What Is the WARN Act?

Posted by Molly DiBiancaOn September 30, 2008In: Reduction in Force (RIF), WARN Act

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Layoffs are happening. And layoffs have lots of implications-morale implications, business and financial implications, and legal implications.  Any time an employer is considering separating one or more employee for lack of work, a whole host of legal considerations are triggered. For employers with at least 100 full-time employees at a job site, one of the most significant is the Worker Adjustment and Retraining Notification (WARN) Act.  image

In short, the WARN Act requires employers to give advance notice to employees who will be affected by a plant closing.  Generally, 60 days' written notice is required before closing a plant or implementing a mass layoff.  Failure to comply with the Act can result in serious liability, including back pay and benefits for each affected employee for every day that the notice was not provided, for up to 60 days.  This number can quickly add up to millions of dollars.

Who Is Entitled to Notice?

WARN notice must be provided to either affected workers or their representatives (e.g., a labor union); to the State dislocated worker unit; and to the appropriate unit of local government.

Which Employers Are Covered?

Private-sector profit and non-profit employers who have 100 or more employees are covered.   In determining whether the minimum number of employees has been met, only those who have worked at least 6 months in the last 12 months and who work an average of at least 20 hours per week should be included. 

When Must Notice Be Given?

With three exceptions, notice must be timed to reach the required parties at least 60 days before a closing or layoff. When the individual employment separations for a closing or layoff occur on more than one day, the notices are due to the representative(s), State dislocated worker unit and local government at least 60 days before each separation. If the workers are not represented, each worker's notice is due at least 60 days before that worker's separation.

The exceptions to 60-day notice are:

(1) Faltering company. This exception, to be narrowly construed, covers situations where a company has sought new capital or business in order to stay open and where giving notice would ruin the opportunity to get the new capital or business, and applies only to plant closings;

(2) unforeseeable business circumstances. This exception applies to closings and layoffs that are caused by business circumstances that were not reasonably foreseeable at the time notice would otherwise have been required; and

(3) Natural disaster. This applies where a closing or layoff is the direct result of a natural disaster, such as a flood, earthquake, drought or storm.

If an employer provides less than 60 days advance notice of a closing or layoff and relies on one of these three exceptions, the employer bears the burden of proof that the conditions for the exception have been met. The employer also must give as much notice as is practicable. When the notices are given, they must include a brief statement of the reason for reducing the notice period in addition to the items required in notices.

What Must the Notice Include?

Notice must be in writing but no particular form is required.  Notice must be specific. 

What Triggers Notice?

Plant Closing:  A covered employer must give notice if an employment site (or one or more facilities units within an employment site) will be shut down, which will result in an employment loss for 50 or more employees during any 30-day period. 

Mass Layoff: A covered employer must give notice if there is to be a mass layoff that does not result from a plant closing, but will result in an employment loss at the employment site during any 30-day period for 500 or more employees, or for 50-499 employees if they make up at least 33% of the employer's active workforce.

Cumulative Layoff:  Even if the first two events do not occur, WARN Act provides still for a third circumstance where notice is required.  If, during a 30-day period, the number of employment losses for 2 or more groups of workers, each of which is less than the minimum number needed to trigger notice, would reach the minimum threshold if they were combined during any 90-day period.  Job losses within any 90-day period will count together cumulatively.

What Is An Employment Loss?

The term "employment loss" means:

(1) An employment termination, other than a discharge for cause, voluntary departure, or retirement;

(2) a layoff exceeding 6 months; or

(3) a reduction in an employee's hours of work of more than 50% in each month of any 6-month period.

Not included as an employment loss is an employee who refuses a transfer to a different employment site within reasonable commuting distance; an employee who accepts a transfer outside this distance within 30 days after it is offered or within 30 days after the plant closing or mass layoff, whichever is later.  In both cases, the transfer offer must be made before the closing or layoff, there must be no more than a 6-month break in employment, and the new job must not be deemed a constructive discharge.

Are There Any Exceptions?

An employer does not need to give notice if a plant closing is the closing of a temporary facility, or if the closing or mass layoff is the result of the completion of a particular project or undertaking. This exemption applies only if the workers were hired with the understanding that their employment was limited to the duration of the facility, project or undertaking. An employer cannot label an ongoing project "temporary" in order to evade its obligations under WARN.

An employer does not need to provide notice to strikers or to workers who are part of the bargaining unit(s) which are involved in the labor negotiations that led to a lockout when the strike or lockout is equivalent to a plant closing or mass layoff. Non-striking employees who experience an employment loss as a direct or indirect result of a strike and workers who are not part of the bargaining unit(s) which are involved in the labor negotiations that led to a lockout are still entitled to notice.

An employer does not need to give notice when permanently replacing a person who is an "economic striker" as defined under the NLRA.

How Long Is the Notice Period?

With three exceptions, notice must be timed to reach the required parties at least 60 days before a closing or layoff.

The exceptions to 60-day notice are:

(1) Faltering company. This exception, to be narrowly construed, covers situations where a company has sought new capital or business in order to stay open and where giving notice would ruin the opportunity to get the new capital or business, and applies only to plant closings;

(2) unforeseeable business circumstances. This exception applies to closings and layoffs that are caused by business circumstances that were not reasonably foreseeable at the time notice would otherwise have been required; and

(3) Natural disaster. This applies where a closing or layoff is the direct result of a natural disaster, such as a flood, earthquake, drought or storm.

1 Comments

Thanks for writing this article up. It compelled me to ask your thoughts on WARN in regards to post-petition hirings.

For example; DIP is in the midst of a sale under an APA; DIP continues to hire within 60 days of the APA closing date; DIP further designates these new hires as "temporary or seasonal" and includes a signature for the new hire to sign acknowledging such; New Hire's, unbeknown to them, receive "termination notice" one week before closing of APA; 60 day notice was given to all other employees(i.e. not New Hires but employees currently employed since petition date) about the pending termination notice and offer letter from Buyer of the APA.

So, in this hypothetical could this be construed as "evading" applicability of WARN and thereby giving exceptional cause for the "New Hires" for damages under WARN AND Administrative priority under 503?

Anthony G.

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