Reed Smith Client Alerts

The COVID-19 pandemic presents unprecedented business challenges that have caused employers everywhere to control costs during this time of economic uncertainty. With such an effort to control costs, many employers are facing the difficult decision of whether to implement temporary or permanent employee layoffs. Before finalizing layoff plans, however, employers must first be mindful of the federal Worker Adjustment Retraining Notification (“WARN”) Act.

Auteurs: James A. Holt

construction worker helmet

WARN basics

The WARN Act protects workers by requiring employers to provide written notice at least 60 days in advance of covered plant closings or mass layoffs. The notice must be provided to affected workers (exempt and non-exempt), their labor union (if applicable), the state dislocated worker unit, and the appropriate unit of local government.

Generally, employers are covered by the Act if they have (i) 100 or more employees, not counting employees who have worked less than six months in the last 12 months or employees who work an average of less than 20 hours a week (collectively, “part-time employees”), or (ii) 100 or more employees, including part-time employees, who in the aggregate work at least 4,000 hours per week, exclusive of overtime hours.

Under the Act, a “plant closing” means the permanent or temporary shutdown of a single site of employment, or one or more facilities or operating units within a single site of employment, if the shutdown results in an employment loss at the single site of employment during any 30-day period for 50 or more employees, excluding part-time employees. Notably, a shutdown that halts production or work may be considered a covered plant closing even if a few employees remain.

If a reduction in force (often called a “RIF”) event does not constitute a plant closing, it may constitute a “mass layoff” under the WARN Act if, during any 30-day period, there is employment loss at a single site of employment affecting:  (i) 500 or more employees (excluding part-time employees); or (ii) 50-499 employees, if that group makes up at least 33 percent of the employer’s active workforce (excluding part-time employees).

Employers naturally understand that “employment loss” includes termination of employment, subject to the exceptions defined in the Act. However, employers should not overlook the fact that “employment loss” also can occur when any layoff exceeds six months, or when an employee’s work hours are reduced by more than 50 percent during each month over a six-month period. This is an important point for employers to heed if they are considering staffing strategies that include modifying work schedules, placing employees on furlough or any other plan that might result in a reduction of work hours for its workforce.

The Act also contains a so-called aggregation rule, under which notice is required when a series of two or more reduction events – none of which individually constitutes a covered plant closing or mass layoff – occur within 90 days and, in the aggregate, satisfy the above-stated employment loss thresholds sufficiently to constitute a covered plant closing or mass layoff, with minimal exceptions. By its nature, the 90-day aggregation rule requires employers to be both backward-looking (i.e., consider all reduction events occurring in the prior 90 days) and forward-looking (i.e., consider all reduction events reasonably expected to occur in the subsequent 90 days). Accordingly, employers are well advised to form a comprehensive reduction in force plan from the outset, to the extent practicable. Even if a comprehensive plan is not feasible in an unpredictable business landscape, employers generally should not overlook reduction events occurring within the prior 90 days when none of the prior or current events alone constitute a plant closing or mass layoff under the Act.