Layoffs Ahead? A Warning About the WARN Act
After suffering through labor shortages amid strong consumer demands, it now seems the economic pendulum could be swinging back the other way. In recent months, a number of well-known companies have announced layoffs due to recession fears and an attempt to tighten belts and perhaps now correct issues stemming from trying to grow too far too fast. Big names such as Netflix, Tesla, JP Morgan Chase, Carvana and a slew of cryptocurrency businesses have all made headlines recently for closing plants and/or parting ways with hundreds of employees. If your company may also be facing future layoffs, make sure you know how to comply with the requirements of the WARN Act.
What is the WARN Act?
The Worker Adjustment and Retraining Notification (WARN) Act was signed into law in 1988 and went into effect at the beginning of 1989. It was implemented to provide both workers and states advance notice of plant closings and/or mass layoffs in order to coordinate efforts to help affected employees find employment and/or obtain retraining to enhance job skills and marketability in order to seek future jobs in a different role or industry. When the WARN Act is triggers, covered employers must provide at least 60-days advance notice to any employees facing possible employment loss.
Which Employers Must Comply with the WARN Act?
Generally speaking, the WARN Act applies to any private or non-profit employers with 100 or more full time employees. Part-time employees working 20 hours or less or those full-time employees who have been employed fewer than 6 months in any 12-month period are not included in the employee headcount. HOWEVER, an employer who employs 100 or more full AND part-time employees that work a combined average of 4,000 hours per week (excluding overtime) is also a covered employer. The act typically does not apply to federal, state, local or Indian tribal government employers who provide public services. Temporary employees may be included in counts even if they are not eligible to receive notice under the act. In some instances, states may also have their own rules and regulations for mass layoffs which may include thresholds of fewer employees, more notice, etc. For example, in Vermont the WARN act is triggered if the layoff or closing affects 50 or more employees regardless of how many total employees a company has.
What Triggers WARN Act Filing Requirements and Notices?
There are a few actions that can set off a WARN notification. Employers should take great care in analyzing both future and recent past job terminations and pay careful attention to job statuses in order to not run afoul of WARN. Here are some of the basics:
Plant Closings – Plants are not simply those typically associated with manufacturing, but can also include any employment site, factory, group of office buildings or other facility/(ies) that house a group of employees of a single employer that may own other plants or office sites. If either a temporary or permanent closure is to take place with the shutdown affecting 50 or more employees (excluding part-time working less than 20 hours/week or those employed fewer than 6 months) during any 30-day period, then WARN notices will need to be issued.
Mass Layoff – If an employer lays off either 50 or more employees or 33% of its workforce at a single site of employment, then the WARN act will be triggered. For the purpose of counting laid off employees, part-time workers working less than 20 hours per week and those employed fewer than 6 months in any 12-month period are not included. If there are more than 500 employees at a site, then the 33% measure does not apply and instead simply the 50 or more employees threshold would be used.
90-Day Rule – If separate employee layoffs during any 30-day period do not reach the level of an individual mass layoff or plant closing, but combining the layoffs from each of the separate events during any 90-day period does reach the thresholds, then the WARN Act is triggered. There is an exception if the employer can demonstrate that the layoffs were the result of very distinct and separate actions and/or causes.
Are All Layoffs Treated the Same?
No, they are not. Layoffs must result in “employment loss” and there are some factors can make a layoff technically not result in employment loss. To be considered a true “employment loss” it must meet the following definition:
- An employment termination, other than a discharge for cause, voluntary departure, or retirement;
- a layoff exceeding 6 months; or
- a reduction in an employee’s hours of work of more than 50% in each month of any 6-month period.
There are also some exceptions, which employers may use in trying to provide alternate employment for affected workers. Employees who fall under any of these scenarios will not be considered as having suffered an employment loss:
- Employees who refuse a transfer to comparable position at another of the company’s employment sites that is within a reasonable commuting distance.
- Employees who within the later of 30-days of an offer, a mass layoff or plant closing accept a position at another employment site even if it is beyond a reasonable commuting distance.
- Note: Offers for transfer must be made prior to a mass layoff or plant closing.
Other exceptions include the closing of any plants or employment sites that were temporary and where workers understood at the time of hire that their employment was on a temporary basis for the completion of a specific project, etc. Also, any sites where employees are part of a union and go on strike that results in the temporary shutdown of a plant or site of employment will not be covered by the WARN Act for such a shutdown unless the employees are not members of the union or are union members who do not participate in the strike.
How Are Remote Employees Treated?
This is where things can get a little more confusing. The COVID-19 pandemic greatly affected the way people work. Even as cases decline and there is a return to more normalcy, many employees have insisted on continuing to work remotely or have sought employment with other companies that permit them to do so.
As such, employers may now have employees working from remote locations either within the state, in neighboring state, across the nation or perhaps even from abroad. Where the WARN Act was initially implemented to aid both states and workers when faced with mass layoffs, there is significantly more grey area in dealing with these matters when a company has either a partial or fully remote workforce.
As a general rule, remote employees are counted as part of whatever employment site they report to. Many states initially issued waivers during the pandemic for remote workers employed in one state, but working from home in another. Most of those waivers have since expired. Hopefully, prior to coming to terms with an employee on their full or partial remote work arrangements, the employer addressed any possible legal ramification related to such employment, such as:
- Unemployment Insurance – In which state will your employee file for unemployment and have the appropriate UI payments been made? Here is a helpful list of the various state contacts: https://in.checkmatepayroll.com/register-your-business-to-process-payrolls
- Final Paycheck – Are you required and prepared to meet the final paycheck laws in the state in which your remote employee works? (For example, some states will permit you to pay the employee on the next regular payroll while others require payment on or within a few days of the last day of employment). Check out our resource page here: https://in.checkmatepayroll.com/final-paycheck-due-dates-by-state
- Taxes/Withholdings – Have the appropriate state and/or local taxes been withheld and filed from the employee’s paycheck and any potential severance package payments?
- Wage and Hour Laws – In addition to complying with any payroll taxes, have you also been complying with the appropriate wage and hour laws for the state in which the remote employee is legally considered to be working? Access our minimum wage and overtime rules page here: https://in.checkmatepayroll.com/minimum-wage-rates-and-overtime-by-state-0
- Labor Law Postings – Have you adequately met the required labor law posting requirements for your remote employees including ensuring the rights they have under the WARN Act and other federal and state positing requirements?
Whether or not you are an employer covered by the WARN Act, if you are facing the potential need to layoff any of your employees due to economic reasons that are not directly associated with an employee’s job performance, providing employees with as much advance notice and assisting them with finding employment opportunities is simply the right thing to do. If you are a covered employer, be sure to review the complete guide for covered employers to make sure you comply with all notice and filing requirements and that you fully understand when the WARN Act is triggered. The complete guidelines can be found here: https://www.dol.gov/sites/dolgov/files/ETA/layoff/pdfs/_EmployerWARN2003.pdf. We also recommend reviewing any potential layoffs with your employment law legal counsel.