Legal Intelligencer
(By Stephen A. Antonelli)
Is the country heading toward a recession? Are we already there? If so, for how long will it last? Or, will we narrowly avoid a recession and instead see a mere economic slowdown as we (hopefully) put the global pandemic in our collective rearview mirror?
The answers to these questions are unclear. Inflation and interest rates are rising, yet the economy added 528,000 new jobs in July and unemployment is at a pre-pandemic level of 3.5 percent. Moreover, by the time you read this, the Inflation Reduction Act may have been signed into law. As a result, the opinions of actual economists and other experts in the field differ as to the likelihood, timing, and duration of a recession. I will therefore certainly not attempt to offer a prediction of my own. I will, however, note that employers of all sizes must be mindful of the law if and when they are forced to make the difficult decision of reducing their workforce.
The Worker Adjustment and Retraining Notification (WARN) Act is one such law. The WARN Act was enacted in 1988 in an effort to ensure advance notice to employees in cases of qualified plant closings and mass layoffs, thereby providing employees with sufficient time to prepare for the transition into a new job. It requires larger private employers to give advanced notice of plant closings or mass layoffs to their employees (or their unions, if applicable) as well as to state agencies that assist impacted workers and the local government of the impacted area. Specifically, the Act requires employers with 100 or more full-time employees (or 100 or more full- and part-time employees who work a combined 4,000 hours per week) to provide written notice 60 days in advance of a facility or plant closure or a mass layoff.
A facility or plant closure occurs if an employer discontinues a facility, plant, or operating unit, whether permanently or temporarily, in a manner that affects at least 50 employees at a single site of employment, A mass layoff, on the other hand, occurs if a reduction in force is not the result of a facility or plant closure, but is instead the result of an employer laying off: 500 or more full-time employees at a single site of employment; or laying off 50-499 full-time employees if the number of layoffs equals 33 percent of the employer’s active workforce at the single site of employment. The employer’s “single site of employment” is defined loosely, and may consist of a single building, an office or group of offices within a building, or a group of buildings on a campus or in an industrial park. For workers whose primary duties require travel, or for those who are stationed away from headquarters, the single site of employment to which they are assigned as their home base, from which their work is assigned, or to which they report will be the single site in which they are covered for purposes of the Act. Although not specifically addressed by the applicable regulations, this same rationale will likely apply to employees who have transitioned to a remote work arrangement during the past two and a half years.
The WARN Act also applies if a closure or mass layoff occurs as the result of a sale of all or part of a business, even in the event of an asset only sale. The party responsible for providing the notice is determined by the timing of the closure or mass layoff relative to the sale. The seller is responsible for the notice if the closure or mass layoff occurs before the sale becomes effective. The buyer, on the other hand, is responsible for providing the notice if the closure or mass layoff occurs after the sale becomes effective.
When providing employees with a WARN Act notice, employers should be sure to prepare the notice in a manner that will be easily understood by its intended audience. The notice must indicate: the anticipated date of the job loss; whether the job loss is anticipated to be permanent; whether it will impact an entire work location; and whether the impacted employee has the ability to take the job of a less senior employee who will not be impacted. The notice must also must provide impacted employees with contact information of a company representative who will be able to provide additional information about the closure or mass layoff. The notice must be in writing and may be delivered using any reasonable delivery method designed to ensure delivery at least 60 days before the separation from employment. Employers may not, however, simply include the notice in each employee’s paycheck or pay envelope.
For a unionized workforce, rather than providing the notice to individual employees, employers must notify the bargaining representatives of impacted employees. In addition to the information required by a notice to individuals, when notifying a union, employers must also provide a list of the names and job titles of each impacted employee. The Act does not supersede the terms of a collective bargaining agreement that provide for additional notice or additional rights in the event of closure or mass layoff. Furthermore, employers should be aware of the fact that a number of states have enacted their own “mini-WARN” laws that provide additional protections to employees. Pennsylvania does not have a mini-WARN law, but neighboring states such as Maryland, New York, New Jersey, and Ohio have enacted such laws.
In the event that an employer is not able to determine the exact date the closure or mass layoff will occur, WARN regulations allow employers to identify in their written notice a two-week window during which the closure or mass layoff will occur. In some instances, an employer may need to extend the date of a closure or mass layoff. If such a need arises, the employer must provide a new notice if the date of the closure or mass layoff extends for 60 days or more beyond the 14-day period announced in the original notice. If the extended closure or layoff date is postponed for less than 60 days, less formal notice will suffice.
Upon receipt of a WARN notice, a state agency or Rapid Response Dislocated Worker Unit will coordinate with the employer to provide on-site information to the impacted employees about employment and retraining services that are designed to help them find new jobs. These services often include: general information about the labor market and recent hiring trends; job search and placement assistance; or training, whether entrepreneurial, on-the-job, or in the classroom.
In some instances, employers are unable to provide 60 days’ notice in advance of a plant closing or mass layoff due to unforeseen circumstances such as a natural disaster or business circumstances beyond the company’s control (such as a global pandemic, arguably). In those instances, employers may qualify for an exception to the 60-day notice rule. In the event of a plant closure, if a company is actively seeking capital or business and reasonably believes that compliance with the 60-day rule would preclude its ability to obtain such capital or business, and the new capital or business would allow the employer to avoid or reasonably postpone a shutdown, the company may be excused from the 60-day rule. With each of these three situations, employers must provide as much notice as possible and they must state in their written notice the reason why it failed to provide the requisite 60 days’ notice.
Employers who violate the WARN Act may be ordered to pay impacted workers’ wages and benefits for the period of the violation, for up to 60 days and a civil money penalty not to exceed $500 for each day of the violation. Violating employers may also be ordered to pay the attorneys’ fees and costs of employees who successfully sue the employer. As a result, if the economic outlook calls for your organization to make the difficult decision of a closure or mass layoff, be sure to consult with counsel in advance of announcing the decision.
Stephen A. Antonelli is a shareholder in the Employment and Labor and Litigation groups of Babst Calland. His practice includes representing employers in all phases of labor and employment law, from complex class and collective actions and fast-paced cases involving the interpretation of restrictive covenants, to single-plaintiff discrimination claims and day-to-day human resources counseling. Contact him at santonelli@babstcalland.com or 412-394-5668.
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Reprinted with permission from the August 18, 2022 edition of The Legal Intelligencer© 2022 ALM Media Properties, LLC. All rights reserved.