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September 14, 2007

Q: I'm in charge of a factory that has been around for more than 20 years. Business has been declining for the last six months, and I'm afraid that we're going to have to lay off some of our employees. What must I do before announcing the layoffs?

A: Under the federal Worker Adjustment and Retraining Notification Act (WARN) law, employers are required to notify the government of anticipated plant closings and layoffs. WARN was designed to protect workers, their families, and communities by requiring employers to provide notice 60 days before certain plant closings and mass layoffs. The notice must be provided to affected workers or their representatives (e.g., a labor union), to the state's dislocated worker unit, and to the appropriate unit of local government. A number of states also have WARN Act layoff notice laws that may be stricter than the federal law and apply to smaller employers.

State-by-state comparison of 50 employment laws in all 50 states including plant closings, health insurance continuation, unemployment compensation, and employment at will

Who's covered?
In general, an employer is covered by the WARN Act if it has 100 or more employees, not counting people who have worked less than six months in the last year or employees who work fewer than 20 hours a week on average (irregular employees).

Private for-profit employers and private nonprofit employers are covered. So are public and quasipublic entities that operate in a commercial context and are separately organized from the regular government. Regular federal, state, and local government employers that provide public services aren't covered.

Exempt and non-exempt workers and managerial and supervisory employees are all entitled to layoff notice under WARN. Business partners aren't.

What triggers notice?
Plant closing. A covered employer must give layoff notice if an employment site (or one or more facilities or operating units within an employment site) will be shut down and if the shutdown will result in job loss for 50 or more employees during any 30-day period. That doesn't count irregular employees, although they're entitled to notice.

Mass layoff. A covered employer must give notice if it's planning a mass layoff that doesn't result from a plant closing but will cause a job loss for 500 or more employees at the work site during any 30-day period or for 50 to 499 employees if they make up at least 33 percent of the employer's active workforce. Again, that doesn't count irregular employees.

An emploeyr also must give layoff notice if the number of job losses for two or more groups of workers, each of which is less than the minimum number needed to trigger notice, reaches the threshold level of either a plant closing or mass layoff during any 90-day period. Job losses within any 90-day period will count together toward WARN Act threshold levels unless they're caused by separate and distinct actions.

Sale of business. When a mass layoff or plant closing occurs because part or all of a business has been sold, the following rules apply:

  • There's always an employer responsible for giving layoff notice.
  • If the sale of a covered employer results in a plant closing or mass layoff under the WARN Act, the affected parties must receive at least 60 days' notice.
  • The seller is responsible for providing notice of any covered plant closing or mass layoff 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 that occurs after the date/time of the sale.
  • For purposes of the WARN Act, the seller's employees as of the date and time of the sale (other than employees who have worked less than six months during the previous year or who work fewer than 20 hours a week on average) become employees of the buyer immediately following the sale.

An employer doesn't have to give layoff notice if a plant closing affects a temporary facility or if the closing or mass layoff occurs because a particular project or undertaking is completed. That 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 can't label an ongoing project "temporary" to evade its WARN Act obligations.

Businesses don't have to provide layoff notice to strikers or workers who are part of the bargaining units 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 lose their jobs because of a strike and workers who aren't part of the bargaining units involved in the labor negotiations that led to a lockout are still entitled to layoff notice.

HR Guide to Employment Law: A practical compliance reference manual covering 14 topics, including discrimination and issues related to reductions in force

Who must receive notice
Employers must give written notice to the chief elected officer of the affected employees' exclusive representative or bargaining agency and to unrepresented individual workers who may reasonably be expected to experience an employment loss. Irregular employees are also entitled to layoff notice even though they aren't counted when determining the trigger levels.

In addition, an employer must provide layoff notice to the state dislocated worker unit and the chief elected official of the unit of local government where the work site is located.

Notification period
With three exceptions, a business' layoff notice must be timed to reach the affected parties at least 60 days before a closing or layoff.

When job losses occur on more than one day, the notices should be provided to employee representatives, the chief elected official of the unit of local government where the work site is located, and the local government at least 60 days before each closing or mass layoff. If the workers aren't represented, each worker's layoff notice is due at least 60 days before he loses his job. The three exceptions are:

  1. Faltering company. This exception covers situations in which a company has sought new capital or business to stay open and giving notice would ruin its opportunity to get the new capital or business. It applies only to plant closings.
  2. Unforeseeable business circumstances. This exception applies to closings and layoffs caused by business circumstances that weren't reasonably foreseeable at the time notice would otherwise have been required.
  3. Natural disaster. This exception applies when a closing or layoff is the direct result of a natural disaster like a flood, earthquake, drought, or storm.

If an employer relies on one of the three exceptions to provide less than 60 days' advance notice of a closing or layoff, it bears the burden of proving that it had met the conditions for the exception. The business also must give as much layoff notice as possible. In addition to the other required information, the notices must include a brief statement about why the notice period was reduced.

Form and content of notice
No particular form is required, but all layoff notices must be specific and in writing. Any reasonable method of delivery designed to ensure receipt 60 days before a closing or layoff is acceptable. Notice may be given conditionally upon the occurrence of an event only when the event is definite and its occurrence will result in a covered employment action in less than 60 days.

An employer that violates the WARN Act by not providing appropriate notice is liable to each affected employee for back pay and benefits for the period of violation, up to 60 days. Liability may be reduced by wages the employer paid the employee during the period of the violation and by voluntary and unconditional payments made to the employee.

An employer that fails to provide required notice to a unit of local government is subject to a maximum $500 penalty for each day of the violation. The penalty may be avoided if the business satisfies its liability to each affected employee within three weeks after it orders the closing or layoff.

Audit your layoff and reduction in force policies and practices with the Employment Practices Self-Audit Workbook

Bottom line
The federal WARN Act was designed to provide employees who lose their jobs because of layoffs or plant closures with enough time to make financial arrangements or find other work. The layoff notice requirements are fairly minimal, especially since employers covered by the WARN Act probably already have established ties to the entities that must be notified.

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Copyright 2007 M. Lee Smith Publishers LLC. This article is an excerpt from ARKANSAS EMPLOYMENT LAW LETTER ARKANSAS EMPLOYMENT LAW LETTER should not be construed as legal advice or a legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only. Anyone needing specific legal advice should consult an attorney. The State Bar of Arkansas does not certify specialists in labor law, and we do not claim certification in any listed area. For further information about the content of any article in this newsletter, please contact any of the editors.


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