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Temporary Office Closings, Furloughs, and Layoffs: What Employers Should Know About the WARN Act

The disruptions resulting from the novel coronavirus (COVID-19) pandemic present difficult questions for many employers who must decide whether to close offices, furlough employees, or layoff all or part of their workforce. Employers who do so may have to comply with the notice requirements of the federal Work Adjustment and Retraining Notification (WARN) Act and comparable state laws, which require covered employers to notify employees, unions, and government officials in advance of covered plant closings or mass layoffs.

The WARN Act exempts employers from compliance with notice requirements for otherwise covered events that occur as a result of a natural disaster or unforeseeable business circumstances. But employers still must provide as much notice as practicable and explain the reasons for any shortened notice period.

Moreover, a number of states have their own “mini WARN” Acts, some of which have more onerous or expansive notice requirements, and some of which do not contain exemptions for unforeseeable business circumstances. As a result, employers who claim the unforeseeable business circumstances exemption under the federal WARN Act may not be able to claim a similar exemption under state law.

Thus, in situations where a covered plant closing or mass layoff must occur due to the impact of COVID-19, employers should comply with the applicable WARN Act’s notice requirements where feasible, as soon as practicable, and explain the reasons for the shortened notice period.

The Federal WARN Act

Under the federal WARN Act, employers with 100 or more full-time employees must provide notice to employees, employee representatives (i.e., unions), and state/local officials at least 60 calendar days in advance of certain plant closings or mass layoffs. Specifically, the notice requirements of the federal WARN Act are triggered if a covered employer:

  • Closes a facility or discontinues an operating unit, permanently or temporarily, and it impacts at least 50 full-time employees at a single site of employment;
  • Implements a mass layoff of 500 or more full-time employees at a single site of employment during a 30-day period, or lays off 50 – 499 employees and those layoffs constitute 33% of the employer’s total active workforce (not counting part-time workers) at a single site of employment;
  • Announces a temporary layoff of fewer than 6 months that meets any of the above criteria and then extends the layoff for more than 6 months; or
  • Reduces the hours of work for 50 or more workers by 50% or more for each month in any 6-month period.

Employers who are considering temporary layoffs or reducing employees’ work hours in response to the COVID-19 pandemic are not required to provide notice under the federal WARN Act if the layoffs are for 6 months or fewer, or if employees’ work hours are not reduced by 50% for each of six consecutive months. Given the current uncertainty regarding how long the impacts of the COVID-19 pandemic will last, employers contemplating temporary layoffs or staffing reductions may not know how long they will last.

Federal WARN Act Exemptions

The federal WARN Act contains several exemptions that excuse employers from having to provide notice for certain events even where they would otherwise satisfy the statute’s threshold criteria, though these exemptions have been narrowly construed, hard for employers to claim, and frequently litigated by impacted employees.

For example, notice is not required for plant closings or mass layoffs that occur as a result of a natural disaster, such as a flood, earthquake, drought, storm, tidal wave, or similar acts of nature.

The federal WARN Act also exempts employment actions that are the result of “unforeseeable business circumstances,” which includes business circumstances caused by sudden, dramatic, and unexpected conditions that were not reasonably foreseeable at the time that 60-days’ notice would have been required. In cases involving natural disasters and unforeseeable circumstances, employers must provide as much notice as practicable and explain the reasons for the shortened notice period.

The unique circumstances of the COVID-19 pandemic should give employers a strong case for claiming an exemption — particularly where a plant closing or mass layoff occurs as a result of orders from state or local officials mandating that certain businesses must cease operations. But the exemptions have never been construed in a pandemic, so it is unpredictable precisely how courts would interpret employer obligations or fashion relief for affected employees upon a finding that the WARN Act governs employment actions resulting from COVID-19.

In situations where a covered plant closing or mass layoff must occur due to the impact of COVID-19, employers should comply with the federal WARN Act’s notice requirements where feasible as soon as practicable and explain the reasons for the shortened notice period.

State “Mini-WARN” Acts

In addition to the federal WARN Act, sixteen states have comparable statutes with their own unique — and sometimes more stringent — requirements. These so-called “mini WARN Acts” apply in addition to the federal WARN Act, meaning that employers in these jurisdictions must comply with both the federal and state requirements.

The following states have mini-WARN Acts with more onerous or expansive notice requirements than those required under the federal WARN Act.

California. California’s WARN Act applies to “covered establishments” that have employed at least 75 employees, either full- or part-time, within the preceding twelve months. In addition to facility closings, 60 days’ notice is required for mass layoffs that impact at least 50 employees, regardless of whether that number constitutes 33% of the employer’s active workforce. It also applies to the relocation of an employer’s operations to a different location 100 miles or more away. Moreover, courts have held that California’s statute applies to temporary shutdowns or layoffs as short as three weeks.

The statute does not include an exemption for unforeseeable business circumstances, although California recently announced that it is suspending the 60 days’ notice requirement until the State of Emergency declared by Governor Gavin Newsom in response to the COVID-19 pandemic ends. Instead, employers must provide as much notice as practicable. The statute does contain an exemption for natural disasters, and although that provision has never been interpreted to apply to pandemics, the argument would exist that it is applicable to the state of emergency caused by the COVID-19 pandemic.

Connecticut. Connecticut’s WARN Act requires employers to continue existing group health plan benefits of employees impacted by a plant closing or relocation to another state for as long as 120 days. The statute does not contain an exemption for temporary plant closings or relocations.

Hawaii. Hawaii’s WARN Act applies to employers with 50 or more employees, rather than the 100 employees used to determine federal WARN Act coverage. The statute has been interpreted not to apply to temporary losses of employment, but it does not define the length of time that constitutes a temporary loss of employment.

Illinois. Illinois’s WARN Act applies to employers with 75 employees, as well as mass layoffs of 25 or more employees where that number constitutes at least 75% of the employer’s workforce. Like the federal WARN Act, Illinois’ statute exempts closings or layoffs that result in a loss of employment for fewer than six months.

Maine. Maine’s WARN Act does not contain an exemption for unforeseeable business circumstances. The statute does contain an exemption for natural disasters, and although that provision has never been interpreted to apply to pandemics, the argument would exist that it is applicable to the state of emergency caused by the COVID-19 pandemic. Additionally, it is unclear under the statute whether layoffs and closings that result in a loss of employment for fewer than six months are exempted.

New Jersey. New Jersey’s WARN Act applies to the permanent or temporary relocation of operations to another location in addition to the events covered under the federal WARN Act. The statute excludes temporary layoffs that result in a loss of employment for fewer than six months, but only if the employer guarantees reinstatement within that six month period. New Jersey’s WARN Act does not contain an exemption for unforeseen business circumstances but does contain an exemption for plant closings (not mass layoffs) that are the “direct cause” of a natural disaster. That provision has never been interpreted to apply to pandemics, but the argument would exist that it is applicable to the state of emergency caused by the COVID-19 pandemic.

Moreover, New Jersey recently passed the Amended New Jersey WARN Act, which will take effect on July 19, 2020. The amended statute will require 90 days’ notice and will apply to mass layoffs that result in the termination of at least 50 full- or part-time employees “at or reporting to” any establishment or group of establishments within the state, regardless of whether that number constitutes 33% of the employer’s workforce.

The expansion of coverage to employees who merely report to an establishment within New Jersey raises the prospect that employees who work outside of the state must be considered when determining whether the impacted employee threshold has been met. More significantly, the amended statute will require employers to provide severance pay to impacted employees in an amount equal to one week for every year of employment — even if the employer has complied with the 90-day notice period. If an employer does not provide the requisite notice, an additional four weeks of severance is required. The severance provisions apply to employees terminated as a result of both plant closings and mass layoffs.

New York. New York’s WARN Act applies to employers with 50 or more full-time employees. The statute also requires 90 days’ notice in the event of (1) a facility closing that impacts 25 or more employees; (2) a mass layoff that impacts at least 33% of the employer’s workforce, where that 33% equals at least 25 employees, or a mass layoff that results in a total loss of 250 employees; or (3) the relocation of employees to a different location at least 50 miles away. Layoffs shorter than six months are not covered under New York’s WARN Act.

Tennessee. Tennessee’s WARN Act applies to employers with 50–99 full-time employees at a single workplace located within Tennessee. In addition to plant closings and mass layoffs, the statute also requires notice where 50 or more employees are relocated to a new location more than 50 miles away. Like the federal WARN Act, Tennessee’s statute exempts closings or layoffs that result in a loss of employment for fewer than six months.

Wisconsin. Wisconsin’s WARN Act applies to any employer with 50 or more employees in Wisconsin. It also applies to closings impacting 25 or more employees, as well as layoffs of 25% of the employer’s workforce or 25 employees, whichever is greater. The statute does not apply to temporary losses of employment that are shorter than 60 days.

Takeaways

Employers faced with the difficult prospect of permanent or temporary closings, furloughs, or layoffs should ensure that they comply with federal and applicable state WARN Act requirements to the extent feasible. Even though the fast pace of events as the COVID-19 pandemic unfolds may make it impossible for employers to provide the full amount of notice required by applicable law, employers should provide as much notice as practicable as a best practice.

As a practical matter, federal and state enforcement authorities might not file actions alleging technical violations, but this will not deter lawyers for employees from asserting claims and seeking maximum allowable damages and penalties for any noncompliance. Although employers will likely be able to argue that the notice is not required due to the unforeseeable business circumstances resulting from the spread of COVID-19, it is currently unclear whether that will be a winning argument.

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