Updated: Jul 15, 2020
By Rayan Omer
The economic fall of small businesses has made owners lay off their employees as quickly as the blink of an eye. Regardless of how tough it was to make the decision of laying off your employees, most employees understand the economic reasoning behind it.
Nevertheless, it’s critical for employers to be aware of the laws governing employee layoffs because small business owners might not have previously dealt with situations requiring them to let go of numerous employees or even worse, close their business altogether. But, in this unprecedented time, COVID-19 hit the economy really hard.
So, what is the buzz about firing people? Doesn’t it happen all the time? Yes, it does occur often but not in such large numbers, nor do entire plans shut down every day. Because these events have serious, lasting consequences on employees, employers are required to give notice to their workers and their families in advance. This requirement was created by the Worker Adjustment and Retraining Notification “WARN” Act of 1988.
The “WARN” Act allows the workers to start looking for an alternative job or to learn a needed skill for moving into another department in the company. Providing the required notice also helps the families adjust their budget, so they can make sure they have their essentials covered, such as food, paying the rent and other bills.
Here are some of the frequently asked questions about the “WARN” Act explained to small business owners below:
What is the “WARN” Act?
The Worker Adjustment and Retraining Notification “WARN” Act of 1988 protects workers and their families from employment loss by providing them with a 60-day written notice before being let go. The law also applies in the event of plant closures.
What constitutes an employment loss?
Ogletree Deakins explains an employment loss is “(a) an employment termination, other than a discharge for cause, voluntary departure, or retirement; (B) a layoff exceeding 6 months; or (C) a reduction in hours of work of more than 50 percent during each month of any 6-month period.”
Careerminds provided a practical explanation of the term employment loss. For example,
if Jayhawk Manufacturing has 95 full time employees and they are planning on laying off staff members, they wouldn’t have to give a “WARN” notice. However, according to the plant closing and/or mass layoff stipulation, Jayhawk Manufacturing would have a duty to notify if it was going to close a facility that would affect more than 50 workers and last for more than 30 days or if they were going to lay off more than 50 workers over a 30-day period (since this is more than 1/3rd of their workforce).
Whom should I give the notice to?
According to the Balance Career, “the notice must be provided to the employees; the State Dislocated Worker Unit, the chief elected official of the unit of local government in which the employment site is located, and any collective bargaining unit.”
Are all employers required to provide such notice?
If you are a small business owner with less than 100 employees, then, luckily, you’re most likely off the hook. The “WARN” Act applies to employers
· With 100 or more full-time employees,
· When laying off 50 or more employees on the same site, or
· When reducing the hours of work for 50 or more employees by 50% or more for each month in any 6-month period.
Providing notice is required, whether your organization or business is for profit or nonprofit, public company or private.
Which employees does the “WARN” Act exclude?
Any employee who has worked for less than six months in a twelve-month period is excluded, in addition to any employee who works, on average, less than 20 hours in a week.
How is the “WARN” Act enforced?
The “WARN” Act is enforced by private legal action brought in the U.S. District Court for any district in which the violation is alleged to have occurred or in which the employer transacts business.
What should the “WARN” Act notice include?
The notice must include whether the layoff of employees or the closing of the plant is for more or less than 6 months’ duration because the law considers employment loss as any layoff or plant closure lasting for more than 6 months.
Error in the “WARN” notice?
In general, notices should be accurate because employees depend on them for their planning. Nevertheless, if an error occurred that was minor in nature or because of a change in circumstances during the 60 days period, those errors, if minor, would not render the notice unacceptable.
According to the United States Department of Labor, there is no specific format required to deliver the written notice. Any reasonable method would suffice. But, if a company regularly provides written notices to their employees, for instance, notices about the workplace or paychecks inserting the “WARN” notice in those regular company notices would not be permissible because employees would not expect the “WARN” notice to be included in regular communications.
Exceptions to the “WARN” Act?
There are three main exceptions for not providing the 60-day notice.
The first exception is when a company tries to obtain capital that would help prevent or postpone the closing of the plant or the mass layoffs. If the employer provides the 60-day notice in advance, this would hinder its ability to secure investment to capital. The employer’s belief that the “WARN” notice would affect the probability of obtaining capital must be made in good faith. This exception is called the flattering of the company.
The second exception is unforeseeable circumstances, like closing or mass layoffs resulting from an unexpected event that did not allow time to provide the 60-day notice, do not violate the “WARN” Act. For example, if a client cancelled a significant order that led to the closing of the plant, or mass layoffs, then that event was probably out of the employer’s control.
The third exception is natural disasters. When the natural disaster was the main cause of closing the plant or the layoffs, like an earthquake, storm, or flood, the notice may be given after the disaster.
In any case, the employer should provide the notice as soon as it’s practicable to do so. The employer must provide the reason for not meeting the 60 days’ notice requirement if they fail to meet that deadline.
Additionally, if the plant is closing temporarily, which is less than a 6 months’ period, then the “WARN” act is not triggered. For additional information on the “WARN” notice exceptions, check out work place fairness.
Consequences for not providing notice under the “WARN” Act?
Any violation of the “WARN” Act’s provisions warrants payments of damages to affected employees. For example, if an employer did not provide written notice before a mass layoff or the closing of a plant, then the employer is liable for backpay and benefits for the duration of the violation, up to 60 days, to each aggrieved employee.
The violation penalty may be reduced if the employer provided the employee with wages during the period of the violation.
Additionally, according to the Department of Labor, “an employer who fails to provide notice as required to a unit of local government is subject to a civil penalty not to exceed $500 for each day of violation. The penalty may be avoided if the employer satisfies its liability to each affected employee within three weeks after the closing”. The court has discretion to allow the prevailing party reasonable attorney's fee.
Payment in lieu of the “WARN” notice?
The law does not recognize the concept of paying money in lieu of the notice required by the “WARN” Act. As mentioned earlier, this notice is needed to prepare the workers and their families in advance. But, because the consequences of not providing the notice is mainly damages and backpay with benefits to the employee, an employee may be precluded from getting such relief if the employer had already provided the employee with full payments for the 60 day period.
What events do not trigger the “WARN” Act?
Temporary work with known end dates do not trigger the “WARN” Act. If a small business owner closes a plant after completing a temporary project, then the “WARN” Act would not be triggered because the employees were aware of the facts before they were hired.
Furthermore, if the employer closed the plant due to a strike or a lockout, this would not trigger the “WARN” Act. Ultimately, the intention must not be to evade the purpose of the “WARN” Act.
When do I start calculating the 60 day notice?
To determine an employment loss, whether it’s a plant closing or a mass layoff, the “WARN” Act reviews the acts within a 30-day period. For example, an employer has 50 employees, lays off 40 employees and after 25 days, they lay off the remaining 10 workers, this is considered a plant closing that requires the “WARN” notice. Even though the employer did not layoff the 50 employees at once, they were all laid off within a 30-day period.
Additionally, the Act does not look at each layoff individually but rather in the aggregate. This means that if there was a sequence of minor terminations or layoffs that do not trigger the “WARN” Act, but when added collectively, does trigger the “WARN” Act, then the employer is required to provide notice.
However, the employer does not have to provide notice if they can prove that the small terminations were a consequence of a separate cause, not an attempt to bypass the “WARN” Act. The “WARN” preamble act provides a 90-day aggregate for the employer to determine whether the layoff would trigger the “WARN” Act.
Can an employer transfer an employee in lieu of the “WARN” Act?
If an employee is offered a transfer that is within reasonable distance and does not significantly change their duties, benefits or conditions, then the transfer would not trigger the “WARN” Act. Keep in mind that the transfer offer must be given before the occurrence of the plant closing or the mass layoffs.
Additionally, if an employee accepts a transfer within 30 days of losing their job, then there is no loss of employment, provided that the duration between losing the job and accepting the transfer was less than a 6-month period.
Closing Thoughts on "WARN" Act
In conclusion, small business owners should make informed decisions before deciding to close their business or laying off mass employees due to the negative economic impact of the Coronavirus. If the employer has 100 or more full-time employees, the “WARN” Act applies to their company. An employer should not reduce the working hours of 50 employees by 50% for a duration of 6 months without written notice. Additionally, owners should not close their company or lay off employees in mass because this is considered an employment loss under the “WARN” Act.
Employers should put themselves in the shoes of their employees when providing the written notice. Add any helpful information that would ease the uncomfortable situation of the laying off process or closing of the plant. Bear in mind that your reputation as a leader amongst your employees is your most valued asset.
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