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March 23, 2009 |
Schiff Hardin Labor and Employment Alert By Thurston C. Bailey and Eric L. Barnum In today's challenging economic times, in order to remain competitive, many employers are implementing large-scale layoffs and facility shutdowns. Before doing so, however, it is critical that employers comply with the federal Worker Readjustment and Retraining Notification Act, otherwise known as the WARN Act (the "Act"), as well as state law versions of the Act. In general, the Act applies to private and some quasi-public employers with either 100 or more full-time employees or 100 or more full- and part-time employees (who work combined hours of more than 4000 per week). The Act requires that covered employers provide notice of significant workforce reductions to employees or their union leaders, and to city and state government officials. Failure to provide such notice could result in liability for up to 60 days of back pay and benefits for each violation, penalties of up to $500 per violation, and attorney's fees. When is Notice Required? The Act requires that covered employers provide 60 days' written notice before plant closings or mass layoffs occur. A plant closing refers to the shutdown of a facility that results in an "employment loss" of 50 or more full-time employees at a single site during any 30-day period. A "mass layoff" refers to a reduction-in-force, which is not the result of a plant closing, that causes an employment loss for: (1) 33 percent of the full-time employees at a single site and at least 50 employees at that same site during any 30-day period; or (2) 500 or more full-time employees. In either case, the employment loss refers not only to the termination of employees, but also to temporary layoffs exceeding six months and to a reduction in employee work hours by 50 percent or more during any six-month period. Events that trigger the notice requirements of the Act may occur in a variety of contexts. For example, if employees will be terminated due to the sale of all or part of a business (and not rehired by the buyer), this event may trigger the Act's notice requirements. Additionally, where an employer has multiple layoffs that are too small to give rise to WARN Act notice requirements, it may still be required to comply with those requirements if the number of employees laid off during any 90-day period would be sufficient to trigger them. Notably, the 60-days' notice is not required, and may be reduced, in circumstances involving:
In those situations, employers must provide the required notice as soon as practicable. The Act's notice requirements do not apply at all when a facility closing or layoff arises from a temporary project, a strike or a lockout. Notice of the plant closing or mass layoff must be provided to:
While the Act does not mandate the use of any particular form of notice, it does have specific requirements concerning the content of the notice an employer provides to employees, union officials and political officials. In general, notices must include information about the location of the layoff or closing, a company contact person, whether the employment loss will be temporary or permanent, the schedule of employment reductions, affected positions, the number of employees affected, and employee "bumping" rights. In a seniority system, the term bumping rights refers to the rights of workers with greater seniority whose jobs are abolished to replace (bump) workers with less seniority so that the worker who ultimately loses his or her job is not the worker whose job was abolished. Employers should review the Act's specific requirements for each class of recipients before preparing notices. Yes. Several states have statutes that are similar to the federal statute. Some differ slightly because they cover a broader group of employers or contain notice requirements that are more favorable to employees than the federal law. For specifics on various state WARN Acts or equivalent statutes, contact any Schiff Hardin attorney listed above. The Illinois WARN Act differs from the federal WARN Act in several ways, including:
California's WARN Act differs from the federal Act in several important respects, including:
New York has enacted a WARN Act, effective February 1, 2009, containing broader employee protections than the federal law, including:
Because the federal and state WARN Act laws will affect planning for employee layoffs and because they are not uniform, employers contemplating a mass layoff, relocation or plant closing must carefully review the requirements under federal and state WARN Acts and consider seeking advice from counsel to ensure compliance with those laws. ABOUT SCHIFF HARDIN LLP Schiff Hardin represents management in labor matters and employment-related litigation, and provides counsel to employers with respect to all legal aspects of employer-employee relations. Our firm's labor law practice encompasses both the private sector and the public sector for large and small employers in a broad range of markets and industries. Schiff Hardin provides clients with management and supervisory training programs covering current employment-related legal issues, including complex layoffs and reductions in force (RIFs). We regularly counsel clients in helping them comply with federal and state WARN Acts and associated notice requirements. We offer both standardized training modules and training programs that are individually tailored to the client's needs and requests. For more information, please feel free to contact us. RECENT LABOR AND EMPLOYMENT PUBLICATIONS "Summary of New Executive Orders Affecting Government Contractors," Labor and Employment Update (March 4, 2009)
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