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WARN: What is it good for?... Serious Stress for Employers Considering a Mass Layoff or Closing
By Molly Batsch on August 22, 2013 at 9:45 AM

WARNActJob dislocations, mass layoffs, plant closings. News of these events has become more and more prevalent in recent years, leaving many employers grappling with how to handle complicated PR and legal issues in today’s changing job market.

One issue often overlooked by employers is whether they must “WARN” affected employees in such situations. The failure to consider this question or the failure to reach the “right” conclusion can have devastating consequences for an employer – particularly when an affected employee opts to file a class action challenging the employer’s decision.

Where Does the Notice Obligation Come From?

The primary notice obligation is found in the federal Worker Adjustment and Retraining Notification Act (“WARN”), which requires employers to provide 60 days of notice to employees affected by a mass layoff or plant closing.

Several states such as Illinois, Iowa, and New York have also adopted their own “mini” WARN Acts, which can impose more stringent requirements than the federal WARN Act. For this reason, both the federal WARN Act and all applicable state WARN Acts should be carefully reviewed to determine if they apply to the mass layoff or plant closing being considered. This post is limited to addressing the federal WARN Act.

Which Employers Are Covered by WARN?

WARN only applies to employers with 100 or more full-time employees OR 100 or more full and part-time employees who in the aggregate work at least 4,000 hours per week. In other words, smaller employers will frequently be excluded from WARN’s requirements.

However, it is important to remember that WARN obligations have been recognized in situations where entities have common ownership or management, and are therefore considered to be a “single employer” for purposes of WARN. For this reason, employers should carefully analyze whether affiliates, subsidiaries, or other related entities may result in a determination that the employer is subject to WARN’s requirements.

When is WARN Triggered?

WARN is triggered and notice is required when a covered employer engages in either a “mass layoff” or a “plant closing”:

  • Mass Lay-Off: a reduction in force that results in an employment loss for at least 50 full-time employees and at least 33% of employees at a single site of employment; or results in an employment loss for at least 500 full-time and part-time employees;
  • Plant Closing: the closing of a single site of employment during any 30-day period that affects 50 or more full-time employees.

WARN regulations define an “employment loss” as a: 1) termination of employment other than a discharge for cause, voluntary departure, or retirement; 2) a layoff that is longer than six months; or 3) a reduction in hours of more than 50 percent during each month of any six-month period.

Once WARN is triggered, an employer is required to provide employees with at least 60 days written notice of the plant closing or layoff. This notice is required to contain certain information, including but not limited to the expected date of the layoff or closing and the expected date when the individual’s employment will be separated. In addition, advance notice must be provided to the state dislocated worker unit, the elected official of the local government where the layoff or closing is to occur, and any applicable union(s).

An employer who fails to provide required notice under WARN is liable to each affected employee for up to 60 days of back wages and benefits and attorney’s fees. In addition, employers who fail to provide notice to a local government unit may be subject to significant civil penalties – up to $500 for each day of the violation. That’s steep!

The Rise of the WARN Class Action

To be sure, not every layoff or plant closure triggers WARN’s notice requirements. However, interpretation of these requirements and the manner in which they are applied is anything but uniform in the courts. This lack of uniformity has led to significant confusion on the part of employers as to whether or not WARN may apply to a particular employment decision – resulting in increased litigation and substantial settlements.

For this reason, a careful analysis which considers the factors frequently applied by the courts in cases claiming WARN violations is critical. Such an analysis will better equip an employer not only to assess whether WARN applies in the first place, but to defend against private litigation or government challenges that may stem from this decision. To conduct this analysis, employers are well advised to consult an attorney familiar with the intricacies and nuances of the WARN Act, any applicable mini-WARN Acts, and regulations and case law interpreting these laws.

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