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A wave of corporate mergers and downsizings in the ’80s led Congress to pass the Worker Adjustment and Retraining Notification (WARN) Act of 1988. The act requires certain employers to give affected employees 60 days’ notice of an impending layoff or plant closing. You can be liable for back pay to employees for any portion of the 60-day notice period.

The term “layoff” or “reduction in force” is often used interchangeably with “firing” or “termination.” Yet there are important distinctions. A layoff occurs when workers are let go for reasons beyond their control—for example, the company has suffered an economic downturn or has been restructured, bought out or shut down.

Under the WARN Act, a “plant closing” is defined as a temporary or permanent shutdown that results in 50 or more full-time employees losing their jobs. A “mass layoff” is a work force reduction that’s not the result of a plant closing but causes employment loss at a site for any 30-day period for one-third (but not less than 50) of the full-time work force, even if the plant remains open. If 500 or more full-time employees are affected in the layoff, the one-third requirement doesn’t apply.

The provisions of WARN apply to any employer that has 100 or more full-time employees or has 100 or more employees, including part-time workers, whose total work amounts to at least 4,000 hours per week, not counting overtime.

Before contemplating a layoff or shutdown, consult an attorney to see what your obligations are under the WARN Act. Also, keep in mind that many states and municipalities have notification laws more stringent than the federal law.

The WARN Act requires employers to send notices to:

  • Each employee affected by the closing or mass layoff (or, if union workers are affected, to the designated representative).
  • The state’s dislocated-worker unit, which provides training and assistance to employees who have lost their jobs.
  • The appropriate local government official (usually the mayor or city manager).

All notices must be made in writing at least 60 days before the action and must include, at a minimum, the following:

  • Name and address of the employment site where the action will occur.
  • Name and phone number of a company official to contact for further information.
  •  A statement as to whether the planned action is expected to be permanent or temporary and if the entire facility is to be closed.
  • Expected date of the first separation and the anticipated schedule for making separations.
  • Job titles of positions to be affected and names of workers currently holding those jobs.

Notices to the state’s dislocated-worker unit must also state the number of employees holding each job title and whether bumping rights exist.

Exceptions to notification

The advance-notice rule has four key exceptions. If you rely on any of them to give less than 60 days’ notice, you bear the burden of proof that it’s true:

1. "Faltering company” exception. This applies to plant closings but not to mass layoffs. It covers situations in which a company has sought new capital or business in order to stay open and giving notice would ruin the opportunity to obtain new capital or business.

2. “Unforeseeable business circumstances” exception. Your company can be exempted if the layoff or plant closing was brought about by a sudden, dramatic and unexpected action or condition beyond your control: for example, an economic downturn, a strike at a major supplier or the sudden termination of a major contract.

3. “Natural disaster” exception. This applies to plant closings and mass layoffs in the wake of a natural disaster, such as a flood, earthquake or storm. Note: Employers don’t have to give notice when closing a temporary facility or if a closing or layoff results from completion of a project. But this exemption applies only if the workers, upon hiring, knew that their jobs were limited to the project’s duration.

4. “Government action” exception. After 9/11, the government federalized all airport security. Contractors that provided the service were legislated out of business. To add insult to injury, displaced workers sued their employers under the WARN Act, arguing they didn’t provide appropriate notification. The 9th Circuit ruled that company closings due to governmental action are exempt from WARN’s requirements. Deveraturda v. Globe Aviation Security Svcs., Case No. 04-16633, 9th Cir. (July 24, 2006)

Caution: Lawsuits challenging WARN Act compliance have become more common in the wake of the recent increase in layoffs. Meanwhile, states have enacted their own layoff notification laws, which vary considerably from state to state. Check your state law before undergoing any mass layoffs.

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