While most of us have been focused on the new federal laws in the form the Families First Coronavirus Response Act and CARES Act the past few weeks, employers must not forget some of the old laws that can be implicated as action is taken to combat a slack in business or loss of business altogether due to the Coronavirus pandemic. One old federal law in particular is the Worker Adjustment and Retraining Notification Act of 1988 (more popularly known as WARN) as employers are often left with little choice but to significantly cut employee work hours, layoff or furlough employees, or unfortunately close the business completely during the economic downturn.
If you are contemplating such business decisions, the requisites of WARN must be considered and should be adhered to by covered employers.
Does The WARN Act Apply To You?
If you are an employer with 100 or more employees, chances are you may be covered under the WARN provisions. However, not all of your employees need to be counted when determining the 100 employee threshold. Employees who have worked less than 6 months in the past 12-month period or those employees who worked on average less than 20 hours a week can be excluded from the count.
What Triggers WARN Compliance?
WARN is triggered when there is a “plant closing” or a “mass layoff” by an employer. The phrases “plant closing” and “mass layoff” are defined by WARN as distinct events. In both cases, an “employment loss” (also defined by WARN) suffered by a sufficient number of employees must occur. The critical phrases are defined as follows:
Plant Closing – When an employment site (or one or more facilities or operating units within an employment site) will be shut down (includes temporary shutdown) and results in an “employment loss” for 50 or more employees during any 30-day period. Again, the number of employees excludes employees who have worked less than 6 months in the past 12-month period or who worked an average of less than 20 hours a week.
Mass Layoff – does not result in a plant closing, but is a reduction in force that results in an “employment loss” during any 30-day period at the employment site of:
- 500 or more affected employees (not counting those who have worked less than 6 months in the past 12-month period or those who worked on average less than 20 hours a week), OR
- between 50 & 499 affected employees IF the number of affected employees makes up at least 33% of the employer’s active workforce (not counting those who have worked less than 6 months in the past 12-month period or those who worked on average less than 20 hours a week).
Employers should be aware of the fact there is a 90-day rolling period when considering whether the requisite number of employees have suffered an “employment loss” for purposes of a “mass layoff” triggering WARN. Any action or decision by an employer deemed to be taken as an effort to circumvent the requisites of WARN will not be received well by the Department of Labor.
An “employment loss” occurs when an employee is being (a) terminated (other than for cause, voluntary departure or retirement); (b) laid off for more than six (6) months; or (c) reduced in work hours of more than 50% in each month of any 6-month period. An exception to the phrase “employment loss” is allowed IF an employee is allowed transfer opportunities within a reasonable commuting distance [or outside this distance if accepted by the employee within 30 days of offer or closing/layoff] with no more than a six (6) month break in employment. Thus, for any employee provided such a transfer opportunity, he/she would not be included in the count of those deemed to have suffered an employment loss.
What Are You Required To Do?
If you are a covered employer and if a qualifying plant closing or mass layoff occurs, the employer is required to provide a 60-day notice in advance of the pending closure or layoff. A written Notice, which must contain certain information, must be sent to:
- (where there is no union) employees who may reasonably be expected to experience an employment loss;
- (where there is a union) chief union official of the union representing employees;
- State dislocated worker unit; and
- Chief elected official of the local government (usually the Mayor or President of the County Board of Supervisors or both).
What If Employer Can’t Wait 60 Days to Take Action?
There are three exceptions to the 60-day Notice obligation under WARN: (a) faltering company; (b) unforeseeable business circumstances; and (c) natural disaster. As it pertains to the COVID-19 pandemic, “unforeseeable business circumstances” is, has been and will be the most commonly relied upon exception as the “faltering company” applies only to plant closings and is very narrowly construed. It is unknown whether the COVID-19 outbreak would be viewed as a “natural disaster” even though most feel it should be so.
In order to rely on and utilize the “unforeseeable business circumstance” exception, the circumstances must have not been reasonably foreseeable at the time the 60-day notice would have been required. Usually, this means the circumstance is caused by some sudden, dramatic and unexpected action or condition outside the employer’s control. Examples provided in the regulations include: principal client’s sudden and unexpected termination of a major contract with employer, a strike at a major supplier of the employer, an unanticipated and dramatic major economic downturn, and a government ordered closing that occurs without prior notice.
In any case, an employer is obligated to provide as much notice as is practical once it is determined that WARN is or will be triggered by its actions. It is important to note that the longer an employer waits during the COVID-19 pandemic while business slowly falls off, the more difficult it may be to argue the action was unforeseeable – unless there is an unexpected loss of a major contract – although we are all hoping for the best and a quick turnaround.
Please Contact Us With Questions/Concerns
Aside from the federal law, many states have what are known as mini-WARN statutes with their own requisites. These too must be considered as some can be implicated before the federal law is triggered.
Should you have any questions or concerns about the potential implication of WARN or a state mini-WARN with a current or prospective decision, please contact one of Butler Snow’s attorneys in the Labor & Employment Practice Group for advice and guidance.