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Don’t Forget WARN Warnings When Reducing Head Count

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We have not talked much about the Worker Adjustment and Retraining Notification Act (“WARN”) in recent years both because unemployment has been low and we have not seen many plant closings or mass layoffs that would trigger WARN. But much like solar eclipses and cicadas, the frequency of WARN events is cyclical, and, during the last couple of months, several of my colleagues and I have found ourselves having more conversations about WARN than we have had in the last few years. So this might be a good time to review the basics of the federal plant closing law that went into effect some 30 years ago.

First, an employer is generally covered by WARN if it has more than 100 employees. Second, the WARN obligation to provide 60 days’ notice of an upcoming layoff is triggered in two situations: (1) a “plant closing” that results in an employment loss for more than 50 employees at a particular site during any 30-day period or (2) a “mass layoff” that results in either 500 employees or 33% of the employer’s active workforce suffering an employment loss at a particular site during a 30-day period. Third, the WARN notice must be provided to affected employees or their union, to the state dislocated worker unit, and to the chief elected official of the unit of local government containing the affected site. Failure to comply with the WARN Act could make an employer liable for up to 60 days of back pay for each employee, including the value of any benefits.

Employers that try to get around WARN by having multiple layoffs in a row, all under the triggering threshold, may still be liable, because WARN can be triggered by cumulative layoffs in a 90-day period.

WARN does provide certain exceptions to the notice requirement, including an exception for the “faltering company” who has sought new capital in order to stay open and for whom giving notice would ruin that opportunity. There are also exceptions for layoffs caused by unforeseeable business circumstances or natural disasters. Typically, these exceptions have been narrowly construed by the courts, and employers would be well-advised to seek legal counsel before relying on them.

Finally, employers should not forget that many states have their own WARN-like statutes. While these are often referred to as “mini-WARNs,” some of them have stricter requirements than the federal law. Failure to comply either with WARN or these state statutes can be expensive, so it is important to consider these laws before conducting any reduction-in-force.

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This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.