DOL Issues FAQs on WARN Act and COVID-19
The US Department of Labor (DOL) recently issued some FAQs on the WARN Act and COVID-19 that provide some further clarity for employers.
By way of background, the WARN Act requires employers with 100 or more full-time employees (not counting workers who have fewer than 6 months on the job) to provide at least 60 calendar days advance written notice of a worksite closing affecting 50 or more full-time employees, or a mass layoff during any 90-day period affecting (1) at least 50 full-time employees at a single site of employment who comprise at least 1/3 of the site’s total workforce or (2) 500 or more full-time employees at the single site of employment. A “part-time” employee for WARN Act coverage is someone who has worked an average of less than 20 hours per week or fewer than 6 of the last 12 months.
Not all worksite closings or mass layoffs require 60 days’ notice. The WARN Act exempts employers from complying with the full 60-day notice requirement when they can show that the layoffs or worksite closings occur due to faltering companies, unforeseen business circumstances, and/or natural disasters. In such instances, the WARN Act requires employers to provide as much notice to their employees as practicable.
Temporary layoffs or furloughs lasting longer than 6 months are included among the types of employment losses that require notice under the WARN Act if they constitute covered closings or mass layoffs. The DOL confirmed in the FAQ that a temporary layoff or furlough without notice that is initially expected to last six months or fewer, but later is extended beyond 6 months, may violate the Act unless:
- The extension is due to business circumstances (including unforeseeable changes in price or cost) not reasonably foreseeable at the time of the initial layoff; and
- Notice is given when it becomes reasonably foreseeable that the extension is required.
This means that an employer who previously announced and carried out a short-term layoff (6 months or fewer) and later extends the layoff or furlough beyond 6 months due to business circumstances not reasonably foreseeable at the time of the initial layoff is required to give notice at the time it becomes reasonably foreseeable that the extension is required. A layoff extending beyond 6 months for any other reason is treated as an employment loss from the date the layoff or furlough starts.
For permanent layoffs because of COVID-19, the DOL recommends that employers review the “unforeseeable business circumstances” exception to the 60-day notice requirement set forth below:
The “unforeseeable business circumstances” exception applies to plant closings and mass layoffs caused by business circumstances that were not reasonably foreseeable at the time that 60-day notice would have been required.
- An important indicator of a business circumstance that is not reasonably foreseeable is that the circumstance is caused by some sudden, dramatic, and unexpected action or condition outside the employer’s control. A principal client’s sudden and unexpected termination of a major contract with the employer and an unanticipated and dramatic major economic downturn might each be considered a business circumstance that is not reasonably foreseeable. A government-ordered closing of an employment site that occurs without prior notice also may be an unforeseeable business circumstance.
- The test for determining when business circumstances are not reasonably foreseeable focuses on an employer’s business judgment. The employer must exercise such commercially reasonable business judgment as would a similarly situated employer in predicting the demands of its particular market. The employer is not required, however, to accurately predict general economic conditions that also may affect demand for its products or services.
When invoking an exception to the WARN Act’s 60-day notice requirement, a covered employer is still required to:
- Give as much notice as is practicable; and
- Include a brief statement of the reason for giving less than 60-days’ notice along with the other required elements of a WARN notice.
According to the DOL, the applicability of the “unforeseeable business circumstances” exception rests on an employer’s particular business circumstances. The WARN Act is enforced by private legal action, which plaintiffs may file in the US District Court for any district in which the violation is alleged to have occurred or in which the employer transacts business. Thus, if a WARN Act action is brought alleging that an employer did not provide the requisite notice, an employer may need to prove that it could not foresee the circumstances that prevented it from providing affected employees with full notice. Any dispute regarding the interpretation of the WARN Act, including the applicability of its exceptions, will be determined on a case-by-case basis in such a court proceeding. The role of the DOL is limited to providing guidance and information about the WARN Act, and such guidance is not binding on courts and does not replace the advice of an attorney.
Where WARN notice is required, the DOL confirmed that employers may send it by email. The regulations implementing the WARN Act state that: “Any reasonable method of delivery which is designed to ensure receipt of notice” is an acceptable form of notice. The DOL cautioned that a WARN notice sent via email must still be specific to the individual employee, and comply with all requirements of the WARN Act and its regulations regarding contents of written notifications.
Although most state mini-WARN Acts are interpreted in a manner similar to the federal WARN Act, employers should check the laws in their state to make sure they are in compliance with both. In particular, if an employer intends to assert the unforeseen business circumstances exception under the federal WARN Act, it should be sure to confirm that a similar exception exists under any state mini-WARN Act that may be applicable.