Who is covered by WARN?

An entity is covered by WARN if it employs 100 or more employees, excluding employees who have worked less than six of the last 12 months and employees who work an average of fewer than 20 hours per week in the shorter of (1) the full period of employment or (2) the most recent 90 days. WARN also applies to employers of 100 or more employees, including part-time employees, who collectively work at least 4,000 hours each week, excluding overtime. 

Whether the employees of subsidiaries and affiliates are considered together when counting the number of employees is determined via a multi-factor test taking into account factors such as (1) common ownership, (2) common directors and/or officers, (3) de facto exercise of control, (4) unity of personnel policies emanating from a common source, and (5) the dependency of operations.

What events trigger the need to provide WARN notices?

Covered employers generally must provide notice of the following events:

  1. a temporary or permanent shutdown of a single site of employment (a “plant closing”), or one or more facilities or operating units within a single site of employment, if it results in an “employment loss” for 50 or more full-time employees during any 30-day period; or  
  2. a “mass layoff” that is not the result of a plant closing that is:
    1. expected to exceed six months; and
    2. results in an “employment loss” at a single site of employment within a 30-day period of either:
      • 500 full-time workers or  
      • between 50 and 499 full-time workers that is at least 33% of the workforce at that site.

A “single site of employment” can refer to either a single location or a group of contiguous locations.  Groups of structures which form a campus or industrial park, or separate facilities across the street from one another, may be considered a single site of employment. There also may be several single sites of employment within a single building (for example, an office building) if separate employers conduct activities within such a building. Thus, an office building housing 50 different businesses will contain 50 single sites of employment. 

Plant closings involve employment loss which results from the shutdown of one or more distinct units within a single site or the entire site. A mass layoff involves employment loss, regardless of whether one or more units are shut down at the site. 

Layoffs that occur within a 90-day period may have to be aggregated to determine if the mass layoff thresholds are met.

What is an employment loss? 

Employment loss means (a) an employment termination, other than a discharge for cause, voluntary departure or retirement, (b) a layoff exceeding six months, or (c) a reduction in hours of work of more than 50% during each month of any six-month period.

An employment loss does not occur when the employee is transferred or reassigned to employer-sponsored programs like retraining or job-search activities provided the transfer or reassignment is not a constructive discharge. Nor does it occur when a closing or layoff results from a relocation or consolidation of the employer’s business and: (1) the employer offers to transfer the employee to a different site within a reasonable commuting distance within six months; or (2) the employer offers to transfer the employee to any other site within six months, and the employee accepts the offer within 30 days of the offer or relocation. 

What notice must be provided for a WARN triggering event?

WARN requires 60 calendar days’ advance, written notice to the affected employees (if not in a union) when there is a triggering event, as well as corresponding notice to state and local government officials.  If the affected employees are in a bargaining unit, the notice must be given to the employees’ union representative. Notice, of course, also may be given to the employees in the unit as well. 

Affected employees are full-time employees, including managers and supervisors, who may reasonably be expected to experience an employment loss as a consequence of a plant closing or mass layoff. This includes individually identifiable employees who will likely lose their jobs indirectly as a result of the triggering event. For example, employees that may be affected by others’ exercising bumping rights provided through a collective bargaining agreement, to the extent that such individual workers reasonably can be identified at the time notice is required to be given, should be included. Affected employees can include temporarily laid off employees with a reasonable expectation of recall at the time of the employment loss. This is an objective inquiry that considers (1) the past experience of the employer; (2) the employer's future plans; (3) the circumstances of the layoff; (4) the expected length of the layoff; and (5) industry practice.

What exceptions exist to the WARN notice requirement?

  • “Faltering company” exception – the employer is actively seeking capital or business, reasonably believes that advance notice would preclude its ability obtain such capital or business, and the capital or business would allow the company to avoid or postpone a shutdown.
  • “Unforeseeable business circumstance” exception – the closing or layoff is caused by business circumstance that was not reasonably foreseeable at the time that 60 days’ notice would have been required – for example, a sudden incident or event outside the employer’s control, like cancellation of a major order, a key supplier’s inability to deliver goods due to a strike, government closing of an employment site, and an “unanticipated or dramatic economic downturn.”
  • “Natural disaster” exception – the triggering event is the direct result of a natural disaster, such as a flood, earthquake, drought, or storm. 

In each of the above scenarios, the employer still must give “as much notice as is practicable,” according to the WARN regulations. The employer also must include in its notices a brief statement of the reason for reducing the notice period. Employers relying on one of the exceptions must recognize it is an affirmative defense—i.e. they bear the burden of proof—if they choose to provide the truncated notice. 

When does a temporary shutdown trigger a WARN event?

A temporary shutdown triggers the notice requirement only if there are a sufficient number of terminations, layoffs exceeding six months, or reductions in hours of work to be an employment loss.

Are layoffs an employment loss, trigging a WARN event?

Layoffs trigger an employment loss only when they: (1) exceed six months, (2) are a termination of employment that are not for cause or a voluntary departure, and (3) are a mass layoff as defined above.

Are furloughs an employment loss? What about intermittent furloughs?

Furloughs, whether full-time or intermittent, are an employment loss if they: (1) are a termination of employment or (2) are a reduction of work hours of more than 50% during each month of any six-month period.

Is a reduction in work hours an employment loss?

Reductions in hours of more than 50% a month for every month in any six month period are an employment loss. 

An employees’ hours should be calculated based on base hours of work (not including overtime). For an employee whose hours fluctuate, the monthly base would be the sum of the non-overtime hours worked in each week of the month. 

If not yet an employment loss, at what point might layoffs and furloughs become an employment loss? 

Layoffs and furloughs that initially are expected to be short-term (i.e. last for less than six months) may become an employment loss if they extend longer than six months. Notice when the layoffs or furloughs initially commenced may be excused if it was not reasonably foreseeable at that time that the layoffs or furloughs would extend for six months. However, once it becomes reasonably foreseeable that the layoffs or furloughs will extend beyond six months, the notice obligation then is triggered. The six-month period for an employment loss is measured from the date of the initial layoff or furlough, not from the subsequent decision to extend the layoffs or furloughs. 

Some federal courts only require the notice when objective evidence demonstrates that it is "more likely than not" that an external event will occur, necessitating the extension for more than six months. Other courts have not adopted that standard. 

The Department of Labor requires that notice be provided 60 days before the end of the six-month period for hours reduction or layoff, assuming it is reasonably foreseeable at that point that the layoff or furlough will become an employment loss. If an employment loss is still not reasonably foreseeable at that point, the employer must provide notice as soon as it is reasonably foreseeable.

What factors should an employer consider in evaluating when an employment loss becomes reasonably foreseeable? 

Employers should consider factors such as the following:

  • Whether commercially reasonable business judgment suggests that the business circumstance that led to the temporary layoff/furlough will continue for longer than six months?
  • The length of any government order that led to a furlough or layoff.
  • The company’s financial situation including canceled orders, unfulfilled requests, and other documents that demonstrate when the company determined that an extension of a layoff or furlough, or layoff of additional people, is economically necessary.
  • What are peer businesses in the industry doing?
  • What is the likely timeline for resuming operations when the shutdown orders are lifted?
  • Are reductions in the number of employees or the hours worked likely to continue for some time after the business reopens?

Employers should document internal deliberations regarding their intent to resume operations and return staff to work. Remember that all documentation – internal and external – may be examined when evaluating the often ill-defined “magic moment” when an employment loss became reasonably foreseeable. 

Do workforce communications (including to laid off or furloughed employees) play a part in the evaluation of an employment loss? 

Yes. Communications to employees may be a factor in determining whether there is an employment loss.  If an employer plans the layoffs or furlough to be less than six months, it is ideal to communicate that to employees at the time the notice of layoff or furlough is given, particularly if they are for a fixed term.

If the length of the layoff or furlough is not known at the time that it begins, communications to employees about the reason for the layoff or furlough may be a factor in demonstrating why the layoff or furlough is expected to be shorter than six months.

Communication with employees as the situation changes is important. Though initial communications may have a certain recall date, additional communications should track the situation and inform employees if recall seems unlikely. By updating employees as circumstances change, employers can temper expectations and create an evidentiary basis for relying on the unforeseen business circumstances rule in this context.

Does the COVID-19 pandemic constitute “unforeseen business circumstances” for WARN purposes? 

The governmental orders that resulted in the shutdown of many businesses are likely “unforeseen business circumstances” for WARN because they were outside of the control of the employer. While the U.S. Department of Labor has not offered a view on this subject in the context of COVID-19, the WARN regulations specifically include a “government ordered closing of an employment site that occurs without prior notice” as an event that may qualify as unforeseen business circumstances. 

Does COVID-19 constitute a “natural disaster” for WARN purposes?

No cases have addressed this yet, nor has the Department of Labor. At least one court has suggested that human involvement negates the natural disaster exception, which makes application to COVID-19 unlikely.

Should we be concerned about state and local WARN laws? 

Yes. Many states have local WARN laws that employers must follow. While some of the requirements are aligned with the federal WARN, many states set different thresholds or requirements. Some localities, such as the City of Philadelphia, also have plant closing ordinances that employers must follow. 

Has the DOL or any state/city taken any special action around WARN issues and COVID-19?

The Department of Labor has not. However, the City of Philadelphia and a number of states have adopted special WARN rules or guidance under the local/state laws. Some have recognized that layoffs due to COVID-19 shutdowns that are expected to be temporary (i.e. the company plans to reopen the location) fall under the unexpected business shutdown exception, so 60 days’ notice is not required.  States that have eased notice requirements include New York, New Jersey and California. 

Employers who expect layoffs or furloughs to continue after the shutdown orders are lifted should confirm the notice requirements in their states.

Ballard Spahr’s Labor and Employment (L&E) Group is prepared to help employers facing workforce reductions navigate these complex issues. 

Copyright © 2020 by Ballard Spahr LLP.
www.ballardspahr.com
(No claim to original U.S. government material.)

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, including electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of the author and publisher.

This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.