When do Coronavirus-Related Closures Trigger WARN Act Obligations?
As the COVID-19 crisis continues to develop, one question employers are beginning to ask is whether and when they are obligated to provide notices to employees under the federal and state WARN Acts. The federal and Illinois WARN Acts are not implicated by temporary closures of less than 6 months, provided that employees are returned to work following the closure. However, for businesses facing an uncertain future, it may be prudent for employers to issue WARN notices now even to employees who may be recalled to work when public health and business circumstances permit. Government employers are not covered by the federal or Illinois WARN statutes.
Below are some answers to some basic questions regarding WARN notices. Because WARN is a highly technical law, employers should consult with experienced employment counsel to determine whether and when WARN notices should be issued.
What does the federal WARN Act require?
Generally speaking, the federal WARN Act requires employers with 100 or more full-time employees (or full-time equivalents) to give written notice to affected employees, unions, and the government at least 60 days before an “employment loss” that meets the definition of a “mass layoff” or a “plant closing.”
What is “employment loss”?
Under the Federal WARN Act, an “employment loss” means (i) an employment termination, other than a discharge for cause, voluntary departure, or retirement, (ii) a layoff exceeding 6 months, or (iii) a reduction in hours of work of individual employees of more than 50% during each month of any 6-month period.
What is a “mass layoff” under federal WARN?
The federal WARN Act defines a “mass layoff” as a reduction in force that results in “employment loss” at a “single site of employment” during any 30-day period for: (i) at least 33% of the active employees at that site (excluding part-time employees); and (ii) at least 50 employees (excluding part-time employees). The 33% requirement does not apply if the total number of affected employees is 500 or more. Note that the 30-day period may be expanded to include employment losses occurring over a 90-day period, unless an employer can show that the losses due to for separate and distinct causes and actions.
What is a “plant closing” under federal WARN?
The federal WARN Act defines “plant closing” as “the permanent or temporary shutdown of a ‘single site of employment,’ or one or more ‘facilities or operating units’ within a single site of employment, if the shutdown results in an ‘employment loss’ during any 30-day period at the ‘single site of employment’ for 50 or more employees, excluding part-time employees. Again, the 30-day period may be expanded to include employment losses occurring over a 90-day period, unless an employer can show that the losses due to for separate and distinct causes and actions.
How does the Illinois WARN Act differ from the federal Act?
The Illinois Act mirrors many of the aspects of the federal WARN Act. However, it applies to employers with 75 or more full-time employees (or equivalents). A “mass layoff” under the Illinois Act is triggered by a reduction in force at a single site of employment affecting at least 25 employees and at least 33% of the employees (excluding part-time employees) at the site, or at least 250 employees (excluding part-time employees). The definition of “plant closing” is the same as under the federal WARN Act.
How does this apply to coronavirus-related closures?
WARN notices are not required for “employment loss” of less than six months, so businesses that anticipate closing or reducing operations temporarily but expect (at least for now) to recall affected employees once public health and business circumstances allow may not need to issue WARN notices now. However, businesses that currently expect employment losses to extend beyond six months or that terminate employees, rather than temporarily furlough or lay them off, may be required to issue WARN notice if the number of affected employees exceeds the thresholds under state and federal law.
Under present circumstances, many employers are facing immediate closures or severe changes to their businesses and cannot wait 60 days to implement their response. Both the Illinois and Federal WARN Acts include limited exceptions to the 60-day requirement for notices of layoffs, most notably in cases of “unforeseen circumstances” or “natural disasters.” Under the Illinois Act, employers are exempted from the 60-day notice requirement if the Illinois Department of Labor determines that the need for a notice was not reasonably foreseeable at the time the notice would have been required. While these exceptions may well apply to the current crisis, employers are still required to provide notice as soon as practicable and include a brief explanation of the basis in reducing the 60-day notification period in the notice.
What if we do not issue WARN notice now but find later that we cannot recall employees laid off due to the COVID-19 crisis?
If an employer initially announces layoffs lasting less than 6 months and the layoffs extend beyond 6 months, both the Illinois and federal WARN Acts require the employer to provide notice that the layoff will extend beyond 6 months as soon as practicable, and include a brief explanation of the basis in reducing the 60-day notification period in the notice.
What happens if an employer fails to provide WARN notice?
Employers that fail to provide notice as required by WARN may be liable to employees for all lost compensation and benefits that the employees would have earned for the notice period, up to 60 days, plus attorneys’ fees. Additional statutory penalties may also apply.
What actions should employers take to comply with WARN?
Again, the WARN Act may not come into play if an employer temporarily lays employees off due to the COVID-19 crisis but resumes operations and recalls all employees within 6 months. Hopefully this will be the case for most affected employers and employees. However, if an employer determines that it needs to permanently cease operations at a given employment site, or that it must discharge or lay off employees for a period of more than six months, the employer should consult with experienced employment counsel to determine whether the planned action may trigger WARN requirements and, if so, what notices must be issued.
Where can I find additional information about WARN Act obligations?
The U.S. Department of Labor has a detailed guide for employers regarding their obligations under the federal WARN Act, available here.