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You can’t outsource your WARN Act notice obligations

by on
in HR Management,Human Resources

If your company outsources HR tasks, don't expect the outside provider to share the rap for a Worker Adjustment Retraining and Notification (WARN) Act violation, the law that requires certain companies to give 60 days' notice of impending layoffs or plant closings.

Many smaller companies use so-called professional employer organizations, or PEOs, to handle routine personnel and benefits duties. But in most cases, the ultimate responsibility for employment actions, including WARN notices and COBRA notices, lies squarely with you.

Recent case: When it ran into financial trouble, a clothing manufacturer closed one of its facilities without providing the required 60 days' layoff notice. A labor union that represented some workers sued under the WARN Act, saying the company that the plant used to outsource its HR functions (Administaff) should be liable.

A federal appeals court disagreed, saying Administaff didn't order the plant closing, nor did it have advance knowledge of company plans. So the company, not Administaff, was liable for the WARN violation.

To determine that Administaff was not a "joint owner" with the manufacturer, the court looked at a Labor Depart-ment five-point test for determining joint ownership:


  • Common directors and officers.



  • Common ownership.



  • De facto exercise of control.



  • Dependency of operations on each other.



  • The unity of personnel policies coming from a common source.




(Administaff Companies Inc. v. N.Y. Joint Bd., Shirt & Leisurewear Division, Union of Needletrades, Industrial and Textile Employees, No. 02-21259, 5th Cir., 2003)

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