Business Owners Beware: Second Round of Federal WARN Act Notices Coming Due

Business Owners Beware: Second Round of Federal WARN Act Notices Coming Due

As employers nationwide continue to grapple with the longstanding impact of the COVID-19 pandemic, a looming obstacle that awaits in early Fall 2020 is an employer’s obligation to provide WARN Act notices to employees who were furloughed or temporarily laid off six months earlier due to business decline from the coronavirus.

The Federal Workforce Adjustment and Retraining Notification (WARN) Act requires covered employers to provide a specific kind of written notice to workers who suffer employment loss due to a plant closure or mass layoff. Generally, this notice musts be provided 60 days in advance to affected employees, their union representatives (if applicable), and certain local government entities, and the notices must contain particular information about the mass layoff or plant closure, as required by the Act. The WARN Act allows for limited exceptions to the 60-day notice rule, including an exception for unforeseeable business circumstances caused by some sudden, dramatic, and unexpected action or condition outside the employer's control; however, even if a covered employer qualifies for an exception under the Act, notice must still be provided as soon as possible.

The federal WARN Act applies to all business enterprises that employ either:

  1. 100 or more full-time employees (i.e. those who have been employed for at least six months and who work an average of at least 20 hours each workweek); or
  2. 100 or more employees (including full-time and part-time employees) who work at least 4,000 hours per week (excluding overtime).

If you qualify as a covered employer under the federal WARN Act, you must determine whether an “employment loss” has occurred due to a plant closure or mass layoff. An employment loss occurs under the Act when an employee:

  1. is terminated, other than a discharge for cause, voluntary departure, or retirement;
  2. laid off for more than six months; or
  3. suffers a reduction in hours of work of more than 50 percent during each month of any six-month period.

As a result, business owners, managers and/or HR should carefully review their employment records going back at least six months to identify which employees have either been: (1) temporarily laid off in Spring 2020 and who have not yet been returned to work (and likely will be permanently laid off); or (2) furloughed, or otherwise working at a significantly reduced schedule for the past six months (likely following business decline from the pandemic). If a portion of your workforce has been impacted by such temporary layoffs, furloughs, or significant reduction in work hours, then you will need to determine if these circumstances result from a “plant closing” or “mass layoff” as defined by the Act.

In this context, plant closing means the permanent or temporary shutdown of a single site of employment, (or one or more facilities within a single site of employment), if the shutdown at the worksite: (1) results in an employment loss; (2) during any 30-day period; (3) for 50 or more employees, excluding any part-time employees. A mass layoff is defined as a reduction in force that: (1) is not the result of a plant closing; and (2) results in an employment loss at the single site of employment during any 30-day period for: (a) at least 50 full-time employees who make up at least 33 percent of employees; or (b) at least 500 full-time employees.

When thinking about the number of employees impacted by a plant closure or mass layoff, employers should also be wary of the 90-day aggregation rule. Under this rule, employers are required to look ahead 90 days and look back 90 days from each employment loss to determine if those losses are related to the plant closing or mass layoff. A series of small layoffs or closing a plant in phases can therefore be viewed collectively and trigger WARN Act notice requirements as if the employment events had occurred simultaneously.

As a result, any business owners covered by the WARN Act who implemented such mass layoffs or plant closings need to be prepared to send out WARN Act notices within six months of the date of “employment loss” as defined by the Act.

Employers who violate the WARN Act’s notice requirements can suffer significant and costly monetary penalties. These penalties may include backpay for the separated employees, reimbursement for the cost of employee benefits following separation, and a daily fine of $500 for each day that a WARN Act violation has occurred. Penalties can also increase depending on whether the impacted workforce is located in a state that has an independent mini-WARN Act, which often covers more employers than their federal counterpart, and has steeper penalties for businesses who fail to comply with state law.

Business owners and managers should be prepared to work with their Human Resources team and/or outside counsel to identify which current or former employees are entitled to notices under the federal WARN Act, as well as any mini-WARN Act that may apply under state law. Employers must also carefully review draft notices to ensure that they contain all information required by the Act, and that the notices are sent to all necessary recipients. Employers or HR personnel with questions about WARN Act notice application and processing should contact experienced employment law counsel for assistance.

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