Alerts

FAQs: WARN Act in the COVID-19 Era

Alerts / August 6, 2020
Q: What is the WARN Act?

A: It is the federal Workers’ Adjustment and Retraining Notification Act, which requires, under certain circumstances, that employees receive 60 days’ advance notice of their termination and that letters be sent to employee representatives, if any, and to certain state agencies and officials.

Q: Under what circumstances do I need to provide advance notice of termination to my employees?

A: The federal WARN Act applies only to employers employing 100 or more full-time employees, and notice is required for:

  1. Plant closings – when a business is permanently or temporarily shut down, resulting in employment loss for at least 50 full-time employees.
  2. Mass layoffs – a reduction in force that is a result of employment loss for 500 full-time employees OR at least 50 full-time employees, if that number of employees comprises at least 33 percent of active employees.
Q: If my business was ordered to shut down because of COVID-19, do I still need to provide notice?

A: Yes, you still are required to provide notice to the employees and other parties. However, if you were ordered to shut down immediately by the government or other unexpected circumstances have caused an immediate need for a plant closing, it may be possible to take advantage of one of the exceptions to the 60-day notice requirement. In that case, certain additional information must be included in the notice and the notice MUST be provided as soon as practicably possible.

Q: If I have to conduct a mass layoff as a result of falling profits because of COVID-19, do I still need to provide notice? What if I cannot provide the full 60 days?

A: Yes, you still are required to provide the notice. As indicated above, employers are permitted an unforeseen business circumstance exception to provide less than the 60 days’ notice when there is an unexpected event that causes a mass layoff or plant closing, but employers should use caution in relying on this exception now that we are several months into the pandemic. We have been provided with months of information related to the pandemic, and it is clear that there is no definite idea of how much longer it will last and that it flares up unpredictably. Note, however, that even with this exception, notice must be provided as soon as practicably possible once it becomes reasonably foreseeable that a layoff or plant closing may be necessary.

Q: What if I lasted this far through the COVID-19 crisis without having to conduct any layoffs or closings but now am forced to shut down my plant due to the toll the crisis has taken on my business? Additionally, the financing I was anticipating to receive from investors to keep the business afloat has fallen through.

A. In addition to potentially being able to use the unforeseen business circumstances exception, the faltering business exception may be available to you if you can show that you attempted to obtain capital; there was a realistic opportunity for you to have received that capital; if the capital had been obtained, it would have been sufficient to keep the business open or at the very least postpone the plant closing for a reasonable period of time; and providing the necessary notice would have made it impossible to obtain the financing. The faltering business exception is applicable only to plant closings, not mass layoffs, and is much more difficult to prove than unforeseen business circumstances.

Q: I likely have to lay off a significant portion of my staff (500 employees), but we are still working with pre-pandemic orders. I need to keep at least some of the staff on until those are finished. Can I avoid providing WARN notices if I make the layoffs in waves – for instance, laying off 100 employees in August, 100 employees in September and 300 employees in October?

A: No. You are not able to avoid notice in this circumstance; although, if the layoff is for demonstrably different reasons, more spacing of a layoff may be possible without triggering the WARN Act. In determining whether notice is required in this scenario, in which all the employment loss is occurring because of a graduated layoff, you are required to look ahead and back 90 days to determine whether the planned and completed employment losses would trigger WARN. Here, when terminating the 100 employees in August, you must look ahead 90 days to October to determine whether your planned layoff, if aggregated, would add up to 500 employees (or at least 50 employees, if that number is one-third of the workforce). In this case, all the terminations would be subject to WARN notice because of the 90-day aggregate rule.

Q: So, every single employment separation is an employment loss for the WARN Act?

A: No. Terminations for cause, voluntary separations and/or retirements do not count as employment losses for WARN purposes. Likewise, layoffs for less than six months also are not considered an employment loss. Importantly, a reduction in work hours of more than 50 percent during each month of a six-month period is also considered an employment loss for WARN purposes.

Q: For how long can I use the unforeseen business circumstances exception for COVID-19?

A: It depends. This is an incredibly fact-intensive argument that the employer will have the burden of proving if it is challenged. It is very likely that plaintiffs’ attorneys will be hyper focused on this being a potential claim for all layoffs that happen from this point forward, so if you set forth the exception, you must be prepared to back it up with documentation and a timeline that shows that the layoff or plant closing was truly caused by some sudden, dramatic and unexpected action/condition outside your control. So at this point, saying that COVID-19 in and of itself was unpredictable is becoming somewhat stale, since most of the consequences related to COVID-19 are things that employers have been aware of and dealing with since at least March of this year. Therefore, it will be important to point to something specific (e.g., a sudden reversal in a state’s COVID-19 recovery plan that restricts your business more than previously, new federal laws or regulations related to COVID-19 that have a specific financial impact on your business).

Q: My company has 10,000 employees across several different work locations. We are about to lay off 1,000 people, but the 1,000 people all will be from different work locations. Do I need to provide notice?

A: It depends. Notice is required only if the minimum number of employees to suffer an employment loss occurs at a “single site of employment,” but single site of employment is a factual determination based upon a number of factors, such as whether the sites are contiguous (and if they are not, their proximity to the other sites), whether they share management or employees, and whether they produce the same products and share equipment.

Q: I plan only to furlough employees at this time. Do I still need to provide a WARN notice?

A: Provided the furlough is anticipated to last less than six months and there is no foreseeable way that the furlough could last longer, then no notice is required. However, as soon as it becomes foreseeable that the furlough may need to last longer than six months, WARN notices should be provided as soon as practicable, and you should be prepared to show why there was a change in plans.

Q: Do I need to be concerned about any state laws related to the WARN Act?

A: Yes. There are several state WARN Acts, referred to has mini-WARNs, and if your business is located in one of those states, you will have to comply with both statutes. Of note, some places, in such as New York, require more notice than the federal WARN – 90 days instead of 60. Likewise, some of the mini-WARNs, again like New York, have lower thresholds to trigger WARN. Be sure to check the applicable state laws before implementing any layoff or plant closing. The following jurisdictions have mini-WARNs or similar laws that require certain notice or payments be made prior to termination in certain circumstances or for certain types of employees: California, Connecticut, Delaware, Georgia, Hawaii, Illinois, Iowa, Kansas, Louisiana, Maryland (as of Oct. 1, 2020), Michigan, Minnesota, New Hampshire, New Jersey, New York, North Dakota, Ohio, Oregon, Philadelphia, Tennessee, Vermont, Washington, D.C., Wisconsin and Wyoming.

Q: Have there been any changes made to WARN or mini-WARNs in light of COVID-19?

A: Yes. Some states (including California and Hawaii) have issued orders relieving employers of some of the mini-WARN requirements, and some (including New Jersey) have created an exception to their requirements if the situation is caused by a national emergency like COVID-19. New York, on the other hand, explicitly stated that COVID-19 did not relieve employers of the requirements of its WARN Act, but employers may be able to use the unforeseeable business circumstances exception.

Q: What should I keep in mind when making termination decisions with respect to WARN?

A: Take it step by step.

First, assess whether you are an employer subject to the WARN Act.

Second, determine whether the layoff or plant closing that you are considering will affect the minimum number of employees to trigger a WARN notice.

Third, consider whether the employees are coming from separate or the same sites – remember, this is a fact-intensive issue that must be carefully reviewed.

Fourth, don’t forget to look ahead and back 90 days to determine whether any planned or completed employment losses, if aggregated, would meet the minimum number of employees to trigger a WARN notice.

Fifth, also remember that if there is a WARN Act event, all other employment losses within 30 days of that event are also considered WARN events and require notice.

Last, don’t forget to consider other potential factors, like mini-WARNs and whether there is a collective bargaining or employment contract that requires more notice or pay during the notice period.

Q: What are some of the common pitfalls that employers encounter when conducting a mass layoff or plant closing?

A:

  1. They do not allow enough time to strategically plan how to conduct a layoff that might otherwise avoid the need to provide a WARN notice.
  2. They need to find ways to keep workers motivated during the notice period.
  3. They fail to realize that providing the notice is far less expensive than not providing the notice.
  4. They might not know that potential WARN damages could include medical costs of the laid-off employees.
  5. They need to structure their notices to the state and local governments with messaging in mind, as these become public documents.
  6. It is difficult to make adjustments to a WARN notice after it is given, so being able to formulate a plan the company can stick to is important.
  7. They forget to involve their friendly neighborhood employment lawyer in the process – we can help with thoughtful solutions!

Authorship Credit: Marc Antonetti and Amanda Van Hoose Garofalo

Baker & Hostetler LLP publications are intended to inform our clients and other friends of the firm about current legal developments of general interest. They should not be construed as legal advice, and readers should not act upon the information contained in these publications without professional counsel. The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask us to send you written information about our qualifications and experience.

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