the closing of the plant that produces the articles supplied under the contract 30 days after the contract expires, the employer may give notice at least 60 days in advance of the projected closing date, which states that if the contract is not renewed, the plant closing will occur on the projected date. The notice must contain each of the required elements.
Exceptions The WARN Act does not apply to a plant closing or mass layoff when:
The closing is of a temporary facility or the closing or layoff is the result of the completion of a particular project or undertaking, and the affected employees were hired with the understanding that their employment was limited to the duration of the facility or the project or undertaking.
The closing or layoff constitutes a strike or constitutes a lockout not intended to evade the WARN Act requirements.
A lockout is when, for tactical or defensive reasons during the course of collective bargaining or during a labor dispute, an employer lawfully refuses to utilize some or all of its employees for the performance of available work. A lockout not related to collective bargaining that is intended as a subterfuge to evade the act does not qualify for an exemption. A plant closing or mass layoff at a site of employment where a strike or lockout is taking place, which occurs for reasons unrelated to a strike or lockout, is not covered by the notification exceptions.
Employers are not required to give notice when permanently replacing a person who is an economic striker under the National Labor Relations Act (NLRA). However, nonstriking employees at the same single site of employment who experience a covered employment loss as a result of a strike are entitled to notice. Situations in which a strike or lockout affects nonstriking employees at the same plant may constitute an unforeseeable business circumstance and reduced notice may apply. Similarly, the faltering company exception may apply in strike situations.
Where a union that is on strike represents more than one bargaining unit at a single site, nonstrikers include the nonstriking bargaining unit(s). Notice also is due to those employees who are not a part of the bargaining unit(s) that is involved in the labor negotiations that led to the lockout. Employees at other plants which have not been struck, but at which covered plant closings or mass layoffs occur as a direct or indirect result of a strike or lockout, are not covered by the strike/lockout exemption. The unforeseeable business circumstances exception to 60 days’ notice also may apply to these closings or layoffs at other plants. Faltering Company
The faltering company exception applies to plant closings but not to mass layoffs, and should be narrowly construed. To qualify for reduced notice of fewer than 60 days under the faltering company exception, the following conditions must apply:
An employer must have been actively seeking capital or business at the time that 60-day notice would have been required. The employer must have been seeking financing or refinancing through the arrangement of loans, the issuance of stocks, bonds, or other methods of internally generated financing; or the employer must have been seeking additional money, credit, or business through any other commercially reasonable method. The employer must be able to identify specific actions taken to obtain capital or business.
There must have been a real opportunity to obtain the financing or business sought.
The financing or business sought must have been sufficient, if obtained, to have enabled the employer to avoid or postpone the shutdown. The employer must be able to objectively demonstrate that the amount of capital or the volume of new business sought would have enabled the employer to keep the facility, operating unit, or site open for a reasonable period of time.
The employer reasonably and in good faith believed that giving the required notice would have precluded the employer from obtaining the needed capital or business. The employer must be able to objectively demonstrate that it reasonably thought that a potential customer or source of financing would have been unwilling to provide the new business or capital if notice were given; that is, if the employees, customers, or the public were aware that the facility, operating unit, or site might have to close. This condition may be satisfied if the employer can show that the financing or business source would not choose to do business with a troubled company or with a company whose workforce would be looking for other jobs. The actions of an employer relying on the faltering company exception will be viewed in a company-wide context.
Thus, a company with access to capital markets or with cash reserves may not avail itself of this exception by looking solely at the financial condition of the facility, operating unit, or site to be closed. Unforeseeable Business Circumstances
The unforeseeable business circumstances exception to WARN Act notification requirements applies to plant closings and mass layoffs caused by business circumstances that were not reasonably foreseeable at the time that 60-day notice would have been required.
An important indicator of a business circumstance that is not reasonably foreseeable is that the circumstance is caused by some sudden, dramatic, and unexpected action or condition outside the employer’s control. Business circumstances that are not reasonably foreseeable include:
A principal client’s sudden and unexpected termination of a major contract with the employer.
A strike at a major supplier of the employer.
An unanticipated and dramatic major economic downturn.
A government-ordered closing of an employment site that occurs without prior notice.
The test for determining when business circumstances are not reasonably foreseeable focuses on an employer’s business judgment. The employer must exercise such commercially reasonable business judgment as would a similarly situated employer in predicting the demands of its particular market. However, the employer is not required to accurately predict general economic conditions that may also affect demand for its products or services.
Natural Disaster No WARN Act notice is required if the plant closing or mass layoff is due to any form of natural disaster. To qualify for the natural disaster exception, an employer must be able to demonstrate that a plant closing or mass layoff is a direct result of a natural disaster. A natural disaster is any of, but is not limited to, the following:
Similar disastrous effects of nature
While a disaster may preclude full or any advance notice, such notice as is practicable, containing as much of the required information as is available in the circumstances of the disaster still must be given—whether in advance or after the fact of an employment loss caused by a natural disaster. Where a plant closing or mass layoff occurs as an indirect result of a natural disaster, the natural disaster exception does not apply; however, the unforeseeable business circumstance exception, as previously discussed, may be applicable.
This information is not legal advice, it is for informational purposes.