The swift onset of the 2019 novel coronavirus (COVID-19) pandemic caused lost revenue and financial hardship for many employers. Some quickly instituted layoffs as a cost-saving measure. Others went out of business altogether.
Regardless of whether employees suffered job losses as a result of layoffs or business shutdowns, employers may have had, or still have, a duty to provide notice of these job losses under the Worker Adjustment and Retraining Notification Act (WARN Act).
Many states also have their own so-called “mini-WARN” laws. For Wisconsin businesses, the applicable state law is the Wisconsin Business Closing and Mass Layoff Law (WI-WARN).
What is the WARN Act?
The WARN Act protects workers, their families and communities by requiring employers to provide at least 60 calendar days’ advance written notice of a plant closing or mass layoffs affecting certain numbers of employees. Under state law, if applicable, the notice period and the content of the notice may be different.
The purpose of the WARN Act is to provide workers and their families with transition time to adjust to the prospective loss of employment, to seek and obtain other jobs, and, if necessary, to enter skill training or re-training that will allow these workers to compete successfully in the job market.
Typically, obligations under the WARN Act arise when an employer has sufficient advance knowledge of the need for a plant shutdown or mass layoff such that the employer would be able to give employees the required 60 days’ advance notice. The plant closings and layoffs caused by the COVID-19 pandemic, however, were anything but typical. Many employers felt the need to act quickly and, as such, failed to issue WARN Act notices.
Does the WARN Act apply to your business?
Coverage under the WARN Act and similar state laws depends on the size of your workforce. Coverage under the WARN Act is triggered by having 100 or more employees in the U.S. In contrast, WI-WARN covers Wisconsin employers with 50 or more employees in the state. Who is considered an employee for purposes of coverage is dictated by statute and generally excludes new and low-hour employees.
Does the WARN Act apply to your layoffs?
The duty to provide WARN Act notice is triggered by either a plant closing or mass layoff, which are defined as:
- A plant closing (referred to as a business closing under Wisconsin law) is a permanent or temporary shutdown of a single site of employment, or of a facility or operating unit at a single site, that results in an employment loss for 50 or more full-time employees. This threshold is lowered under WI-WARN to 25 or more full-time employees within a single municipality.
- A mass layoff is defined as any workforce reduction that:
- Does not result from a plant closing, and
- Creates an employment loss affecting either 50 or more employees and at least 33 percent or more of the employers’ total active workforce at a single site of employment or, alternatively, 500 or more employees. Under WI-WARN this threshold is lowered to 25 employees or 25 percent of the workforce, whichever is greater.
Before jumping to the conclusion that there is a duty to provide WARN Act notice, an employer should carefully analyze whether they are covered under the law and, if so, whether the actions taken meet the plant closing or mass layoff definitions.
Are there exceptions to the application of the WARN Act?
There are many exceptions and nuances under the WARN Act and state law. Two pertinent exceptions in light of the current pandemic are:
- Layoffs of less than six months: If a temporary layoff lasts less than six months, an employer is not obligated to comply with the 60-day notice requirements of the WARN Act.
- Unforeseeable business circumstances: The WARN Act allows an employer to order a plant closing or mass layoff before the conclusion of the 60-day notice period if the closing or layoff is caused by “business circumstances that were not reasonably foreseeable as of the time that notice would have been required.” A government-ordered closing of an employment site that occurs without prior notice also may be considered an unforeseeable business circumstance.
To date, the U.S. Department of Labor and, in Wisconsin, the Department of Workforce Development, have provided no guidance on whether the business circumstances exception would apply to shutdowns and layoffs caused by the COVID-19 pandemic. Some attorneys and commentators believe that the exception could apply to certain industry sectors such as restaurants, bars and other service-sector employers who were subject to state government-mandated shutdowns.
However, for the majority of employers who have continued to operate as an essential business or are receiving government relief funding such as Paycheck Protection Program funds, the answer is far less clear. It remains to be seen how the state and federal governments will accept this exception in circumstances where operations have continued in some capacity, mass layoffs were contemplated prior to the COVID-19 pandemic or where an employer knows now that it will need to do a mass layoff as soon as federal funding ceases.
What, if anything, should an employer do?
Employers should consider these six actions:
- Determine if you have enough employees to be covered by the WARN Act or state-specific mini-WARN laws.
- Calculate whether the employment losses occasioned by a business shutdown or layoff would meet the coverage numbers set forth under applicable law.
- In the case of a temporary layoff, determine, to the extent possible, whether it will exceed six months (if not, the WARN Act does not apply).
- Because a layoff that lasts more than six months could trigger coverage, it is important to monitor the expected length of any current temporary layoffs. If a layoff is extended beyond 6 months due to business circumstances, notice is required when it becomes reasonably foreseeable that the extension is required.
- Even if the unforeseeable business circumstances exception applies, an employer still must provide as much notice as possible under the circumstances. The notice must provide a brief description of why the employer could not provide the full notice period.
- Consider whether it makes sense to play it safe and send notices even if the employer hopes to rehire workers within six months. A possible downside to this approach is that it could result in the laid-off workforce being motivated to find other jobs.
The bottom line is that the application of the WARN Act can be complicated. This complication is exacerbated by the fact that the law, while well-intentioned, did not anticipate how it should be applied in the face of a pandemic. If you think you may need to WARN your employees, seek legal counsel to help navigate these complicated laws.