With the economy in uncertain condition, layoffs or plant closures will likely be more prevalent for companies adversely affected by the economic downturn. But before pulling the trigger on layoffs or plant closures, employers should beware of the Worker Adjustment and Retraining Notification Act, or “WARN” Act.

The WARN Act is a federal law that mandates advance written notice to employees before a plant closing or mass layoff may take effect, absent limited exceptions. When applicable, the law requires employers to provide notice 60 days in advance of covered plant closings and covered mass layoffs. This notice must be provided to either affected workers or their representatives (e.g., a labor union); to the State dislocated worker unit; and to the appropriate unit of local government.

But what is a “mass layoff” or “plant closing” that would trigger the WARN Act’s protections and duties? And what is a “covered employer” under the WARN Act? The answers to these crucial questions, which guide the applicability of the statute, are very much numbers driven. And when these numbers are met, the WARN Act is precise in the obligations it imposes upon a company that is subject to its coverage.

What Employers And Employees Are Covered?

Generally speaking, employers with 100 or more full-time employees are subject to the WARN Act. The Act applies to all private companies (whether for-profit or non-profit), as well as quasi-public entities that conduct commercial activity separately organized from the regular government. For any employer covered by the WARN Act, all affected hourly and salaried workers, including managerial and supervisory employees, are entitled to the notice provisions described in the WARN Act.

What Triggers WARN Act Notice?

The WARN Act mandates a 60-day notice prior to any “plant closing.” A “plant closing” is defined as the permanent or temporary shutdown of a single site or operating unit within a single site, which will result in an employment loss for 50 or more employees during any 30-day period.

The WARN Act also requires employers to provide a 60-day notice of a “mass layoff” as defined in the Act. A “mass layoff” is an event that does not result from a plant closing, but one that nevertheless results in an “employment loss” at the single employment site during any 30-day period for either (1) 500 or more full-time employees or (2) at least 50 full-time employees and at least 33% of the employer’s active workforce. Though part-time employees (as defined in the WARN Act) are not included in these calculations, they are still entitled to notice if the event qualifies as a “mass layoff” or plant closing under the WARN Act.

The WARN Act also contemplates an employer implementing layoffs in stages. Even if one round of layoffs does not meet the threshold number to trigger the WARN Act requirements, the employer still must give notice if the number of workers laid off in two or more rounds—when added together—reaches one of the Act’s threshold levels during any 90-day period of either a plant closing or mass layoff. Job losses within any 90-day period will be aggregated for purposes of the WARN Act, unless the employer demonstrates that the employment losses are the result of separate and distinct actions and causes. As a practical matter, if tough economic times are the reason for the plant closing or mass layoff, an employer may have difficulty satisfying this exception.

What Does “Employment Loss” Mean?

The WARN Act speaks in terms of “employment loss” in defining when advance notice is required. Employers who are large enough to be subject to the WARN Act should generally regard layoffs as the type of event that may trigger WARN Act notice. But the WARN Act defines “employment loss” more broadly than simply “layoffs,” as that term is generally understood. The WARN Act defines “employment loss” to mean:

(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 an employee’s hours of work of more than 50% in each month of any 6-month period.

Who Must Receive Notice and When?

The employer must give notice to each employee whom the employer reasonably expects to experience an employment loss. This notice must be in writing and given to either (1) the chief elected officer of the exclusive representative or bargaining agency (i.e., the union) or (2) if there is no such representative, each unrepresented individual worker. The employer must also provide notice to the State’s designated dislocated worker unit and to the chief elected official of the “unit of local government” in which the employment site is located (e.g., the mayor of the city where the plant closing or layoff will occur).

When given, the written notice must be specific and written in an understandable manner. At a minimum, the notice must include (1) an explanation of whether the action (plant closing or layoff) will be temporary or permanent and, if a plant closing, whether the facility will be closed entirely; (2) the date on which the closing or layoff will occur and when the employment loss will occur; (3) a statement of whether “bumping rights” exist; and (4) the name and telephone number of a company official to contact for further information.

The WARN Act Has Teeth.

A violation of the WARN Act can carry significant consequences, including payment of back pay and benefits to each employee who was not given proper notice. Moreover, an employer who fails to provide notice as required to a unit of local government is subject to a civil penalty of up to $500 for each day of violation.

Unfortunately, the WARN Act is likely to be triggered for many employers during these troubled economic times. Even though the WARN Act does include some exceptions that may relieve an employer from its otherwise stringent requirements under certain circumstances, employers should not assume that they will be exempted from the Act’s provisions. Employers contemplating a plant closing or a mass layoff should therefore consult with their employment counsel before making and carrying out that decision, as the Act contains many significant nuances.