Studies show that as many as 98% of CEOs are anticipating a global recession in the next 12-18 months, which means that companies have already started focusing on cutting costs and redistributing resources to best position themselves to survive. One of the largest cost centers on any company’s balance sheet is its workforce. As such, layoffs or other reductions-in-force (RIF) have already started to hit, and will likely continue. What’s different this time around? Because of the ups and downs in the market, and phenomena like the “great resignation” and remote work on a scale never seen before, there is a greater likelihood that more employers will find themselves potentially triggering the Worker Adjustment and Retraining Notification Act of 1988 (WARN Act) (and analogous state laws, known as state “mini-WARN acts”) statutes. These statutes impose notice and information obligations, which can be tricky to keep track of, and carry potentially heavy penalties for noncompliance.
What to do? Employers who see a layoff on the horizon — and even those who may have already undertaken layoffs — should revisit the requirements of WARN (and state mini-WARNs) now, and keep the following “WARN-ings” and practice tips in mind as they work with counsel.
What is WARN and what WARN-ings should companies watch out for?
In short, WARN requires employers to give advanced notice to affected employees in the event of a covered mass layoff or plant closing. Under the federal WARN, employers must provide 60 days’ notice of termination to the impacted employees, union representatives (if applicable), and certain government authorities. Under some state mini-WARN acts, 90 days’ notice is required.
Which employers are covered?
Under the federal WARN Act, covered employers are employers with:
- 100 or more employees, excluding part-time employees and those with less than 6 months of service in the last 12 months, or
- 100 or more employees, including part-time employees, who collectively work more than 4,000 hours per week, excluding overtime.
WARN-ing: State mini-WARN acts often have lower thresholds for covered employers.
When is notice required?
Under WARN, covered employers need to provide notice if a triggering event–a “mass layoff” or “plant closing”–occurs.
Mass layoff: A mass layoff is a reduction in force that (i) does not result from a plant closing, and (ii) results in an employment loss at the single site of employment during any 30-day period for:
- at least 50-499 covered employees if they represent at least 33% of the total active workforce, or
- 500 or more covered employees.
Plant closing: A plant closing is the permanent or temporary shutdown of a single place of employment or one or more facilities/operating units resulting in an employment loss during a 30-day period for 50 or more covered employees.
How should employers calculate the time frame to determine when WARN notice is required?
WARN always requires aggregating the employment losses that occur over a 30-day period.
WARN also requires aggregation of the employment losses that occur over a 90-day period that did not, on their own, trigger WARN notice, unless the employer can show that the layoffs were the result of separate and distinct causes and are not an attempt to evade WARN.
WARN-ing: Therefore, employers should look ahead and behind 90 days and add up layoffs that have occurred and any planned layoffs to determine whether separate layoffs may trigger notice requirements under WARN.