Considering a Layoff or Business Closure Due to COVID-19? Be Sure to Consider the WARN Act

04.07.2020

Many businesses faced with financial hardship as a result of the COVID-19 pandemic will be faced with the unfortunate option of laying off employees or closing down operations.  

Employers considering a large layoff or closure should be aware of the requirements of the federal Worker Adjustment and Retraining Notification Act (the “WARN” Act). The WARN Act requires certain employers to provide written notice at least 60 days in advance of “plant closings” or “mass layoffs.”

Below are a few questions employers should ask if considering a layoff or closure:

1.  Does the WARN Act apply to my business?

The WARN act applies to:

Businesses with more than 100 full time employees (where “full time” is defined as more than 20 hours per week and having worked at the business for more than 6 months); and

Businesses with more than 100 full-time and part-time workers who work at least a combined 4,000 hours per week.

In counting the number of employees for purposes of the WARN Act, a business should count employees at all locations, and not just locations affected by layoffs or closures. Additionally, affiliated companies may need to be aggregated for purposes of the employee threshold.  Factors favoring aggregation include: (i) common ownership; (ii) common directors and/or officers; (iii) de facto exercise of control; (iv) unity of personnel policies emanating from a common source; and (v) the dependency of operations.

2.  What events trigger WARN Act requirements?

The WARN Act is triggered by either a “Mass Layoff” or a “Plant Closing” that results in an “employment loss.” An employment loss is a termination, a layoff lasting more than six months, or a reduction of workhours by more than 50%.

What is a Mass Layoff?

A “Mass Layoff” is a reduction in the workforce during a 30-day period that is not the result of a plant closing and results in an employment loss at a single site of:

• 50 or more full time employees IF that totals at least 33 percent of full time employees (where “full time” is defined as more than 20 hours per week); or
  • For example: if you have 500 employees, and lay off 50 full time employees, this is not a Mass Layoff, as the 33% threshold was not met.
  • Another example: if you have 100 employees, and lay off 33% of your employees, this is not a Mass Layoff, as you have not met the 50 employee threshold.
• 500 or more full time employees (where “full time” is defined as more than 20 hours per week).

What is a Plant Closing?

A “Plant Closing” is a permanent or temporary shutdown of a single site of employment during a 30-day period, resulting in an “employment loss” for 50 or more full time employees (where “full time” is defined as more than 20 hours per week).

The WARN Act’s notice requirement may also be triggered by separate reductions in force occurring within a rolling 90-day period that, alone, do not meet these thresholds but, in the aggregate, constitute a plant closing or mass layoff.

3.  What type of notice does the WARN Act require?

The WARN Act requires that employers provide written notice 60 days before a Plant Closing or Mass Layoff, to the following:

• All affected employees;
• The representatives of affected unionized employees;
• The state or entity designated by the state to carry out rapid response activities (in Virginia, the Virginia State Dislocated Worker Unit); and
• The chief elected official of the unit of local government where the closing or layoff will occur.

4.  What if I cannot provide 60 days’ notice?

There is an exception to the 60-day notice requirement that applies when the Plant Closing or Mass Layoff is caused by “unforeseeable business circumstances.”   

If the layoff is due to unforeseeable business circumstances, the employer must provide notice as soon as practicable, as well as provide a brief statement explaining the reasons for the reduced notification period.

Is COVID-19 an “Unforeseeable Business Circumstance? It is reasonable to think so, but this is unprecedented territory, and the longer the pandemic unfolds the less likely it is that layoffs will be deemed unforeseeable. This and other WARN Act exceptions are often subject to litigation. Be sure to provide written notice as soon as is practicable if your layoff or closure is a result of COVID-19.

5.  What else should I consider?

The WARN Act is a federal law, but some states have their own WARN Acts, referred to as “mini WARN acts.” Virginia does not have a mini WARN act, but if your company has employees in other states, those state laws should be considered for mini WARN act compliance as well. 

If your business is  considering a mass layoff or plant closing, you should also be aware that the recently passed CARES Act has established a Paycheck Protection Program that provides loans for employers to cover eligible payroll and certain other costs. These loans are forgivable, but the forgiveness will be reduced proportionally by any reduction in employees retained compared to the prior year or certain reductions in overall compensation during the period in question. 

As always, if you have question about the WARN Act or if you are considering a mass layoff or plant closing, contact experienced employment counsel.