When Reducing Force, Remember Your Duty to WARN
The crippling economic downturn has caused employers nationwide to reduce forces in order to sustain viability, but noncompliance with the Worker Adjustment and Retraining Notification Act (WARN) may just be the nail in the coffin for your business. Knowing when and how WARN is implemented may prove lifesaving in the unsteady economic sea that companies are currently navigating.
General Provisions of WARN
WARN provides notice requirements for employers when implementing closings and mass layoffs. Employers must provide 60 days advance written notice not only to affected workers or their union representatives of covered plant closings and mass layoffs, but also to the state dislocated worker unit (usually unemployment services), and to the designated unit of local government.
Employers are covered by WARN if they have 100 or more employees (not including part-time employees). Employees who have been employed fewer than 6 months in the last 12 months or employees who work an average of fewer than 20 hours a week are considered part-time, and thus do not count toward the total.
Employees entitled to WARN notice include salaried and hourly workers, as well as managerial and supervisory employees.
When Notice is Required
WARN notice applies to plant closings and mass layoffs.
Plant Closings – If a single site of employment or an operating unit within a single site of employment will be permanently or temporarily shut down resulting in an employment loss for 50 or more full-time employees during any 30 day period, the employer is required to give WARN notice.
Mass Layoffs – A reduction in force that is not the result of a plant closing, but will result in an employment loss at a single employment site during any 30 day period for 500 or more employees, or for 50 or more employees and at least 33% of the employer's workforce at that site is considered a mass layoff. Under either of these circumstances, WARN notice must be given to employees.
What is an Employment Loss?
An "employment loss" is an employment termination, other than a discharge for cause, voluntary departure, or retirement; a layoff exceeding 6 months; or a reduction in an employee's hours of work of more than 50% in each month of any 6-month period.
Employers Must Predict the Future
When deciding whether notice must be issued, an employer should look ahead 30 days and behind 30 days to determine whether taken and planned employment actions will, in the aggregate for any 30 day period, reach the minimum numbers for a plant closing or a mass layoff that trigger the notice requirement.
An employer should also look ahead 90 days and behind 90 days to anticipate whether taken and planned employment actions that separately are not substantial enough to prompt WARN coverage will, in the aggregate for any 90 day period, reach the minimum numbers for a plant closing or a mass layoff and consequently trigger the notice requirement.
The notice of an employment termination for WARN purposes must contain a certain date or a 14 day period during which the employment termination will occur. Where a 14 day period is used, the notice must be given at least 60 days in advance of the first day of the period.
Because failure to comply with the statute can result in potentially severe penalties, an employer should always err on the side of caution when predicting the amount of employment losses as well as the dates of employment terminations. To the extent possible, a schedule of employee terminations must be devised in order to facilitate WARN compliance.
Exceptions to Providing 60 Days Notice
Notice must be given to the proper affected parties at least 60 days before a closing or mass layoff except in three circumstances.
- The first exception, the "faltering company" exception, allows an employer to close a plant before the conclusion of the 60 day period if at the time that the 60 day notice was required, the employer was actively seeking capital or business which, if obtained, would have enabled the employer to avoid or postpone the shutdown. The employer must have reasonably and in good faith believed that giving the required notice would have precluded it from obtaining the needed capital or business.
- The second exception, "unforeseeable business circumstances," applies to both closings and layoffs caused by business circumstances that were not reasonably foreseeable at the time notice would otherwise have been required.
- The third exception, the "natural disaster" exception, provides that no notice is required if the closing is the result of a natural disaster such as a flood, earthquake, drought, or storm.
The above exceptions are very narrowly construed and even where applicable obligate an employer to give as much notice as is practicable and an explanation of the basis for reducing the notification period.
Noncompliance with WARN results in liability to each affected employee. The amount liable to each employee includes back pay and benefits which accrue for a maximum of 60 days during the violation period. If notice is not provided to the appropriate unit of local government, an employer faces civil liability. Civil penalties include an amount of up to $500 for each day in violation, with the maximum penalty being $30,000.
For more information on how to insulate yourself from WARN penalties, please contact Frost Brown Todd's Labor and Employment Department.