The Worker Adjustment and Retraining Notification Act (WARN) of 1992 was passed by the U.S. Congress in part to provide workers with an early warning of layoffs and plant closings so as to limit the amount of disruption in the workers’ lives as much as possible. Given that so many companies continue to reorganize and lay off workers, this continues to be an important act for both employers and workers to understand.
In general, this law requires employers who have at least 100 employees to provide at least 60 days’ notice to affected employees in the event of a mass layoff or plant closing. A mass layoff means a reduction in the workforce that results in an employment loss at a single site for any 30-day period for at least 33 percent of the active full-time employees and is equal to at least 50 full-time employees, or at least 500 full-time employees regardless of the percentage of employees affected. An employment loss is further defined as a termination of employment, a layoff of six months or more, or a decrease in work hours by more than half over a six-month period.
Notice to affected employees must include name and address of the plant closing location, the job(s) being terminated, the date of termination, any “bumping” rights that may exist, a telephone contact number, and a statement indicating if the layoff is temporary or permanent.
However, there are a number of conditions under which employers have no duty to provide notice to affected workers. These include waiver of one’s rights, exemptions allowed under the law, a faltering company, unforeseeable business circumstances, natural disaster, independence of operations, sale of a business, single-site issues, bankruptcy, bridge banks, and a statute of limitations.
The courts have allowed employees to waive their WARN rights under various federal and state laws, so long as consideration is provided for the relinquishment of the right and the person(s) did not waive their rights under conditions of fraud or duress.
Those employees who are hired with the knowledge that their employment is for a limited period have no notice rights under the WARN Act. In addition, employers are not expected to provide notice for any layoff or plant closing that occurs as a direct cause of a strike or a lockout.
Organizations can escape WARN provisions under the faltering company clause so long as it is actively seeking capital or new business that would prevent a layoff or plant shutdown. Firms must demonstrate that they were acting in good faith and actually seeking capital or additional business to qualify.
There are other adverse business conditions that occur from time to time that are unforeseeable. These are also excluded under the law. For example, despite prior warnings from the government, a prominent defense contractor was able to qualify for this exemption when the government suddenly cancelled one of its defense contracts.
Even a casino that was unexpectedly unable to renew its license was able to avoid complying with WARN provisions. Layoffs’ and plant closings’ notice requirements are also waived for natural disasters that might occur such as floods and hurricanes.
Businesses may also steer clear of WARN provisions under the independence of operations clause. In effect, this means that parent companies may avoid liability if they do not exercise control over day-to-day operations of subsidiaries or other companies that they own or to whom they have lent money. Other considerations in this determination include common ownership, common directors or officers, common personnel policies originating from a single course, and dependency of the operation(s) on the higher-level unit.
Whenever there is a sale of a business to another firm, the seller is only liable for any layoff prior to the date of sale. After that date, the buyer, even if the seller’s name is still on the lease, is liable for any failure to provide notice to workers in the event of a layoff or plant closing.
Single-site issues are the most complicated part of the WARN Act. Basically, buildings that are next to each other and owned by the same employer are not covered by WARN provided they have separate management, produce different products and services, and have separate workforces. Consideration is also given to employee rotation between sites and sharing of staff and equipment. The greater the distance between buildings or sites, then the less likely they are to be ruled to be a single site. Courts have found buildings as close as 20 yards apart to be separate sites when they were managed by independent management teams or had independent workforces.
Those businesses that have filed for bankruptcy are also excluded from WARN requirements. The courts have determined that companies in bankruptcy are not engaged in commercial activities, which is a fundamental requirement of having a business. In a related situation, banks that fail are often operated temporarily by the Federal Deposit Insurance Corporation (FDIC) through the use of bridge banks. The courts have also found these bridge banks to be excluded from WARN provisions.
Statute Of Limitations, Penalties, and Awards
The WARN Act does not have a time limit for filing for any violations. However, the Supreme Court has ruled that when a law is silent on the period for filing a claim, then generally the most analogous state law is to be used. Victims can receive up to 60 days of back pay. Companies that fail to comply with the WARN Act can also be assessed up to $500 a day.
The fundamental purpose of the WARN Act is to provide workers with notice of layoffs or a plant shutdown to minimize the impact on their families and lives, but achieving this objective has become quite complex in its application. While there are a variety of legal snares that may trap the most well-intentioned organization, there are also many ways to avoid the act’s requirements. Studies have shown that many companies are able to steer clear of the act’s legal demands. As a result, it appears that the WARN Act is generally failing to live up to its intended purpose.
Despite the relative ease of dodging its rules, many companies choose to provide workers with notice even if the layoff or plant closing is not covered by WARN. This practice is not only smart management, but it is also the humane thing to do.
- Louisiana Department of Labor. n.d. Worker Adjustment and Retraining Notification Act of 1992 Fact Sheet. Baton Rouge, LA: Author. (http://www.laworks.net/workforcedev/wfd_warnfacts.asp).
- Ludlow, R. 2001. “To ‘WARN’ or Not to ‘WARN.’” Retrieved from http://www.nifty-stuff.com/worker-adjustment-retraining-notification-warn-act.php.
- U.S. Department of Labor Employment and Training Administration. n.d. Worker Adjustment and Retraining Notification (WARN) Act Compliance Assistance Materials. Washington, DC: Author. Retrieved from http://www.doleta.gov/layoff/warn.cfm.