Client Bulletin #409

3.6.09

For a printer-friendly copy of this Client Bulletin, click here.

As this Bulletin went to press, the Dow Jones Industrial Average was below 6700, and approximately 6.5 million people are currently unemployed. Given the dire state of our economy, this appears to be an opportune time to review employer obligations under the federal Worker Adjustment and Retraining Notification Act.

It’s not just about “plant closings”

Although most employers are aware that WARN requires 60 days’ notice of facility closings and mass layoffs affecting 50 or more employees, many employers overlook the more complicated features of WARN, as well as the applicability of state closing laws.

WARN is generally referred to as the “plant closing notification” law. It is, however, not limited to “plants” or to “closings.” WARN covers all types of businesses with 100 or more employees, and its notice requirements apply not only to entire facility closings, but also to long-term layoffs, reduction of working hours, and shutdowns of operating units within a site of employment.

When considering whether WARN applies, employers should think in terms of employees who are being terminated or laid off, and not whether a facility is being closed. If a sufficient number of employees will be put out of work for a sufficient period of time, the law’s notification requirements apply even if no basic change occurs in the employer’s business operations.

WARN review

WARN applies to all business entities with 100 or more employees, excluding “part-time” workers. A single major change in an employer’s operations, or the combined effects of several related lesser changes during a 90-day period, may trigger notification requirements.

An employer must give 60 days’ notice in writing to each affected employee (or to the union if there is a recognized bargaining representative), as well as to state and local government representatives, before permanently or temporarily shutting down

* a single site of employment with 50 or more employees, or

* one or more entire facilities or operating units at a single site of employment, if the shutdown will result, during any 90-day period, in termination or layoff lasting more than six months for 50 or more employees.

Even where an employer is not shutting down a single site of employment, or facility or operating unit within that single site, 60 days’ notice must be given before implementing any reduction in force that involves the separation for more than six months of

* 50 or more employees at a single site during any 90-day period if they constitute at least 33% of the employees at the site, or

* 500 or more employees at a single site, regardless of the total number of employees at that site.

Aggregation. WARN also has an “aggregation” clause. If, during a 30- or 90-day period, two or more reductions take place, the aggregated number of affected employees will trigger a WARN obligation if the aggregated number exceeds either of the two thresholds for WARN coverage. This is so even if each reduction considered alone would involve fewer employees than the trigger number for a “closing” or “mass layoff.”

Exceptions. The law contains three exceptions to these advance notice requirements: (1) “unforeseeable business circumstances”; (2) a “faltering company” exception that applies if the employer is actively seeking capital or business that, if obtained, would have postponed the closing or averted the need for it altogether; and (3) a “natural disaster” exception. The employer has the burden of proving that it is entitled to an exception.

Penalties. Penalties for failure to provide notice where required include back pay and benefits to each affected employee for each day of the violation, up to a maximum of 60 days. Fines include $500 per day, per site of violation, up to a total of $30,000. WARN is enforced by the courts, not through an administrative process.

The payment option. Finally, the law does permit employers to avoid or reduce liability by giving employees pay and benefits in lieu of notice. Thus, employers who prefer not to give advance notice of a shutdown or major layoff, are given the option of providing what amounts to pay and benefits for any period of violation, over and above any other severance pay or other termination benefits to which the affected employees are already legally entitled.

State laws. States that have plant closing statutes include California, Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New York, Pennsylvania (Philadelphia city ordinance), South Carolina, Tennessee and Wisconsin.

Does WARN go far enough? The New York Times today criticized WARN, saying that it did not do enough to protect white-collar workers whose terminations may be geographically dispersed and therefore fall under the WARN radar. The article did not take into account that white-collar workers are much more likely than their blue-collar counterparts to receive severance packages that provide for more than the 60-day WARN equivalent.

If you have any questions about compliance with the federal or state plant closing laws, please contact Bob Lemert or the Constangy attorney of your choice.

Constangy, Brooks & Smith, LLP has counseled employers on labor and employment law matters, exclusively, since 1946. A “Go To” Law Firm in Corporate Counsel and Fortune Magazine, it represents Fortune 500 corporations and small companies across the country. Its attorneys are consistently rated as top lawyers in their practice areas by publications such as Chambers USA, Super Lawyers, and Top One Hundred Labor Attorneys in the United States. More than 100 lawyers partner with clients to provide cost-effective legal services and sound preventive advice to enhance the employer-employee relationship. Offices are located in Georgia, Florida, South Carolina, North Carolina, Tennessee, Alabama, Virginia, Missouri, Illinois, Wisconsin, Texas and California. For more information, visit www.constangy.com.

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