Interplay Between Fourth Quarter Corporate Budgets and the WARN Act

    As companies evaluate their year-end performance, many will decide to close plants or lay off employees in unprofitable divisions. Before doing so, companies should pay close attention to the requirements of the Worker Adjustment and Retraining Notification Act of 1988 (“WARN Act”).

WARN Act Background

    Under the WARN Act, before an employer with 100 or more full-time employees implements a “plant closing” or “mass layoff,” it must provide at least sixty-days’ notice to “affected employees” and certain state officials.[1]

    A plant closing occurs under the WARN Act when an employer permanently or temporarily closes “a single site of employment, or one or more facilities or operating units within a single site of employment,” resulting in a loss of employment for at least fifty employees over a thirty-day period.[2]

    A mass layoff occurs when an employer reduces its work force at a “single site of employment” during a thirty-day period by at least fifty employees, an amount which must also constitute at least 33% of its workforce at that single site of employment.[3]

    If two or more groups of employees (each less than fifty employees) at a single site of employment experience employment loss totaling fifty or more employees within any ninety-day period, then, subject to limited exception, a plant closing or mass layoff has occurred.[4]

    An employer that fails to provide the required notice "is liable for back pay, lost benefits, civil penalties, and attorney['s] fees.”[5]

Exceptions to WARN Act

    Three statutory exceptions under the WARN Act (the “faltering company,” “unforeseen business circumstances,” and “natural disaster” exceptions) can reduce the 60-day period to provide a WARN notice, but do not eliminate the need to provide a WARN notice.[6]

    Employers, however, need not provide a WARN notice when a plant closing or mass layoff does not result in “employment losses.” No employment losses are deemed to occur under WARN when: (1) an employee voluntarily leaves the company under an incentive program; (2) an employer offers to transfer the employee to a location that is within a “reasonable commuting distance”; or (3) an employee accepts an offer to transfer to a different location, regardless of whether the location is within a “reasonable commuting distance.”[7] Companies desiring to avoid publicity concerning layoffs may explore voluntary incentive programs and transfers to avoid having to provide WARN notices.

Practical Takeaways

    Employers who anticipate potential plant closings or mass layoffs should plan ahead to ensure they timely provide notice, or alternatively, that they take appropriate steps to lawfully avoid WARN Act notice obligations. Given the intricacies of the WARN Act and numerous state counterparts to the WARN Act, employers should confer with employment counsel in advance of a plant closing or mass layoff.

[1] 29 U.S.C. §§ 2101(a), 2102(a).

[2] 29 U.S.C. § 2101(a)(2).

[3] 29 U.S.C. § 2101(a)(3).

[4] 29 U.S.C. § 2102(d).

[5] 29 U.S.C. § 2104(a).

[6] See 29 U.S.C. § 2102(b)(1); 20 C.F.R. § 639.9.

[7] 29 U.S.C. § 2101(a)(6); see Ellis v. DHL Exp. Inc., 633 F.3d 522, 526-27 (7th Cir. 2011).

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