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The WARN Act: Top Coronavirus Questions Answered by Lawyers

March 25, 2020, 6:43 PM

Many companies have turned to their employment lawyers to understand their legal duties to notify workers about mass layoffs now that the novel coronavirus has forced them to drastically reduce business or shutdown entirely.

The Worker Adjustment and Retraining Notification Act—commonly known as the WARN Act—requires employers to provide at least 60 days’ notice to workers before a plant closure or “mass layoff” that will last more than six months. Employers that violate the law can be liable for back pay, benefits, and a civil penalty of $500 per day. The Labor Department’s pending WARN Act guidance is undergoing legal review, according to sources familiar with the plans.

Management-side attorneys spoke to Bloomberg Law about some of the most common questions they’re getting from businesses large and small.

The government ordered people to stay home and/or my business to temporarily close, so do I have to worry about WARN Act notices?

Yes. Employers must be aware of their WARN Act obligations, despite shelter-in-place or business closure orders prompting layoffs, attorneys said. Generally speaking, notice requirements are triggered by mass layoffs of at least 50 full-time workers and a third of the workforce, or 500 or more full-time employees overall. That includes furloughs, or temporary layoffs, if they are expected to last more than six months. The thresholds are for the workforce at a particular site of employment, not for a company’s total workforce across all locations.

The plant closure prong of the WARN Act notice requirement can be triggered by an employer shutting down an entire facility or an operating unit within a facility.

But the Covid-19 pandemic seemed to come out of nowhere. Aren’t there exceptions for situations like this?

Yes. There are exceptions for “unforeseen business circumstances” and natural disasters. The former are the better bet to apply to coronavirus-related decisions, attorneys said.

“If you go back 60 days from the end of March, then you have a pretty good argument that no business knew this would happen as the result of a virus,” said David Kresser of Fisher & Phillips, who counsels companies on the WARN Act. “But the longer you wait, the less likely you are to prevail on that argument.”

Invoking the “unforeseen business circumstances” exception can also raise questions about what employers knew and when they knew it, said Joshua Ditelberg, co-leader of Seyfarth Shaw’s workforce restructuring practice group. Those questions can be especially complicated if a company was already began planning a reduction in force prior to the coronavirus outbreak. Courts haven’t grappled with a lot of these WARN Act issues, Ditelberg said.

So if the unforeseen business circumstances exception applies, then I don’t have to worry about sending notices, right?

No. Companies still must send out notices, even if the exception applies to coronavirus-driven layoffs, and even though they get some reprieve from the full 60-day requirement, attorneys said.

“It’s an exception that’s not really an exception,” said Philip Miscimarra, co-leader of Morgan Lewis & Bockius’ workforce restructuring practice group. “It operates as a notice reduction provision.” Employers must send out notices for mass layoffs covered by the unforseen business circumstances exception as soon as practically possible, even if they’re issued after the layoff occurs, he said.

My company had to layoff nearly our entire workforce, but I hope to recall all of those workers in the near future. Do I have to send notices?

“That’s almost the existential question for most employers,” said Ditelberg of Seyfarth Shaw. “No one is really quite sure. Some industries and businesses are more likely to be back sooner than others. It’s very much not a one-size-fits-all situation.”

Companies need to weigh how they message layoffs to employees, particularly if they’re in industries in which hiring skilled workers is difficult. There’s a “freak-out quotient” for workers who’ve been let go and get WARN Act notices, he said.

But at this point nobody knows how long the coronavirus will require workers to remain laid off, making it generally advisable for companies to send WARN Act notices even if they hope to rehire workers within six months, said Hagood Tighe, co-leader of Fisher & Phillips’ wage and hour practice group. Giving notice now is safer, he said.

Is there a difference between laying off workers and furloughing them?

No. There is no legal distinction between a “layoff” and a “furlough” under the WARN Act, attorneys said. But which method employers choose for shedding payroll liability can still have financial and legal implications, lawyers told Bloomberg Law.

If I comply with the WARN Act, do I have to worry about state laws?

Yes. Employers still need to comply with state laws for mass layoff and plant closure notification, attorneys said.

More than 20 states have “mini-WARN Act” laws, including California, New York, New Jersey, Pennsylvania, Michigan, Ohio, Maryland, and Massachusetts. These state laws are often more protective of workers than the federal WARN Act, sometimes differing in the events that trigger notice requirements, the number of affected workers that trigger notices requirements, and what information must appear in the notices.

The mini-WARN Acts can have other significant differences from the federal version, lawyers said. For example, California’s law doesn’t have an unforeseen business circumstances exception. But last week, California Governor Gavin Newsom (D) signed an executive order temporarily modifying the state’s law, including the incorporation of that exemption. The state has since issued guidance on that executive order.

—Ben Penn contributed to this report

To contact the reporter on this story: Robert Iafolla in Washington at riafolla@bloomberglaw.com

To contact the editors responsible for this story: Jay-Anne B. Casuga at jcasuga@bloomberglaw.com; Chris Opfer at copfer@bloomberglaw.com

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