What Is the WARN Act?

Layoffs, that had been unheard of for many years, are making headlines. The mortgage industry has laid off thousands of workers and tech companies, that were immune to staff reductions, have also terminated the employment of thousands of employees.

But, unless an exception applies, employers must comply with federal and state laws on layoffs that require advance notice. One of the most important compliance requirements is the Worker Adjustment and Retraining Notification Act of 1988 (WARN Act). It’s the federal law that applies to layoffs.

The WARN Act requires that certain employers provide written notice of massive layoffs or factory closings to employees and government regulators 60 calendar days before the terminations occur.

What is the purpose of the WARN Act?

The WARN Act is aimed at protecting workers from the impact of an unexpected loss of employment. By providing advance notice of layoffs, workers have time to minimize the disruption caused by loss of employment.

Providing notice to government regulators as required by the law provides officials with an opportunity to make employees aware of local resources that will help workers to regain employment.

The federal law defines loss of employment as:

• Layoff that lasts for more than 6 months
• Working hours reduced by 50% in 6 months
• Employment termination

History of the law

The WARN Act was passed by Congressional Democrats in 1988. President Ronald Reagan did not sign the legislation. However, it went into effect without his signature in 1989.

Covered employers

Companies with more than 100 full-time employees must comply. The employment tally does not include workers who have been with the company less than 6 months or workers with 20 or fewer hours a week.

Governmental employers such as local, state, federal and tribal organizations are not subject to the WARN Act.

Covered event

The WARN Act requires covered employers to give employees 60-days’ notice when these conditions apply:

• Plant closings result in at least 50 employees being terminated
• Massive layoffs of at least 50 workers where the loss of jobs is at least 33% of the people at the work site
• Massive layoffs that result in a loss of 500 or more jobs at one site

Exceptions

Employers are not required to provide advance notice in certain instances such as:

• Unforeseeable business circumstances
• Faltering company. Issuing a WARN notice would ruin a company’s opportunities for obtaining new financing.
• A natural disaster has caused the business to close or resort to layoffs

However, even when the exceptions are applicable, notice must be provided as soon as possible. The employer must also provide the reason for the lack of advance notice.

Which employees must get layoff notices?

Employers must send notices to employees who are affected by the layoffs.

If the workplace has a seniority system that involves “bumping rights,” then the employer is only required to use its “best efforts” to supply notice to the workers who will actually lose their jobs.

Employees who do not have to receive layoff notices:

• Employees who have been with the company for less than 6 months are not included
• Contract and temporary employees that work for the company through an employment agency
• Workers located at the company’s foreign offices and facilities
• Part-time workers (those who work 20 hours a week or less)
• Workers out on strike or those who have been locked out of the business because of a labor dispute
• Self-employed

Notices

In addition to affected employees, notices also must be provided to:

• The employees’ bargaining representative at the union
• State agency responsible for providing services, such as career counseling and training, to displaced workers after a massive layoff or closing
• Chief elected official of a local government within the community where the layoffs or closing will take place. For example, the mayor of the community would be a chief elected official.

Information required in notices

Certain information must be provided with each written notice. The WARN Act requires:

• A description of the planned action
• A statement as to whether the planned action is permanent or temporary
• The expected date or dates when layoffs will begin
• Contact information, including name and telephone number of a company official, who can be reached for more information

How should WARN Act notices be delivered to employees?

Verbal notice is not enough. A pre-printed notice in each employee’s pay envelope is not enough. The notice must be written. Employers must use any “reasonable method” designed to make sure that notice is received at least 60 days before employment termination.

WARN Act waivers

Employers may ask employees to sign a document waiving their rights to make claims against the company. However, to be legally valid under the WARN Act and other employment laws, something of value such as extended health benefits or additional pay must be offered in exchange for the right to have claims against the company extinguished.

Pay instead of advance notice

It’s been reported that the new owner of a high-profile social media company did not provide advance notice of massive layoffs but offered 60 days of severance pay. Sixty days of severance pay can help employers avoid liability.

Neither the WARN Act nor the accompanying regulations recognize the concept of “pay in lieu of notice,” according to agency guidance by the U.S. Department of Labor. Lack of notice “does a significant disservice to workers and undermines other services that are part of the purpose of the WARN Act,” the DOL has noted.

However, full payment to workers for 60 days effectively eliminates relief under the federal law because the maximum employer liability under the WARN Act, including back pay and benefits, is 60 days, according to the agency guidance.

Termination date

The date of employment termination does not have to be exact. WARN Act regulations allow employers to identify a 14-day period during which the layoffs are expected to occur.

Penalties and enforcement

Employers who violate the WARN Act may be liable for:

• Employees’ back pay and benefits for the violation period
• Civil penalties up to $500 for each day that local government is not notified

Penalties are not assessed if employers compensate employees within 3 weeks of plant closure or layoff.

WARN Act violations are handled through the federal courts and not via the Labor Department.

State and city WARN Act laws

Several states, such as California and New York and one city, Philadelphia, have their own WARN Act requirements. Those requirements might be stricter than the federal laws.

For example, New York’s WARN Act applies to businesses with 50 more employees and requires 90 days of notice from an employer. California also has a WARN Act. The Golden State law requires 60 days of notice of massive layoffs. It applies to California employers with 75 or more employees.

Several states, such as California and New York and one city, Philadelphia, have their own WARN Act requirements. Those requirements might be stricter than the federal laws.

If another law or agreement provides for a longer notice period, WARN notice runs at the same time as the additional notice period mandated by state law.

Check to see if federal, state, and local laws are applicable

Some employers seem to be unaware that there are laws regarding layoffs that must be followed. Employers should first check to see if federal, state, and local laws are applicable, starting with the required employee tally and whether exclusions provide some relief from compliance.

If the laws are relevant to their situation, then employers should become familiar with the legal mandates if they are contemplating terminating the employment of a large number of employees.