Employers must remain competitive even in the best of times. In today's economic climate, the need is even more pronounced, and employers must consider every method available to them. One such method is the reduction, or downsizing, of the workforce. Before employers set out to use this method, however, they must comply with the Worker Adjustment and Retraining Notification Act (WARN Act), 29 U.S.C. §2101 et seq. The WARN Act, which covers private-sector employers with 100 or more employees, requires that employers provide 60 calendar days written warning.
There are two situations that trigger the WARN Act: mass layoffs and plant closings. A mass layoff is a layoff at a single site of employment where at least 33% of the workforce and at least 50 employees are laid off for a period of six months or more. A plant closing is an action resulting in an employment loss within a 30 day period for at least 50 or more employees at a single site of employment, or one or more facilities or operating units within a single site. The WARN Act defines employment loss as: (1) a layoff of more than six months; (2) a termination (excluding terminations for cause, resignations or retirement); or (3) the reduction of work hours by more than 50% during each month of any six month period.
The WARN Act requires a 60-day advance written warning be provided to the affected employees, their union (if there is one), the State Dislocated Worker Unit, and the chief elected official of the local government where the plant closing or mass layoff is to occur. The notice to employees must be written in plain, understandable language, and must state: (1) whether the action is expected to be permanent or temporary, and whether the entire plant is to be closed; (2) the expected start date of the action, and the individual employee's expected date of separation; (3) whether seniority rights exist; and (4) the name and telephone number of a company official to contact for further information. The notice to the State Dislocated Worker Unit and to the chief local elected official has different, but similar, requirements.
There are three exceptions to the 60-day notice requirement: (1) faltering company; (2) unforeseeable business circumstances; and (3) natural disaster. If an employer provides less than 60 days advance notice of a closing or layoff using one of these exceptions, it bears the burden of proving that the exception is satisfied. These exceptions are very fact-specific and can be difficult to meet. If you are considering a reduction in your workforce and you believe an exception may apply, contact counsel to make sure you are taking the right course of action.
There are substantial penalties for violating the WARN Act. An employer that violates WARN is liable to each employee for an amount including back pay and benefits for the period of violation, up to 60 days. (The employer's liability is reduced by the amount of wages and benefits, if any, paid to the employee during the period of violation.) An employer who fails to provide notice to proper governmental entities is subject to a civil penalty not to exceed $500 for each day of violation.
Work force reduction is an option that no employer wants to face.