This article is a WARNing to all employers when navigating furloughs, layoffs, terminations, and other unfortunate effects of COVID-19.
The federal Worker Adjustment and Retraining Notification Act (WARN) requires employers to provide 60 days’ advance notice before employees experience certain types of employment losses. Although this can be difficult for businesses finding themselves in uncertain times like the present, WARN violations can be costly.
What WARN Covers
The first step is determining whether an employer is covered by WARN.
Federal WARN covers employers with 100 or more employees, excluding part-time employees who have worked fewer than 20 hours per week in the preceding 90 days, as well as certain short-term employees and seasonal workers. Private sector employers, non-profits, and certain quasi-public entities meeting these thresholds are covered.
In addition to federal WARN, many states and localities have enacted their own versions of WARN, sometimes called “mini-WARNs.” These often have their own coverage determinations and other requirements, which are sometimes more onerous on employers.
Under federal WARN, covered employers must send WARN notices to employees (or their union representatives), the relevant state entity carrying out rapid response activities, and the chief elected official of the unit of local government (e.g., the mayor). Notices must be provided at least 60 days prior to the occurrence of a “plant closing” or “mass layoff.” Applying these terms to real-life business scenarios is not always straightforward. In short:
- A “plant closing” is the permanent or temporary shutdown of an entire site of employment, if the shutdown creates an employment loss during any 30-day period for 50 or more full-time employees.
- A “mass layoff” is a reduction in force that creates an employment loss at a single site of employment during any 30-day period for at least 33% of the full-time employees and at least 50 employees at the site.
Defining “Employment Loss”
“Employment loss” is also a term of art. It means not only an involuntary termination but also a layoff exceeding six months or a reduction of hours of more than 50% during each month of a six-month period. This means that an extended layoff or reduced hours situation, even if not “permanent,” can trigger WARN. However, workers who have voluntarily resigned, retired, or were terminated for cause are not included. Thus, people who find new employment during short-term furloughs or voluntarily decide not to return to work for COVID-19-related reasons are not counted.
Importantly, if an employer implemented a short-term furlough near the beginning of the pandemic and later needs to extend this furlough due to previously unforeseeable reasons (e.g., the economic downtown created by COVID-19), it must issue WARN notices as soon as it believes the furloughs will need to exceed six months. As the pandemic rages on, the ability to point to a particular time when an extension is foreseeable becomes increasingly difficult. Any WARN notice provided in this situation must explain the reason for giving fewer than the 60 days’ required notice.
WARN contains several exceptions that may excuse providing the full 60 days’ notice. Two such exceptions may apply to COVID-19-related employment losses: “unforeseeable business circumstances” and “natural disaster.”
- The unforeseeable business circumstances defense, as the name suggests, may apply when the closing or layoff was caused by business circumstances not reasonably foreseeable at the time the 60-day notice would have been required. According to the U.S. Department of Labor, this may include a “sudden, dramatic, and unexpected action or condition outside the employer’s control,” an “unanticipated and dramatic major economic downturn,” or a “government ordered closing of an employment site that occurs without prior notice.” The Department has hinted in recent guidance that, depending on the employer’s circumstances, the unforeseeable business circumstances defense may apply to COVID-19, including furloughs or layoffs that were extended because of it.
- The natural disaster exception may apply to a closing or layoff caused by any form of natural disaster, such as floods, earthquakes, storms, or similar effects of nature. (Pandemics do not appear on the list.) The Department requires that the triggering event be the “direct result” of a natural disaster, which may pose a hurdle.
It remains to be seen how or whether these exceptions will apply to COVID-19-fueled employment losses. Nonetheless, employers would be wise to consider these statutory exceptions in crafting any documents or communications, as each could resurface as an exhibit to any later-filed WARN litigation.
Assuming an employer cannot meet one of the exceptions, penalties for violating WARN can be steep, including up to 60 days’ back pay and benefits for affected employees. WARN claims are also ripe for class actions, given the very nature of “plant closings” or “mass layoffs,” and the fact that courts may award attorneys’ fees to prevailing plaintiffs.
Employers with questions about their WARN obligations should consult legal counsel.