What is the Federal WARN Act and Does it Apply to Your Business?

The federal Worker Adjustment and Retraining Notification Act (WARN) took effect in 1989 to protect workers, their families and communities by ensuring workers receive advance notice about qualified plant closings and mass layoffs. With sufficient notice, workers can better plan for and adjust to a loss of employment, and communities are better able to cope with large-scale job loss. The legislation provides workers time to search for new employment or enroll in workforce training.

This article provides a general overview of what employers should know about the WARN Act and is not exhaustive. An employer’s failure to comply with the act can result in significant legal and financial consequences, such as civil penalties, back pay and attorneys’ fees. Due to the WARN Act’s complexities, employers are encouraged to seek legal counsel to discuss any specific issues and concerns. Employers can also reference the U.S. Department of Labor’s guide and assistance website for resources to help them comply with the WARN Act’s requirements.

What Is the Federal WARN Act?

The WARN Act protects workers, their families and communities by requiring employers to provide written notice at least 60 calendar days in advance of covered plant closings and mass layoffs that result in employment loss to a specified number of employees. Employers need to provide written notice to affected workers or their representatives—such as labor unions—the state’s dislocated worker unit and the appropriate unit of local government. If notice is not provided or is improper, employers can be liable for up to 60 days of back pay and benefits in addition to civil penalties and attorneys’ fees.

Which Employers Are Covered?

Employers are generally required to comply with the WARN Act if they have 100 or more employees. Employers meet the 100-employee threshold with at least 100 full-time employees or 100 full- or part-time employees who work at least a combined 4,000 hours per week, excluding overtime hours. Employees who have been employed less than six months in the last 12 months or individuals who work fewer than 20 hours per week are not counted when determining whether an employer is covered by the law. Part-time employees are not counted for determining the applicability of the WARN Act, except by aggregating their hours, as explained above. Temporary and, in some cases, seasonal workers are counted to determine whether employers are covered.

Private employers – both for-profit and nonprofit – are covered by the law. Public and “quasi-public” entities that engage in business and are separately organized from the regular government are also covered. Regular federal, state, and local government entities that provide public services are not covered by the WARN Act.

When Does the WARN Act Apply?

The WARN Act applies when an employment loss affects the required number of employees. The term “employment loss” means one of the following:

• An employment termination, other than a discharge for cause, voluntary departure, or retirement
• A layoff exceeding six months
• A reduction in an employee’s hours of more than 50% during each month of any six-month period

Employees who volunteer for layoff or early retirement are not considered to have been involuntary terminated and do not count for purposes of employment loss numbers. In most circumstances, accepting a reassignment or transfer or declining a reassignment or transfer within reasonable commuting distance from home also are not considered involuntary termination.

What Triggers Notice Under the Federal WARN Act?

Covered employers must provide at least a 60-day written notice when covered plant closing and mass layoffs result in employment loss to the requisite number of employees. Employer requirements differ depending on the event triggering notice, including the following:

Plant closing

A covered employer must give notice if an employment site (or one or more facilities or operating units within an employment site) is shutting down. The shutdown will result in an employment loss for 50 or more employees during any 30-day period.

Mass layoff

A covered employer must provide notice if there will 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 50 to 499 employees if they make up at least 33 percent of the employer’s active workforce.

An employer also must give notice if the number of employment losses that occur during a 30-day period fails to meet the threshold requirements of a plant closing or mass layoff, but the number of employment losses for two or more groups of workers, each of which is less than the minimum number needed to trigger notice requirements, reaches the threshold level during any 90-day period of either a plant closing or mass layoff. Employment losses within any 90-day period will count toward the WARN Act’s threshold levels unless an employer demonstrates that the employment losses during those 90 days are the result of separate and distinct actions and causes and not an attempt to evade its obligations under the WARN Act.

Covered employers do not need to provide 60-day advance notice before a plant closing or mass layoff when one of the following circumstances apply:

• Faltering company
• Unforeseeable business circumstances
• Natural disaster

Notices must be in writing and contain specific information, which varies depending on the recipient. When the individual employment loss for a plant closing or mass layoff occurs on more than one day, the notices are due to the affected employees and their representatives, state dislocated worker units, and local government entities at least 60 days before each loss.

Which Employees Are Covered?

Hourly and salaried workers are entitled to notice under the WARN Act, including managerial and supervisory employees. Although part-time employees are not counted to determine whether the WARN Act applies to employers, if these employees experience an employment loss, they are entitled to notice as well. On the other hand, temporary employees are counted to determine whether the act covers employers, but they are not entitled to receive notice even if they experience an employment loss. Business partners are also generally not entitled to receive a notification.

When determining whether a plant closing or mass layoff triggers an employer’s notice obligations under the WARN Act, the number of employees experiencing an employment loss must be counted. This is different than when counting employees for the purpose of determining whether an employer is covered by the WARN Act. The number of employees is generally determined at the same time the notice of the layoff or plant closing would be due unless that number is not representative of the normal level of employees.

What Are the Penalties for Violating the WARN Act?

An employer who violates the WARN Act by failing to provide sufficient notice is liable to each affected employee for back pay and benefits for the period of the violation, up to 60 days. An employer’s back pay liability may be offset by wages or benefits paid to employees during the period of violation and by voluntary and unconditional payments made to employees that are not required by law.

An employer who fails to provide notice to governmental entities can be subject to civil penalties of up to $500 per day. An employer may avoid these penalties if it satisfies the liability of each affected employee – meaning back pay and benefits – within three weeks after the plant closing or mass layoff. An employer may also be required to pay attorneys’ fees for its violations.

What Is a Mini-WARN Act?

Many states and even some cities have laws similar to the WARN Act that cover smaller employers and layoff groups. While these so-called “mini-WARN Acts” build on federal law, they can vary significantly from the WARN Act. Employers need to be familiar with these laws to avoid violations and penalties during a plant closing or layoff.

NOTE: New York has its own WARN Act

Summary

The WARN Act’s requirements are complicated and can be confusing. In addition to understanding and following federal law, employers may need to comply with state and city mini-WARN Act requirements. Employers who fail to adhere to these requirements do so at their peril, as penalties can be significant. Mishandling a plant closure or mass layoffs can not only lead to federal and state law violations but also may harm an organization’s brand with current and potential employees, customers, and the community.

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