June 2009
As the economy continues to struggle, more and more businesses are faced with many hard decisions, especially when the decision is to have a mass layoff or to close an entire division/department. As a result, businesses are looking toward their legal counsel to properly instruct them and walk them through the entire process. This article will give a brief review of the Federal Worker Adjustment and Retraining Notification Act, known as the WARN Act. 29 U.S.C. § 2101 et seq., which requires certain businesses to provide its workers 60 days written notice of the layoff or closure.
With the market rising and falling 300 hundred points in a day, businesses are reevaluating how they can remain competitive. Businesses must understand that federal law and, in some cases, state law or collective bargaining agreements, require businesses to send out notice to its employees if a “mass layoff” or “plant closing” is implemented. Although most employees are at-will where no notice is required, Congress determined that certain layoffs should require notice to the employees, community and local government—enter the WARN Act. The purpose of the Act is to establish a bridge from one job to another, and although unemployment benefits also support this bridge, Congress was very concerned that if a major company in a community started to have financial problems and laid off a majority of its workforce without warning, the community and families would be devastated instantly
Therefore Congress enacted the WARN Act, which requires qualified businesses to provides employees written notice at least 60 calendar days prior to a mass layoff or plant closing. But not all businesses must provide this notice. There are several qualifications and certain exceptions that may or may not trigger the written notice. Private businesses must have over 100 full time workers and lay off at least 50 people at a “single site of employment;” or it employs 100 or more workers who work at least a combined 4,000 hours per week. This is a key provision that triggers the Act, but attorneys must review their state law and perhaps a collective bargaining agreement where different notice requirements may be in place. For example, Illinois enacted its own WARN Act that requires businesses with only 75 employees to send out written notice.
Once a company is covered under the Act, it must begin to evaluate which employees will be affected, and therefore protected, by the layoff or closure. The Act protects the following employees:
- employees who are terminated or laid off for more than 6 months or who have their hours reduced 50% or more in any 6-month period as a result of the plant closing or mass layoff;
- employees who may reasonably be expected to experience an employment loss as a result of a proposed plant closing or mass layoff;
- individuals who are on temporary layoff but have a reasonable expectation of recall; (this includes workers on workers’ compensation, medical, maternity or other leave); and
- part-time workers (however as stated above only full-time employees are counted when determining whether notice needs to be sent but, if so, part-time workers would still get the notice).
Individuals not protected under the Act:
- strikers or workers who have been locked out in a labor dispute;
- workers on a temporary project, business partners, consultants, or contract employees; and
- regular federal, state, and local government employees.
Once a company determines that it falls within the Act and certain employees will be affected by its actions, the company needs to determine if its actions of closing a plant or conducting a mass layoff fall within the Act. A company that is covered under the Act will need to provide notice to those workers when it permanently or temporarily closes business operations that involve at least 50 employees at a single site; the company lays off 500 or more workers at a single site for a 30-day period; or lays off 50-499 workers that constitutes 33% of the workforce at that site; the company believes the layoff will be less than 6 months, but then extends beyond the 6 months; or the company reduces 50 or more worker hours by 50% for each month in a 6 month period.
As the economy becomes more and more vulnerable each day, companies are making the hard decision to terminate its workers and even to shut down entire departments. Attorneys providing advice to a company must review the Act and its many definitions to determine if the company does indeed need to provide the written notice.
- This article is only a brief summary and does not discuss many of the requirements or definitions needed to be reviewed prior to enacting the notice requirement.
- When determining if the Company’s layoff or closure falls within the WARN requirements, attorneys must be aware that certain employees are not counted for WARN purposes – for example: part-time workers and workers who retire or resign are just a few that are not counted toward the 100 worker count.
Questions? Please contact WS Attorney Sean Darke in the firm’s Chicago office at (312) 629-9300, or sedarke@wesselssherman.com.
