What is the WARN Act and what do employers need to know about it?

What is the WARN Act?

Within defined circumstances, the WARN Act requires that workers receive an advance notice of 60 calendar days of a plant closing or mass layoff, meant to cushion the blow of employment loss to workers, their families, and their communities. Imagine, if you will, a major technology company closing one of its divisions and leaving thousands of workers without jobs. Such a development would be difficult for the industry and local community to absorb. The hope is that this two-month period is enough for workers to apply for and obtain unemployment insurance and look for new jobs, and for local government agencies to prepare and implement strategies to help.

Lastly, the term “plant closing” bears some interpretation. The site in question does not have to be a manufacturing plant or factory, as the term might suggest. Rather, it must only be a single site of employment, which the DOL defines as “a single location or a group of contiguous locations. Groups of structures that form a campus or industrial park or separate facilities across the street from one another may be considered a single site of employment.”

In other words, a warehouse and office building belonging to the same employer near each other could be considered a single site of employment; two warehouses in separate states could not.  This distinction is important to note for companies that may wrongly think the WARN Act does not apply to them because they do not have “plants,” per se. Plant closings are interpreted more liberally than one might initially think.

U.S. district courts enforce the Act. It is a federal law, but 18 states have enacted their individual “mini-WARN Acts.” These states include California, Connecticut, Hawaii, Illinois, Iowa, Kansas, Maine, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, New York, Oregon, Rhode Island, South Carolina, Tennessee, and Wisconsin. Their state laws go further than the federal WARN Act by extending the notice period and applying it to employers with small numbers of employees. For example, New York has a mini-WARN Act that requires 90 days’ notice — instead of 60 days — and applies to any private business with more than 50 employees if the layoff will affect 25 or more employees.

Now that we know what the Act is, let’s look at who it covers.

Who does the WARN Act cover?

The WARN Act covers full-time employees at work sites with an active workforce over a certain size. In most circumstances, covered employers are those that employ 100 or more full-time workers or have 100 or more employees — including part-time employees — if they collectively work at least 4,000 hours per week, exclusive of overtime.

The Act applies only to for-profit and private, non-profit businesses. It does not cover regular state, local, federal, and federally-recognized Indian Tribal government entities that provide public services.

Workers entitled to 60 days’ notice under the Act include:

• Managers and supervisors
• Hourly workers
• Salaried workers
• Employees’ representatives, such as union officials
• At-will employees, because the Act functions as an exception to the at-will employment doctrine, which is the default employment arrangement in most states

Equally important is who is not covered by the WARN Act. Those workers include:

• Employees who have worked less than six months in the last 12 months
• Workers who perform, on average, less than 20 hours of work a week
• Workers who are on strike or those affected by a lockout as part of a labor dispute
• Temporary workers who do not have a reasonable belief that the work was anything but temporary
• Contractors, consultants, or other workers who may work at a given site but have an independent business relationship with the company

Workers are not the only ones who are required to receive notice. In the event of a plant closing or mass layoff, a company must also notify:

• The local chief elected official — for example, the mayor of a small town
• The state dislocated worker unit

Lastly, employee protections under the WARN Act apply to those who incur an employment loss, meaning the permanent loss of a job. An employment loss is:

• Employment termination that is not a discharge for cause, a voluntary departure, or a retirement
• A layoff exceeding six months — so, a furlough, or temporary layoff without pay, would not activate the Act if it lasts less than six months
• A reduction in work hours of more than 50% each month during a six-month period

Now that we understand what the Act is and whom it covers, let’s look more closely at what it requires.

What are the WARN Act requirements?

For the WARN Act to apply, an employer must be over a certain size, and the mass layoff or plant closure that would trigger a warning must be permanent and confined to a single employment site. Let’s unpack these terms a little more.

The Act defines a mass layoff as one in which:

• At least 500 employees lose their jobs in a 30-day period at a single employment site
• Atleast 50 employees are laid off if those 50 employees make up at least one-third of the workforce
• At least one-third of the full-time workforce is laid off in a 30-day period

If any of these requirements apply, the employer is generally obligated to provide affected employees with a 60-day advance notice of the impending layoffs.

The WARN notice provided to affected workers must:

• Be written in “clear and specific language that employees can easily understand,” as the Department of Labor puts it
• Contain indication as to whether the planned action — that is, closure — is expected to be temporary or permanent
• Include the anticipated date of the pending closure or mass layoff
• Contain the name and telephone number of a company official who can provide further information
• Be a reasonable method of delivery, usually interpreted as first-class mail, hand delivery with a signature required, or inclusion in a pay envelope

Now that we’ve explored what the WARN Act is and when it applies, it’s time to factor in the exceptions.

Exceptions to the WARN Act

The WARN Act allows for three exceptions that include layoffs due to unforeseeable business circumstances, faltering companies, and natural disasters:

• Unforeseeable business circumstances. The Department of Labor defines an unforeseeable business circumstance as one “that is caused by some sudden, dramatic, and unexpected action or conditions outside the employer's control, like the unexpected cancellation of a major order” and is not reasonably foreseeable when the 60 days’ notice would have been required.
• Faltering companies. If a company is actively seeking to raise capital or otherwise drum up business and reasonably — and in good faith — believes that a WARN Act notice would hinder such efforts, an employer can delay or avoid the notice if that capital or new business would allow the employer to sidestep the shutdown that would ordinarily trigger the notice.
• Natural disasters. An employer may give notice after the fact if a plant closing or company mass layoff results from a natural disaster like a flood or tornado destroying a factory. This exception is rarely used.

It's important to note that while these exceptions may allow for less than 60 days' notice, they do not eliminate the requirement to give notice entirely. When seeking an exception to the WARN Act’s 60-day notice requirement, a covered employer is still obligated to provide as much notice to employees, employees’ representatives, and local government bodies as possible. The employer must also include a brief statement of the reason for giving less than 60 days’ notice, along with the other required elements.

What are the penalties for violating the WARN Act?

The penalties for violating the WARN Act include civil penalties, damages, and attorney’s fees:

• Civil penalties. An employer that does not provide required notice to a local unit of government is subject to a civil penalty of up to $500 for each day of violation. Employers can avoid this penalty if they pay affected employees within three weeks of the plant closing or mass layoff. 
• Damages. An employer who violates the WARN Act is liable to every affected employee for back pay and benefits for the period it was in violation, up to 60 days.
• Attorney's fees. If a lawsuit arises from the plant closing or mass layoff, the prevailing party may be awarded reasonable attorneys’ fees.

What are WARN Act best practices for employers?

The primary employer best practice for WARN Act compliance is not to assume it does not apply. That could be a very costly assumption! Such an oversight could result in substantial financial penalties, a tarnished reputation, and increased scrutiny.

Three things are paramount to protect your company when a mass layoff or plant closure is on the horizon:

1. Determine whether your incident meets the threshold. For example, do you employ 100 or more employees, and is there a pending plant closure or mass layoff affecting 50 or more of those employees at a single work site? Then, the WARN Act likely applies. Remember that plant closure and closing are more broadly interpreted than you might think. Don’t forget there may be state mini-WARN Acts to comply with, too.
2. Provide timely, adequate notice. If you have determined the Act applies to your situation, give affected employees, their representatives, and the local government and state dislocated worker unit 60 days’ notice. Ensure you do so via one of the methods considered to be reasonable, like first-class mail, hand delivery, or inclusion in a pay envelope.
3. Document your process. Documentation is almost always a good idea. The more you document the factor leading to the layoff or plant closure — and the more you document the actions you took to comply with the Act — the more likely you will be able to defend yourself if your actions are challenged.

If a mass layoff or plant closure is in your future, an excellent first step is to consult with legal counsel. While not a substitute for legal counsel, the Practical Law Reduction in Force Toolkit or Employee Termination Procedural Checklist can help you inform yourself. Try Practical Law for free today.