7. What is the “Worker Adjustment and Retraining Act”?
The Worker Adjustment and Retraining Act (WARN Act) was passed to protect employee rights and interests in the event of large-scale layoffs as a result of operational closures by businesses (such as plant closure). The law provides that covered employers must provide adequate notice (a minimum of 60 days) to employees in the event of such a pending layoff. The WARN Act is applicable to employers with 100 or more part-time and full-time employees. A part-time employee is one who works a minimum 20 hours per week. If the WARN Act applies to an employer, all employees, including hourly and part-time employees, must be given notice.
The provisions of the WARN Act are made to protect individuals who will suffer a loss of employment as a result of the layoff or operational closure. Loss of employment for purposes of the WARN Act includes:
• termination of employment,
• layoff exceeding 6 months, or
• a reduction in employee’s work time of more than 50% in each month for 6 months.
The broader definition of loss of employment prevents employers from skirting the rules through structural shifts that have the same effect as immediate termination. Any of the following situations qualify as mass layoff events triggering WARN Act notice provisions:
• Plant Closing – This includes closing an employment site resulting in loss of 50 employees within a 30-day period. This applies also if there are more than one plant location closings for the business that combine to equal the number.
• Mass Layoff – This is when 500 or more employees lose their job within a 30-day period, or when more than 50 employees lose their job and it comprises 33% of the employer’s total workforce. Employees that work less than half time do not count toward the 50-employee requirement.
Failure to comply with the provisions of the WARN Act allows for a cause of action by affected employees. The limitations on what constitutes a mass layoff prevents the WARN Act from applying to routine firings and operational downsizing across a business.
There is no governmental agency cause of action, investigation, or other enforcement of the WARN Act provisions. Employees protected by the WARN Act must bring a civil action for violation of the statute. Under the law, these employees are entitled to pay for 60 days from receipt of notice. If notice is not given 60 days prior to the operational closure, the employee receives pay past the date of closure (or layoff) until reaching the 60-day requirement. Further, failure to notify local government in accordance with the provisions of the WARN Act may lead to court-ordered fines up to $500 per day for each day of violation (along with court costs and attorney’s fees).
• Note: The employer may generally avoid penalties if the entire amount owed to employees is paid within 3 weeks of the closing.
Exceptions from WARN Act Provisions
A few limited exceptions to the notice provisions of the WARN Act exist that allow an employer to give less than 60 days notice to protected employees. The primary exceptions are as follows:
• Strikes – An employee may execute a mass layoff and rehiring to replace employees who are striking, so long as such actions do not violate other labor laws.
• Refinancing – Exception to notice may be applicable if an entire business is failing and giving the required notice could disqualify or cause the business to not to be able to secure financing to continue operations.
• Force Majeure – If a natural disaster disrupts the business’s operations leading to a mass layoff.
These exceptions provide for fairness to the employer in the event of happenings that are beyond its control and the equities justify limiting the notice provided to protected employees.
• Discussion: Why do you think the government requires notice of a pending mass layoff or plant closing? Do you agree with the objectives of this law? How do you feel about the exemptions from notice?
• Practice Question: ABC Corp is considering a consolidation of manufacturing sites to cut costs. It currently has 5 manufacturing facilities. ABC is considering closing the two smallest facilities and ramping up production in the three larger facilities. The downside of this plan is that lots of employees will be let go. What do you need to know about each facility to determine whether the WARN Act requires 60-days notice of the pending foreclosure?