Employers’ Obligations Under the WARN Act in Light of COVID-19
In 1988, Congress passed the Worker Adjustment and Retraining Notification (WARN) Act to provide workers with time to prepare for the transition between the jobs they currently hold and new jobs when large employers are going to shut down their facilities or perform mass layoffs. As companies have been forced to shut their doors and lay off employees in response to the COVID-19 pandemic, employers have been forced to analyze their obligations under the WARN Act. The uncertainty regarding how long social distancing measures will remain in place and how long employers might have to close their plants creates a number of complex issues involving the WARN Act. This article is intended to help employers navigate some of these difficult legal questions over the coming months.
The WARN Act requires “covered employers” to provide employees at least 60 days of advance notice of a 1) mass layoff or 2) plant closing.
A business is considered a “covered employer” if it has 100 or more full-time workers (not counting workers who have less than 6 months on the job and workers who work fewer than 20 hours per week), or employs 100 or more workers who work at least a combined 4,000 hours per week, and is a private for-profit business, private non-profit organization, or quasi-public entity separately organized from regular government. Small and mid-sized employers are generally not considered “covered employers” under the WARN Act, and are not subject to the WARN Act obligations covered in this article.
A “mass layoff” is when a covered employer reduces its workforce but does not close its plant, and the reduction causes employment loss at a single site during any 30-day period for (a) at least 33% of the employees and at least 50 employees (excluding part-time employees) or (b) at least 500 employees, excluding part-time employees.
A “plant closing” means the permanent or temporary shutdown of a single site of employment if the shutdown causes 50 or more full time employees at a single site to lose their jobs during any thirty day period. It is important to note that closing one or more facilities or operating units within a single site of employment counts as a “plant closing,” even if other portions of the plant remain open, as long as the termination thresholds and other criteria mentioned in the preceding sentence are met. A “temporary shutdown” triggers the notice requirement only if there is a sufficient number of terminations, layoffs exceeding six months, or reductions in hours of work as specified under the definition of “employment loss.”
An “employment loss” occurs when there is (a) an employment termination, other than a discharge for cause, voluntary departure, or retirement, (b) a layoff exceeding six months, or (c) a reduction in hours of work of more than 50% during each month of any six-month period. It is important to note that an employment loss does not occur when an employee is reassigned or transferred, as long as the reassignment does not constitute a constructive discharge or other involuntary termination. There is no employment loss under WARN if a closing or layoff is the result of a business relocation or consolidation and, prior to the closing or layoff, the employer either offers (a) to transfer the employee to another facility, if the job is within reasonable commuting distance or (b) to transfer the employee to another site, regardless of distance, and the employee accepts within 30 days of the offer or the closing or layoff, whichever is later.
While the above analysis demonstrates how many employers might have WARN Act obligations if they have been forced to shut down on either a permanent or temporary basis in response to the COVID-19 pandemic, it is important to note that there are a few potential exceptions to the 60 day notice requirement of the WARN Act that could apply to employers. Under the WARN Act, an employer may order a plant closing or mass layoff before the conclusion of the 60-day period if the plant closing or mass layoff is caused by (a) business circumstances that were not reasonably foreseeable as of the time notice would have been required or (b) a natural disaster. An unforeseeable business circumstance is caused by some sudden, dramatic, and unexpected action or condition outside the employer’s control. Natural disasters are events like earthquakes, floods, droughts, tidal waves, storms or similar weather events. If you are an employer relying on the unforeseen business or natural disaster exception in the WARN Act, you must still give as much notice as possible and must give a brief statement of the basis for reducing the notice period.
As is likely apparent, the COVID-19 pandemic and fallout stemming therefrom were largely unforeseen until approximately a month ago. Therefore, many employers who are subject to the WARN Act possibly would be able to claim an exception that could provide relief if they were not able to strictly abide by the requirements that the WARN Act would impose on them under normal business conditions.
As with all complex legal matters, employers should consult with legal counsel in the appropriate legal field any time they are forced to make termination decisions involving their employees. Teague Campbell has an Employment Law team that can help covered employers navigate these difficult WARN Act issues, and we are here to help during these trying times.
This update provides general information and does not provide tailored legal advice or establish an attorney-client relationship.