Many employers are being forced to make tough financial choices to survive the difficult economic climate caused by COVID-19. Before closing offices or instituting furloughs or mass layoffs, employers must consider the requirements of the federal Worker Adjustment and Retraining Notification (WARN) Act, as well as any similar state laws that may apply to its workplace.
Who is subject to the WARN Act?
Private for-profit and not-for-profit employers with 100 or more employees are subject to the WARN Act. If an employer has part-time workers or workers that have been employed for less than 6 months, they can often be excluded for purposes of calculating the number of employees; however, they are still entitled to notice if the employer is subject to the Act.
The Act is triggered if –
(1) an employment site will be shut down resulting in 50 or more employees losing their employment during a 30 day period;
(2) there will be a mass layoff which will result in 500 or more employees losing their employment during a 30 day period, or will result in 50-499 employees losing their employment during a 30 day period if the affected workers comprise at least 33% of the employer’s active workforce;
(3) the number of employment losses for two or more groups of workers, while individually not sufficient to trigger the Act, collectively reach either of the above threshold levels during a 90 day period (e.g. through rolling layoffs or multiple worksite closings), unless the employer can demonstrate that the losses are the result of separate and distinct actions and causes.
Note that the aggregation rule in (3) above considers all reduction events in the prior 90 days and subsequent 90 days. While these circumstances are unprecedented and change quickly, employers should do their best to come up with a comprehensive reduction in force plan before taking any action.
What counts as an employment loss?
An employment loss is defined as a termination that was not for cause and was not voluntary, a layoff exceeding 6 months, or a reduction in an employee’s hours by more than 50% in each month of any 6 month period.
If an employer furloughs employees for six months or less, the WARN Act would not apply. However, if the furlough has an uncertain end date and ultimately extends beyond 6 months, employers must comply with the statute.
What are employers required to do to comply with the WARN Act?
Employers must provide 60 days’ notice to affected employees or their representatives (such as a labor union), the state’s dislocated worker unit, and the appropriate unit of local government regarding any covered worksite closing or mass layoff.
Do I still need to comply with the WARN Act during the COVID-19 pandemic?
If an employer is considering a closing or layoff that would result in employment losses sufficient to trigger the Act, they do still need to provide notice to affected employees during the pandemic. However, the 60 day notice requirement MAY be waived under one of the Act’s exceptions – specifically the unforeseeable business circumstances or natural disaster exceptions.
An employer does not need to give 60 days’ notice if “the closings and layoffs are caused by business circumstances that were not reasonably foreseeable at the time notice would otherwise have been required” or if the “closing or layoff is the direct result of a natural disaster, such as a flood, earthquake, drought, [or] storm.”
As of this writing, this is no precedent for these exceptions being used during a pandemic, and the employer has the burden of proving the exception applies. Notably, the natural disaster exception only applies if the closing is a direct result of a natural disaster. The unforeseeable business circumstances exception is broader, but is also subject to various interpretations and often ends up in litigation.
The federal regulations for the WARN Act state that “[a]n 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,” and that a “dramatic major economic downturn” or a “government ordered closing of an employment site that occurs without prior notice” MAY constitute “unforeseeable business circumstances.” This exception is typically used in the case of strikes or the unexpected loss of a major customer or contract that makes ongoing business operations impossible.
The COVID-19 situation is unprecedented. Arguably, the dramatic major economic downturn and government ordered closings of businesses resulting from the pandemic will excuse some businesses from complying with the WARN Act’s 60 day notice requirement, especially those that were required to close suddenly by state or local executive orders. An employer relying on the unforeseeable business circumstance exception must still give as much notice as possible, including a brief statement of the basis for reducing the notice period. However, reliance on the unforeseeable business circumstances exception will likely get weaker as time goes on and businesses have had a chance to adjust.
The penalties for violating the WARN Act are substantial – employers can be liable to each aggrieved employee for back pay and benefits for the period of the violation and can be subject to a civil penalty of up to $500 per day per violation if the employer fails to notify the state. Therefore, we recommend employers consult with an attorney before taking any action that may violate the WARN Act.
Are there any state-specific laws I should consider?
The following states have mini-WARN acts with varying requirements – California, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Tennessee, Vermont, and Wisconsin. California has suspended the requirements of their Act during the pandemic, but other states have not.
Employers who have employees in any of these states should consider these regulations in addition to the federal WARN Act when forming a reduction in force layoff plan.