The WARN Act - Basic, Intermediate, and Advanced Concepts

David Keene, II
July 30, 2008 — 5,959 views  
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Many businesses are feeling the pinch that comes with the current economic downturn.  In response, businesses are increasingly deciding to layoff employees.  As a human resources professional you must be aware of the federal law that places certain obligations upon companies laying off employees, the Worker Adjustment and Retraining Notification Act ("WARN"), 29 U.S.C. sections 2101 et seq. 

The Basics—Number of Employees, Notice Contents, and When Triggered
It is helpful to think of WARN as having three (3) parts.  To trigger WARN, there must be: (1) an employers with 100 or more employees who must (2)  provide at least sixty (60) calendar days written warning because (3) of a "plant closing" or "mass layoff." 

Now let’s take that apart and examine in more detail. 
Employees—Employees who have worked less than 6 months in the last 12 months and employees who work an average of less than 20 hours a week do not qualify as “employees” under WARN.  All other employees are in.

WARN has a ninety (90) day look back rule to capture individual events that did not, on their own, trigger the WARN Act, unless the employer can demonstrate that the individual actions arose from entirely separate and distinct causes; that is, those lay offs occurred because of a totally separate and unrelated event.  The aggregation rule requires the WARN notice even where there was no contemplation at the time the individual events occurred that the layoff would trigger WARN.

Employers—Private, for-profit employers and private, nonprofit employers are covered, as are public and quasi-public entities which operate in a commercial context and are separately organized from the regular government. Regular Federal, State, and local government entities which provide public services are not covered.

Notice—A notice is essentially that: notice that a mass layoff of employees is about to occur, and you are a person affected by this layoff.  This written warning must be made to the affected employees, their bargaining representative (if any), the State Dislocated Worker Unit, and the chief elected official of the local government where the plant closing or mass layoff is to occur.

WARN contains specific notice requirements, both in terms of the content of the notice and to whom the notice must be sent.  There are four elements required in the employee notice, which must be written in a language understandable to the employee:

(1) statements of whether the planned action is expected to be permanent or temporary, and whether the entire plant is to be closed;
(2) the expected date when the plant closing or mass layoff will commence and the expected date when the individual employee will be separated;
(3) an indication of whether seniority ("bumping") rights exist; and
(4) the name and telephone number of a company official to contact for further information.

These four bits of data are the minimum amount of information the notice must contain.  An employer may include information regarding dislocated employee assistance, transfer opportunities, severance entitlement, retention bonuses and, if the planned action is expected to be temporary, the estimated duration (if known).  Notice to the State Dislocated Worker Unit and to the chief local elected official have similar—but different—required elements.

Practical points:
• It is my experience that WARN Act notices should be sent registered mail and regular, first class mail to all recipients.  There is no reason to create a case for someone by failing to make it as easy as possible for him to receive the notice.
• If dislocated employee assistance is available, include that in the notice.  Providing information on where the employee can begin to look for their next job can ease the blow of being laid off.
• It is important that you identify the proper elected officials to notify.  Don’t use mailing addresses as your guide; pull out a map and determine exactly where the plant/facility/operating unit is located.  If you are in doubt, send the notice to multiple officials.  There is no such thing as “overnotification” under WARN.  And if you’re worried about the press finding out that your planning a mass layoff based on an extra notice you mail out, you can allay those concerns—the press is going to find out anyway.

Employment loss—An employment loss is one of three things: (1) a layoff of more than six months; (2) a termination (excluding terminations for cause, voluntary terminations, or retirement); or (3) the reduction of work hours of more than fifty percent during each month of any six month period.
Plant closing—A plant closing is an action resulting in an employment loss within a 30 day period for at least 50 or more employees at a single site of employment or one or more facilities or operating units, within a single site of employment.  Facility refers to a building or buildings, while the term operating unit refers to an organizationally or operationally distinct product, operation, or specific work function (such as an organizationally distinct department or operating division) within or nearby facilities at a single site.

Mass layoff—A mass layoff is a layoff at a single site of employment where at least 33% of the workforce and at least 50 employees are laid off for a period of six months or more.

An employer who violates the WARN by failing to provide appropriate notice is liable to each aggrieved employee for an amount including back pay and benefits for the period of violation, up to 60 days. The employer's liability may be reduced by such items as wages paid by the employer to the employee during the period of the violation and voluntary and unconditional payments made by the employer to the employee.

An employer who fails to provide notice as required to a unit of local government is subject to a civil penalty not to exceed $500 for each day of violation. This penalty may be avoided if the employer satisfies the liability to each aggrieved employee within 3 weeks after the closing or layoff is ordered by the employer.

Intermediate Information
Exceptions to the Sixty Day Notice
The three (3) exceptions to 60-day notice requirement are: (1) faltering company; (2) unforeseeable business circumstances, and; (3) natural disaster.

(1) Faltering company.  This narrowly construed exception covers situations where a company has sought new capital or business in order to stay open and where giving notice would ruin the opportunity to get the new capital or business, and applies only to plant closings.  The faltering company exception requires the employer to prove that the employer was actively seeking capital or business which if obtained, would have enabled the employer to avoid or postpone the shutdown and the employer reasonably and in good faith believed that giving the notice required would have precluded the employer from obtaining the needed capital or business. 

(2) Unforeseeable business circumstances. This exception applies to closings and layoffs that are caused by business circumstances that were not reasonably foreseeable at the time notice would otherwise have been required.  The unforeseen circumstances must be some sudden, dramatic and unexpected action or condition outside the employer's control, such as a principal client's sudden and unexpected termination of a major contract, a strike in a major supplier, an unanticipated and dramatic major economic downturn, or a government ordered closing of an employment site that occurs without prior notice.  The test for determining when business circumstances are reasonably foreseeable states that “the employer must exercise such commercially reasonable business judgment as with similarly situated employers in predicting the demands of its particular market.”

(3) Natural disaster. This applies where a closing or layoff is the direct result of a natural disaster, such as a flood, earthquake, drought or storm.  The hurricane that recently struck Texas is a perfect example of the kind of event that might trigger this exception.

If an employer provides less than 60 days advance notice of a closing or layoff by relying on one of these three exceptions, the employer bears the burden of proof that the conditions for the exception have been met. The employer also must give as much notice as is practicable. When the notices are given, they must include a brief statement of the reason for reducing the notice period in addition to the items required in notices.
Sale of Businesses

In a situation involving the sale of part or all of a business, several specific rules apply.

• There is always an employer responsible for giving notice.  The two or more businesses cannot engage in a WARN-triggering transaction and slough off their duties by pointing fingers at the other party to the transaction.
• No “special notice” is required.  If the sale by a covered employer results in a covered plant closing or mass layoff, the required parties must receive at least 60 days notice.
• The seller is responsible for providing notice of any covered plant closing or mass layoff which occurs up to and including the date/time of the sale.  The buyer is responsible for providing notice of any covered plant closing or mass layoff which occurs after the date/time of the sale.  This is very rational.
• Obviously, just because a sale occurs does not mean WARN is automatically triggered.  You must complete the entire analysis to determine whether any WARN liability exists in the first place.
• Employees of the seller on the date/time of the sale become, for purposes of WARN, employees of the buyer immediately following the sale. This provision preserves the notice rights of the employees of a business that has been sold.
Temporary facility—An employer does not need to give notice if a plant closing is the closing of a temporary facility, or if the closing or mass layoff is the result of the completion of a particular project or undertaking. This exemption applies only if the workers were hired with the understanding that their employment was limited to the duration of the facility, project or undertaking. An employer cannot label an ongoing project "temporary" in order to evade its obligations under WARN.

Practical point:  When hiring persons for a limited duration undertaking, make this perfectly clear in writing.  You want to avoid having a court making a credibility determination regarding your intent to operate a short term facility versus the employees’ expectations.

Strikers—An employer does not need to provide notice to strikers or to workers who are part of the bargaining unit(s) which are involved in the labor negotiations that led to a lockout when the strike or lockout is equivalent to a plant closing or mass layoff.  Non-striking employees who experience an employment loss as a direct or indirect result of a strike and workers who are not part of the bargaining unit(s) which are involved in the labor negotiations that led to a lockout are still entitled to notice.
An employer does not need to give notice when permanently replacing a person who is an "economic striker" as defined under the National Labor Relations Act.

Advanced Knowledge

Multiple Worksites

Corporate transactions involving multiple locations and/or employees who regularly travel or regularly work outside of a fixed office can present complicated issues under WARN.  Identifying who works at a given "site of employment" can be critical to determining whether a WARN notice is required.  A recent decision, Meson v. GATX Technology Services Corp., 507 F.3d 803 (4th Cir. 2007), highlights this problem. 

In Meson, an employee terminated in connection with an asset sale claimed that she should have received a WARN notice. The employee had worked in Virginia; however, the employee asserted that the company’s Florida, headquarters was her site of employment for purposes of the WARN Act because she traveled significantly and reported to the Florida office.

The employee relied on an regulation implementing WARN that states that for employees who are required to travel or who work at multiple sites, the single site of employment to which they are assigned as their home base, from which their work is assigned, or to which they report will be the single site in which they are covered under WARN.  The Fourth Circuit rejected the employee's claim, finding that her Virginia office was her site of employment. The court reasoned that the regulation applies only to truly mobile workers who have no regular, fixed place of work. Therefore, according to the court, because the employee had a fixed place of work, the fact that she traveled substantially and reported to another office did not bring her within the scope of the regulation.

Closing Up Shop
Many times I have been asked, “What if just want to shut the plant down?  I’ll pay my employees wages and benefits for 60 days, but I don’t need them working anymore.  Will I get slammed under WARN?”  The answer to that is yes you can shut down, and no, you won’t be slammed.

The purpose of WARN is to provide notice and pay while undergoing an employment transition; it is not a “make work” statue.  A perfect example of this is a case out of South Carolina, Long v. Dunlop Sports Group Ams., Inc., 506 F.3d 299 (4th Cir. 2007).  In Long, the employer shut down a facility, provided adequate notice, told employees not to report to work, and continued to provide pay and benefits during the next 60 days to all but 22 of the plant's 350 employees.  The notice stated that displaced employees would receive pay and benefits for 60 days, unless they took a job with the plant’s purchaser, at which point pay and benefits would end.

During the 60 day period, 22 employees were hired by the purchasing company, at which point the former employer stopped providing wages and benefits to them. Those 22 employees unsuccessfully sued the former employer for the remainder of their money and benefits as required under WARN.

The employees lost at both the trial and appeals courts.  In both instances, the courts found that the employees had not experienced job losses on the date they received the WARN notices because they kept receiving pay and benefits.  The job loss occurred at the end of those benefits.  The courts’ decisions here place the emphasis on an employee’s right to receive notice and compensation, not actual work to perform, which is the underlying purpose of the WARN Act.  The Fourth Circuit added that nothing in the WARN Act suggests Congress sought to protect an individual's ability to continue performing work during the 60-day notice period.

WARN is a complex statute with which to deal.  The basic elements of a WARN analysis can be easily performed.  When more complex issues arise, such as you find yourself facing an unforeseeable business circumstances, I recommend that you consult an experienced labor attorney for guidance.

David Keene, II


David Keene, an associate in Baker Donelson's Tri-Cities office, concentrates his practice in the area of labor and employment law. Mr. Keene has experience in a multitude of labor and employment areas including negotiating collective bargaining agreements for both private and public sector employers; representing employers in grievance and issue arbitrations; representing employers in all matters, including elections and unfair labor practices, before the National Labor Relations Board and state labor boards; helping clients maintain union-free workforces; handling unemployment claims from initial applications for benefits through court appeals; counseling clients on a multitude of federal employment laws, including the ADA, FMLA, ADEA, and FLSA; litigating employment discrimination claims; and representing individuals against unions. Mr. Keene has been published in The Labor Lawyer, Labor Law Journal, and numerous other publications, and has taught seminars on a wide variety of labor and employment topics.