Today layoffs have become companies’ default response to the challenges created by advances in technology and global competition. As a result of this, employees take the brunt of it.
Be it mass layoffs or unforeseen plant closings; the employees are left unemployed. They face a streak of problems, including bankruptcy, failure to send their children to school, and some even struggle to get bread to survive the day.
To avoid this from happening, WARN Act came to the rescue. It is a cutting-edge idea to make sure everything is fair for an employee being laid off from his duty. In this article, we will tell you all about the WARN Act. If you are a small business, you must take notes because every company has to abide by the WARN act.
This article covers the following:
- What is the WARN Act?
- When is the WARN Act notice required?
- What should be included in the notice for employees?
- Who is covered under the WARN Act?
- Exceptions to the 60-day notice?
- How is the WARN Act enforced?
- Are there any penalties for violating the WARN Act?
- How is WARN Act applicable to bankruptcy situations?
- Glossary of the terms in the WARN Act
- How can Deskera assist you?
What is the WARN Act?
The WARN Act was passed by a veto-proof Democratic majority in Congress and became law without President Ronald Reagan's signature. The WARN Act became law in August 1988 and took effect in 1989.
The purpose of the WARN Act is the well-being of the employees who are often fired or laid off without preparation and left in a nowhere land with their situation. As the term suggests, the WARN act works as a warning for employees to ensure employers warn employees in advance about plant closings and mass layoffs so that they have enough time to help themselves.
The notice period allows them to find new employment opportunities. The WARN Act requires employers to provide written notice at least 60 calendar days in advance of covered plant closings and mass layoffs.
An employer’s notice assures that assistance can be provided to affected workers, their families, and the appropriate communities through the State Rapid Response Dislocated Worker Unit.
The State Rapid Response Dislocated Worker Unit helps provide on-site information about the labor market, including occupational information and economic trends, job search and placement assistance, on-the-job training, classroom training, entrepreneurial training, and referral for basic and remedial education.
Hope this helped you understand what a WARN act is. Let us get into the depths of the WARN Act to get you more information on it.
What Pulls WARN Act Into Action?
Circumstances that trigger WARN act are triggered when a covered employer:
- Closes a facility or discontinues an operating unit permanently or temporarily, affecting at least 50 employees, not counting part-time workers, at a single site of employment.
A plant closing also occurs when an employer closes an operating unit that has fewer than 50 workers, but that closing also involves the layoff of enough other workers to make the total number of layoffs 50 or more;
- Lays off 500 or more workers (not counting part-time workers) at a single site of employment during a 30-day period; or lays off 50-499 workers (not counting part-time workers), and these layoffs constitute 33% of the employer’s total active workforce (not counting part-time workers) at the single site of employment;
- Announces a temporary layoff of fewer than 6 months that meets either of the two criteria above and then decides to extend the layoff for more than 6 months.
Suppose the extension occurs for reasons that were not reasonably foreseeable at the time the layoff was originally announced. In that case, notice need only be given when the need for the extension becomes known. Any other case is treated as if notice was required for the original layoff; or
- Reduces the hours of work for 50 or more workers by 50% or more for each month in any 6-month period. Thus, a plant closing or mass layoff need not be permanent to trigger WARN.
What Does Not Put WARN Act into Action?
Circumstances that do not trigger WARN act are triggered when a covered employer:
- Closes a temporary facility or completes a temporary project, and the employees were hired with the clear understanding that their employment would end with the closing of the facility or the completion of the project; or
- Closes a facility or operating unit due to a strike or lockout, and the closing is not intended to evade the purposes of the WARN Act. WARN is also not triggered when the following various thresholds for coverage are not met:
- If a plant closing or mass layoff results in fewer than 50 people losing their jobs at a single site of employment;
- If 50-499 workers lose their jobs and that number is less than 33% of the employer’s total active workforce at a single site;
- If a layoff is for 6 months or less; or
- If work hours are not reduced by 50% in each month of any 6 months
When is the WARN Act Notice Required?
Under the WARN Act, employers with 100 or more full-time workers must provide written, 60-day advance notice about the closing of a single worksite affecting 50 or more employees, a mass layoff affecting at least 50 employees and one-third of the worksite’s total workforce, or 500 or more employees of a single worksite during any 90-day period.
A WARN notice must be given any time there is an employment loss, including temporary layoffs or furloughs lasting longer than six months. A temporary layoff or furlough without notice that is initially expected to last six months or less but later is extended beyond six months may violate the act.
Unless the extension is due to business circumstances, including unforeseeable changes in price or cost, that are "not reasonably foreseeable at the time of the initial layoff" or if the notice is given when it becomes "reasonably foreseeable that the extension is required."
The act makes certain exceptions to the requirements if employers can show that the layoff or closing occurred due to a faltering company, which occurs when a company actively seeking capital or business believes in good faith that advance notice would prevent its ability to obtain such capital or business that would allow an employer to avoid or postpone a shutdown for a reasonable period.
The act also makes an exception for unforeseen business circumstances or natural disasters. In such instances, the WARN Act requires employers to provide as much notice to their employees as possible.
What Should Be Included in Notice for Employees?
The notice must include a statement as to whether the planned action is expected to be permanent or temporary and, if the entire plant is to be closed (in case of a working plant) the expected date when the plant closing or mass layoff will commence.
The expected date when the individual employee will be separated, an indication as to whether or not bumping rights exist, and the name and telephone number of a company official to contact for further information.
What are the Contents of the Notice to Employees When Not Represented
Notice to individual employees must be written in clear and specific language that employees can easily understand and must contain, at a minimum, the following requirements:
- A statement as to whether the planned action is expected to be permanent or temporary and, if the entire plant is to be closed, a statement to that effect;
The expected date when the plant closing or mass layoff will commence and the expected date when the individual employee will be separated;
- An indication as to whether or not bumping rights (see FAQs) exist; and
- The name and telephone number of a company official to contact for further information.
The notice may include additional information useful to the employees, such as available dislocated worker assistance and, if the planned action is expected to be temporary, the estimated duration if known.
Errors in the Notice
Notices should be as accurate as possible since employees rely on them for their own planning. However, minor or inadvertent errors in the notice or errors that occur because circumstances change during the 60-day notice period do not violate WARN.
Extension of the Notice
Additional notice is required when the date or schedule of dates of a planned plant closing or mass layoff is extended beyond the date or the ending date of any 14-day period announced in the original notice as follows:
- If the employment action is postponed for less than 60 days, additional notice should be given as soon as possible and should include reference to the earlier notice, the new action date, and the reason for the postponement.
- The notice need not be formal but should be given in a manner that will provide the information to all affected employees; or
- If the postponement is for 60 days or more, a new notice is required. Routine periodic notice, given whether or not a plant closing or mass layoff is impending and with the intent to evade specific notice as required by WARN, is not acceptable.
Serving the Notice
An employer may use any reasonable method of delivery designed to ensure receipt of the written notice at least 60 days before separation. However, preprinted notices are regularly included in each employee's paycheck or pay envelope, and verbal notices do not meet the WARN Act requirements.
Contents of Notice to the Dislocated Workers Unit and the Local Chief Elected Official
Advance notice should be given to the State Rapid Response Dislocated Worker Unit as well as to the chief elected official of the local government where the closing or mass layoff is to occur.
If there is more than one such unit, the "tiebreaker" is the local government to which the employer paid the most taxes in the preceding year.
However, suppose many affected employees live in nearby local government jurisdictions. In that case, it is also helpful to provide notice to those additional local governments so that coordinated planning of services for those employees to be laid off may begin quickly.
Notice to the State Rapid Response Dislocated Worker Unit and the local chief elected official must contain at a minimum:
- The name and address where the mass layoff or plant closing is to occur, along with the name and telephone number of a company contact person who can provide additional information;
- An explanation of whether the employment loss will be temporary or permanent and whether the entire plant is being closed;
- The expected date of the first job losses, along with a schedule of any further employment reductions;
- The job titles of positions that will be affected and the number of affected employees in each job category;
- A statement of bumping rights, if any exist; and
- The name of each union/employee representative and the name and address of the chief elected officer of each union.
The WARN regulations also allow employers to provide alternative notice to the State Rapid Response Dislocated Worker Unit and the chief local elected official. The alternative form must be a written notice that provides the following information:
- The name and address of the employment site where the plant closing or mass layoff will occur;
- The name and telephone number of a company official to contact for further information;
- The expected date of separation; and
- The number of affected employees.
Employers who provide the alternative form of notice must keep accessible all other information outlined above and provide it to the State Rapid Response Dislocated Worker Unit and local government upon request. Any failure to provide this additional information will be deemed a failure to give the required to WARN notice.
What Does the Notice to the Union Representative May Contain?
Notice to the bargaining agent/chief elected officer of each affected union or local union official must contain, at a minimum, the following information:
- The name and address where the mass layoff or plant closing is to occur, along with the name and telephone number of a company contact person who can provide additional information;
- A statement as to whether the planned action is expected to be permanent or temporary and, if the entire plant is to be closed, a statement to that effect;
- The expected date of the first separation and the anticipated schedule for making separations; and
- The job titles of positions to be affected and the number of affected employees in each job classification. The notice may include additional information useful to the employees, such as available dislocated worker assistance and, if the planned action is expected to be temporary, the estimated duration if known.
Who is Covered Under the WARN Act?
Generally, the WARN Act covers employers with 100 or more employees, not counting those who have worked fewer than six months in the last twelve-month work period or those who work an average of fewer than 20 hours a week.
Employees entitled to advance notice under the WARN Act include managers, supervisors, hourly wage, and salaried workers. Often, WARN Act problems to arise when employers are acquired by other companies.
Employees covered under the WARN Act include those who are terminated or laid off for more than six months or who have their hours reduced by 50 percent or more in any six-month period as a result of the plant closing or mass layoff.
It also covers employees who will likely lose their jobs because of bumping rights or other factors, to the extent that such individual workers reasonably can be identified at the time notice is required to be given.
If the employer has a seniority system that involves bumping rights, which allows an employee to displace another employee as defined in a collective bargaining agreement, employer policy, or other binding agreement, then the employer must use its "best efforts" to give notice to the workers who will actually lose their jobs as a result of the system.
If that is not possible, then an employer must give notice to the incumbent in the position being eliminated. In addition, the WARN Act covers workers who are part-time or those who are on a temporary layoff but have a "reasonable expectation of recall," including those on workers’ compensation, medical, maternity, or other leave.
Employees Not Protected Under WARN Act
The following employees are not be protected under WARN:
- Strikers, or workers who have been locked out in a labor dispute;
- Workers working on temporary projects or facilities of the business who clearly understand the temporary nature of the work when hired;
- Business partners, consultants, or contract employees assigned to the business but who have a separate employment relationship with another employer and are paid by that other employer, or who are self-employed;
- Regular federal, state, and local government employees.
When determining whether or not your company’s layoff or plant closing falls within the WARN requirements, the following employees are not counted:
- Part-time workers;
- Workers who retire, resign, or are terminated for cause; • Workers who are offered a transfer to another site of employment within a reasonable commuting distance. The closing or layoff is a result of relocation or consolidation of all or part of the employer’s business. The transfer involves no more than a 6-month break in employment.
- Workers who are offered a transfer to another site of employment outside of a reasonable commuting distance if the closing or layoff is a result of relocation or consolidation of all or part of the employer’s business.
The transfer involves no more than a 6-month break in employment; and the worker accepts the offer within 30 days of the offer or the closing or layoff, whichever is later.
Exceptions to the 60-Day Notice
There are three exceptions to the full 60-day notice requirement. However, notice must be provided as soon as is practicable even when these exceptions apply, and the employer must provide a statement of the reason for reducing the notice requirement in addition to fulfilling other notice information requirements.
The exceptions are as follows:
Faltering Company
When, before a plant closing, a company is actively seeking capital or business and reasonably in good faith believes that advance notice would preclude its ability to obtain such capital or business, and this new capital or business would allow the employer to avoid or postpone a shutdown for a reasonable period;
Unforeseeable Business Circumstances
When the closing or mass layoff is caused by business circumstances that were not reasonably foreseeable at the time that 60-day notice would have been required (i.e., a business circumstance that is caused by some sudden, dramatic, and unexpected action or conditions outside the employer's control, like the unexpected cancellation of a major order); or
Natural Disaster
When a plant closing or mass layoff is the direct result of a natural disaster such as a flood, earthquake, drought, storm, tidal wave, or similar effects of nature, in this case, notice may be given after the event.
How is the WARN Act Enforced?
WARN Act is enforced through the U.S. District Courts, as provided in section 5 of the Act. Workers, their representatives, and units of local government may bring individual or class action suits against employers believed to be in violation of the Act.
The U.S. Department of Labor has no authority or legal standing in any enforcement action and cannot provide specific binding or authoritative advice or guidance about individual situations. The Department provides assistance in understanding the law and regulations to individuals, firms, and communities.
Are There Any Penalties for Violating the WARN Act?
Yes, there are penalties for violating the WARN Act. An employer who violates WARN is liable to each affected employee for an amount equal to back pay and benefits for the period of violation, up to 60 days.
This liability may be reduced by any wages the employer pays over the notice period. WARN liability may also be reduced by any voluntary and unconditional payment not required by a legal obligation. An employer who fails to provide notice as required to a unit of local government is subject to a civil penalty not to exceed $500 for each day of violation.
The penalty may be avoided if the employer satisfies its liability to each affected employee within three weeks after the closing. In any suit, the court, in its discretion, may allow the prevailing party a reasonable attorney's fee as part of the costs.
How to Avoid WARN Penalties?
Issue a WARN notice if you are required to do so. Employers who violate the WARN Act may be liable for paying employees back pay and benefits for the violation period.
Employers who do not notify local governments are subject to civil penalties of up to $500 for each day of violation. Penalties can be avoided if employers compensate employees within three weeks of closure or layoff.
Employers need to follow state and federal employment laws. Be sure to stay current with the WARN act requirements as well as employment laws in your jurisdiction. Doing so is beneficial for you and your employees.
Does WARN Replace Other Notice Laws or Contracts?
The provisions of WARN do not supersede any laws or collective bargaining agreements that provide for additional notice or additional rights and remedies. If another law or agreement provides for a longer notice period, WARN notice runs concurrently with that additional notice period.
Collective bargaining agreements may be used to clarify or amplify the terms and conditions of WARN but may not reduce WARN rights. For example, suppose a collective bargaining agreement provides for an employer to issue written notice to the union 75 days in advance of anticipated layoffs.
In that case, the provision will satisfy the WARN requirement for 60-day advance notice. On the other hand, if a collective bargaining agreement provides a 45-day notice period, the WARN requirement for 60 days’ notice supersedes that provision.
Is a Labor Dispute, a Strike By a Union, or a Lockout By Management, Considered a Mass Layoff Under WARN Act?
No. An employer does not need to notify strikers or workers who are part of the bargaining unit(s) and are 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 experience an employment loss as a direct or indirect result of a strike and workers who are not part of the bargaining unit(s) involved in the labor negotiations that led to a lockout are still entitled to advance notice.
The Act specifically states that WARN does not affect employers’ or employees’ rights and responsibilities under the National Labor Relations Act. An employer does not need to give notice when permanently replacing a person who is an "economic striker."
Is Sabotage a Concern When Notice is Given?
Employers have occasionally expressed concern that providing workers with advance notice of layoffs and closings may result in an incident of sabotage by an affected worker. However, the experience of the state Rapid Response specialists indicates that the opposite is generally true.
Providing advance notice, along with early intervention services that boost morale, limit bitterness and apathy, and enable workers to plan their future before they lose their jobs, minimizes the occurrence of sabotage.
This action of goodwill on the employer's part also helps to maintain productivity, lower unemployment insurance costs, and present a more positive image of the company to the communities affected by the layoff or closing.
How is WARN Applicable to Bankruptcy Situations?
WARN remains applicable to an employer that declares bankruptcy in some circumstances. If an employer declares bankruptcy and orders a plant closing or mass layoff, it may still be liable under WARN.
There are two situations that may apply in bankruptcy. The first is when the employer knew about the closing or mass layoff before filing bankruptcy and should have given notice but seeks to use bankruptcy to avoid giving notice.
The second is when the employer continues to run the business in bankruptcy, usually as a "debtor in possession." WARN does not, however, apply to a trustee in bankruptcy whose sole function is to wind up the business.
The exceptions to the notice requirement, known as the faltering company and unforeseeable business circumstances exceptions, often come up in bankruptcy cases. The bankruptcy proceeding does change the court in which any WARN claim must be filed, from the District Court to the Bankruptcy Court.
Glossary of Terms in WARN Act
Here are some important terms that you will find in the WARN Act:
Affected Employees
The term "affected employees" means employees who may reasonably be expected to experience an employment loss due to a proposed plant closing or mass layoff by their employer. They include individually identifiable employees who will likely lose their jobs because of bumping rights or other factors, to the extent that such individual workers reasonably can be identified when notice is required.
The category of affected employees includes managerial and supervisory employees but does not include business partners. Consultant or contract employees who have a separate employment relationship with another employer and are paid by that other employer or are self-employed are not "affected employees" of the business to which they are assigned.
Bumping Rights
Bumping rights are those rights of an employee to displace another employee due to a layoff or other employment action as defined in a collective bargaining agreement, employer policy, or other binding agreement.
These rights are often created through a seniority system. Constructive Discharge: In general, a constructive discharge is when a worker’s resignation or retirement may be found to be involuntary because the employer has created a hostile or intolerable work environment or has applied other forms of pressure or coercion that forced the employee to quit or resign.
Employer
The employer is any business enterprise that employs 100 or more full-time workers or 100 or more full- and part-time workers who work at least a combined 4,000 hours a week. Business enterprises include private for-profit and not-for-profit entities as well as governmental or quasi-governmental organizations that engage in business and are separately organized from the regular government.
Employment Loss
The term "employment loss" means:
1. An employment termination, other than a discharge for cause, voluntary departure, or retirement; 2. A layoff exceeding 6 months; or
3. A reduction in hours of work of individual employees of more than 50% during each month of any 6-month period. An exception to this definition of employment loss is a case where a worker is reassigned or transferred to employer-sponsored programs, such as retraining or job search activities, and the reassignment does not constitute an involuntary termination, or a constructive discharge employee continues to be paid.
Facility and Operating Unit
A facility refers to a separate building or building. An operating unit refers to an organizationally or operationally distinct product, operation, or specific work function within or across facilities at the single site.
Whether a specific unit within an employer’s organization is an operating unit depends on such factors as collective bargaining agreements, the employer’s organizational structure, and industry understandings about what constitutes separate work functions.
Mass Layoff
The term "mass layoff" means a reduction in force.
1. Does not result from a plant closing; and 2. Results in an employment loss at the single site of employment during any 30-day period for:
a. At least 50-499 employees if they represent at least 33% of the total active workforce, excluding any part-time employees; or
b. 500 or more employees (excluding any part-time employees). (In this case, the 33% rule does not apply.)
Part-Time Worker
A part-time worker is an employee who:
- Averages less than 20 hours per week; or
- Has been employed for fewer than 6 of the last 12 months before the notice is due. Plant Closing:
A plant closing is a permanent or temporary shutdown of a single site of employment or one or more facilities or operating units within a single site of employment if the shutdown results in an employment loss at the single site of employment during any 30-day period for 50 or more employees, excluding part-time employees.
All of the employment losses do not have to occur within the unit that is shut down. For example, if the 45-person accounting department in a firm is eliminated and, as a result of the accounting department’s closing, five positions in the clerical support staff are eliminated, a covered plant closing has occurred.
Single Site of Employment
The term "single site of employment" may refer to:
- A single location or a group of contiguous locations. Groups of structures that form a campus or industrial park or separate facilities across the street from one another may be considered a single site of employment. Also, several single sites of employment may exist within a single building if separate employers conduct activities within the building;
Separate buildings or areas within reasonable geographic proximity and share staff and equipment; or 3. For workers who primarily travel:
- a home base from which work is assigned; or
- A home base to which workers report when: - a worker’s primary duties require travel from point to point; - the worker’s duties are out stationed; and - the worker’s primary duties are outside any of the employer’s regular employment sites.
State Rapid Response Dislocated Worker Unit
The term "State Rapid Response Dislocated Worker Unit" means a unit designated in each state by the Governor under the Workforce Investment Act.
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Key Takeaways
- The WARN Act became law in August 1988 and took effect in 1989.
- WARN act ensures that employers warn employees in advance about plant closings and mass layoffs so that they have enough time to help themselves.
- Employees covered under the WARN Act include those who are terminated or laid off for more than six months.
- It includes those who have their hours reduced by 50 percent or more in any six-month period as a result of the plant closing or mass layoff.
- There are three exceptions to the full 60-day notice requirement in case of a faltering company, unforeseeable business circumstances, and natural disasters.
- WARN Act is enforced through the U.S. District Courts, as provided in section 5 of the Act.
- An employer who violates WARN is liable to each affected employee for an amount equal to back pay and benefits for the period of violation, up to 60 days.
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