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Mar 2009
23
March 23, 2009

Heed This Warning: Notification Required Before Mass Layoffs, Closings

The Worker Adjustment and Retraining Notification Act (WARN) is a federal law that requires a covered employer to give 60 days advance notice of a "plant closing" or "mass layoff." If an employer fails to give the required notices, it is liable to the affected employees for pay and benefits during the 60-day notice period. Or, if less than 60 days notice is given, the employer is liable for pay and benefits for the difference between the required 60-day notice period and the period of notice actually given.

If you are downsizing, you need to make sure that you don't violate WARN. Determining whether you may have a "WARN event" can be complicated, requiring detailed calculations as to how many employees are affected, whether they are laid off, terminated, or work reduced schedules, and the dates of each termination, layoff, or reduction in hours.

WARN covers employers with 100 or more employees (excluding "part-time" employees in some circumstances). Part-time employees are defined as those who work an average of less than 20 hours per week, or who have been employed by the employer less than 6 of the preceding 12 months. Separate legal entities (such as a parent corporation and subsidiaries) may be consolidated for purposes of the 100-employee test under the labor law "single employer" standards, depending on the degree of common ownership, common management and control of labor relations, and integration of operations.

The employees who are entitled to WARN notice are those who suffer an "employment loss" in connection with a plant closing or mass layoff. An employment loss is defined as a termination of employment, a layoff exceeding six months, or a reduction of hours of 50 percent or more during each month of any six-month period.

A "plant closing" is a permanent or temporary shutdown of a "single site of employment," or a "facility or operating unit" within a single site of employment, that causes an employment loss for 50 or more employees (other than part-time employees) over a 30-day period, or over a 90-day period unless the employer can show that different "employment losses" outside the 30-day period were due to different causes. For example, if a covered employer terminates 10 employees each month for six months in order to close a plant, WARN would never be triggered, because 50 employees would not be affected over any 90-day period. Conversely, if the employer terminates 20 employees per month, WARN will be triggered in the third month unless the employer can show that the terminations in some months had "different causes" than the terminations in others. If the employer hasn’t given the required notice, it will be liable to all employees for the pay and benefits that they would have received during the 60-day notice period.

A "mass layoff" is a reduction in force that is not a plant closing and that causes an employment loss over a 30- or 90-day period for 50 or more employees (other than part-time employees) who also comprise 33 percent of the total active work force at the single site of employment (including salaried and hourly employees). If 500 employees (other than part-time employees) suffer an employment loss as part of a mass layoff, the 33 percent test does not apply. Once again, if an employee does not receive the required 60 days notice before the beginning of the layoff, the employer is liable.

If all of the above isn't complicated enough, it gets even worse. Under the WARN regulations published by the Department of Labor, each employment loss starts a new 30- and 90-day period. This can be very important when deciding whether there has been a mass layoff, because the total employment at the site, for purposes of applying the 33-percent test, is defined by the regulations to be the total of actively employed employees as of the date that each 30- or 90-day period begins. If this seems confusing, that’s because it is, and is one illustration of why it is so important to understand the details of WARN if you are in a situation that could trigger the WARN requirements.

A valid WARN notice must meet specific requirements in the regulations. Notice must be given to each affected employee or to a union that represents the employee. Notice must also be given to state and local officials. The notice must forecast a 14-day period during which each employee will experience an employment loss, and making that forecast can obviously be difficult. "Conditional WARN notice" can be given in narrow situations specified by the regulations.

There are exceptions to the obligation to give WARN notice, including an "unforeseeable business circumstances" exception and an exception for a layoff that the employer could not know would exceed six months, but the exceptions require the employer to prove specific facts, and also require that the employer must have given as much notice as possible.

The bottom line is that WARN is complicated and has traps for the unwary. Consider yourself warned.
 

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