The WARN Act is the most important regulation when planning a mass layoff or plant closing. Here’s what business leaders need to know.

What is the WARN Act?

In effect since 1989, the Worker Adjustment and Retraining Notification (WARN) Act protects workers, their families and communities. To that end, it requires employers to give notice 60 days in advance of plant closings and mass layoffs under certain circumstances.

The advance notice outlined by the WARN Act helps workers
and their families plan for and adjust to a loss of employment. The
WARN Act requirements give workers some time to search for a new job, and if needed,
enroll in workforce training. 

Given the widespread
local impact resulting from many families becoming suddenly unable to purchase
goods and services, the advance notice also helps communities cope with large-scale
job loss.

Because the law is federal, businesses across the U.S. must
comply with WARN Act regulations. Failure to comply incurs considerable legal
and financial repercussions for the company.

For these reasons, the WARN Act is the most important regulation
to consider before moving ahead with a mass layoff or plant closing. Given the many factors to consider, however,
it’s advisable to consult outside legal counsel to ensure your organization is fully
compliant.

To get you better acquainted with the fundamentals,
however, here’s what you need to know about the federal WARN Act.

The WARN Act requires
employers to give a 60-day notice

The act requires employers to provide 60 days of written notice in
the event of a layoff of more than 50 employees during any 30 days as part
of a plant closing.

Per the U.S. Department of Labor, the notice must be provided to:

  • Employees
  • The applicable state’s dislocated worker unit
  • The chief elected official for the local governing body in which
    the employment site is located
  • Any collective bargaining unit or company union

For companies with work sites in more than
one location, all relevant entities for each site must be notified.

The 60-day notice must
be prepared in writing

There’s no format to
follow when creating a WARN notice.

However, besides being
presented it writing, it should never be included with other notices about
company matters. Providing a WARN notice using a communications channel normally
used for other regular company business is insufficient.

If your organization, for
example, includes written communications about workplace issues with employee
paychecks, employees may not pay attention to material received in a typical
delivery method.

To be compliant, a WARN
notice typically includes:

  • Notification of the planned reduction in force or plant closure
  • Whether or not the layoff is permanent – or if workers can expect to be called to return to work sometime in the future
  • Details on the layoff timeline and positions affected
  • Severance benefits your organization will provide
  • Your company “bumping rights policy” on whether a senior employee can replace a less senior employee should a reduction in workforce elimination of the more senior employee’s job
  • A point of contact at your organization who can provide more detail

In addition to employees
and within the same 60-day notice timeline, a WARN Act notification is sent to:

  • The applicable state’s dislocated worker unit
  • The chief elected official for the local governing body in which
    the employment site is located
  • Any collective bargaining unit or company union

Because of the many individuals and entities who must be contacted, it’s wise to include WARN notifications as part of your mass layoff or plant closing checklist.

Which companies must comply
with the WARN Act?

In general, the WARN
Act applies to companies with over 100 full-time employees and all publicly and
privately held companies. Both nonprofit and for-profit organizations are
expected to comply.

For
companies that fit those criteria, all hourly and salaried workers (including
managerial and supervisory staff) are entitled to WARN Act notifications.

Business
partners are not entitled to the notices.

The federal WARN Act does not apply in cases where employees:

  • Have worked for the employer for less than six months in the past 12 months
  • Have worked, on average, less than 20 hours a week
  • Were hired on condition that their employment would end with the closing of a temporary facility or project once the work is completed

Other
special exemptions to the WARN Act include:

  • If 50 to 499 workers lose their jobs and that number is less than 33 percent of the employer’s total, active workforce at a single employment site
  • If a layoff is six months or less
  • In certain bankruptcy cases
  • If the organization in question is a local, state or federal government entity

Special WARN Act
situations: strikes and some exceptions

In the event of a
strike, there are other factors to consider:

  • Should the strike lead to a company lockout with an impact akin to a plant closing or mass layoff, the employer is not required to provide advance WARN Act notices to strikers or workers involved in labor negotiations that led to the lockout.
  • Non-striking employees impacted by job loss as a direct or indirect result of a strike – as well as workers not part of the bargaining unit involved in labor negotiations that led to the lockout – are still entitled to WARN Act advance notice.

There are also three noteworthy exceptions related to the 60-day
notice window. These instances include when:

  • Struggling owners believe giving such advance notice would hamper their ability to secure new capital or business for the faltering business
  • Unforeseeable business circumstances (such as a significant order’s unexpected cancellation) force sudden, unanticipated layoffs or plant closure
  • A natural disaster (flood, fire, earthquake or storm) makes it difficult for a company to make immediate notifications

In such extreme cases, notices may be given after the event – but they must be made as soon as possible. Moreover, the employer must provide an additional statement in the notices about the why the 60-day notification requirement isn’t being met.

Some states also have
their own regulations

Many
individual states have specific laws (referred to as “mini-WARN acts”) that build
upon federal regulations.

Various states have
additional regulations about which employers should be aware. This information
usually can be found via a state’s labor department.

Although these state-level regulations do typically build upon the federal guidelines, they sometimes go farther. For instance, California extends worker protections to a wider range of employees. Meanwhile, New Jersey now requires advanced notice and severance pay under certain circumstances.

Cities, too, may have
requirements. In Philadelphia, for example, businesses with 50 or more
employees must submit a letter to the city’s director of commerce.

What are the
consequences of not following the WARN Act?

Failure to comply can be costly.

An employer who violates the WARN requirements by ordering a
plant closing or mass layoff without providing appropriate notice is liable to
each eligible employee for an amount including back pay and benefits for the
period of violation, up to 60 days.

An employer who fails to provide notice as required to local
government officials is also subject to a civil penalty up to $500 for each day
of violation.

The United States district courts enforce WARN Act requirements
in the impacted jurisdiction and can require payment of all attorney fees in a
court ruling. Workers, representatives of employees and local government officials
may bring individual or class action suits against an organization for
violations.

The WARN Act and other
layoff best practices

If you look at stressful life events, losing your job comes in second after the death of a loved one. Doing the right thing for your people is always the best approach to take with your workforce – especially at a difficult time in the company’s own life cycle.

Approach a reduction in force as
a thoughtful leader. Some suggestions:

  • Start planning for a reduction in force early (if possible), to allow enough time for WARN Act notifications as well as the support needed to help impacted employees with the transition.
  • Be transparent once your organization decides on a mass layoff or plant closing and share information, so your workforce isn’t kept guessing.
  • Consider best practices for terminating employees, such as notifying employees earlier in the week rather than on a Friday afternoon. 
  • Create an alumni network for soon-to-be-former employees to make it easier to maintain contact with potential returning employees (“boomerang candidates”) should business conditions improve.
  • Seek legal counsel to ensure your business is following employment laws at all levels applicable to your industry and location.

Informing employees why layoffs are necessary, either individually or in groups, helps employers prevent alienating both the workers who are leaving and the ones remaining.

Mishandle the layoff process, however, and disgruntled employees could spread the news to customers, future employees and the media alike, compounding the hassles of shutting down a site or plant.

To learn more about regulatory compliance, download our
complimentary e-book: HR
compliance: Are you putting your business at risk?

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