Massive layoffs and plant closings can dramatically affect the lives of employees. In this lesson, you'll learn about the Worker Adjustment and Retraining Notification Act and how it attempts to alleviate economic fallout.
The Warn Act & Its Purpose
Fred works at a factory building Automobile Parts for Automakers. Unbeknownst to Fred, his employer is currently in the process of negotiating the outsourcing for the manufacturing of the parts to a firm in China. This will mean that Fred will no longer have a job.
Fortunately for Fred, his employer is subject to the Worker Adjustment and Retraining Notification Act (WARN). WARN requires that qualified employers who plan on massive layoffs or closing their plants or factories provide at least 60-days advance notice to affected employees and certain state agencies and affected local communities, such as Fred's hometown.
WARN helps provide some time for employees, local communities and state agencies to prepare for the economic fallout of a large loss of employment. Ironically, even though 'retraining' is part of the Act's title, WARN does not authorize or provide funding for training activities.
Covered Employers & Employees
Not all employers are subject to the act. Private sector employers must have at least 100 full-time employees or 100 or more employees who work at least 4,000 hours per week, not counting overtime. Federal, state, local, and tribal governments are not subject to the Act. However, if a public organization is engaged in a business that functions independent of the government, the act will apply so long as the required minimum number of employees is met. Fortunately for Fred, his employer is covered.
Not all employees are covered under WARN. Generally speaking, employees that are covered under the Act include hourly or salaried employees, including managers and supervisors. However a company's business partners are not covered under the Act. Moreover, contract employees that work for the company through an employment agency are not covered by the Act. Additionally, people who have been told by the company that their employment is only temporary are not entitled to notice under WARN. Workers located at the company's foreign offices and facilities are not covered under WARN. Fortunately for Fred, he's a covered employee.
According to the Congressional Research Service, there are three general types of events that require notification pursuant to WARN. Let's look at each of them briefly.
- Plant closings resulting in at least 50 employees being terminated
- Massive layoffs of at least 50 workers where the loss of jobs is at least 33% of the people at the work site
- Massive layoffs that result in a loss of 500 or more jobs at one site
Employees covered under the act must be provided written notice of the layoff 60 days prior to the layoff or plant closing. If the employees are covered by a collective bargaining agreement, the notification must be sent to the employee's bargaining representative at the union. Additionally, the employer must notify the state agency responsible for carrying out rapid response activities. A rapid response activity is a service provided to displaced workers after a massive layoff or closing. These services may include such things as career counseling, help with finding jobs, education and training services, and unemployment insurance.
Fred and his fellow employees can utilize these services to obtain training for skills in demand, help with finding a new job, and receive state benefits to help make ends meet while looking for new work. Notice must also be sent to the chief elected official of a local government within the community where the layoffs or closing will take place. For example, the mayor of the community would be a chief elected official.
The WARN Act requires certain information to be provided with each written notice. According to the Congressional Research Service, the Act requires '(1) A description of the planned action and a statement as to whether the planned action is expected to be permanent or temporary, (2) The expected date or dates when the layoff will commence, and (3) The name and telephone number of a company official to contact for more information'.
Exception to 60-Day Notice
The WARN Act provides some exceptions to the 60-day notice requirement.
- If a company is 'faltering', employers can provide reduced notice for closings. However, this exception does not apply for mass layoffs. A faltering company is one that has been seeking financing or new business and thought it had a realistic chance of obtaining funds or new business so that it could remain open and believed in good faith that notice would have prevented it from getting financing or business necessary for it to continue.
- There's also an exception for certain unforeseen business circumstances. The circumstances must've occurred without warning and out of the employer's control. Some examples may include losing a major client, some sort of the economic downturn, or a non-natural disaster, such as an act of terrorism.
- Natural disasters can provide another exception if it caused the layoff or plant closing to occur. For example, if a flood or tornado destroyed a plant, the exception may apply. However, a layoff or the closing due indirectly to a natural disaster would not apply. Keep in mind that the unforeseeable business circumstance exception may apply.
- A plant closing or layoff as a result of a strike or lockout is not subject to the notice requirements unless the lockout is an attempt by the employer to avoid compliance with the WARN Act. Non-striking employees who are affected by the lockout, however, may be entitled to notice.
Sometimes bumping can save an employee's job. Bumping rights means that an employee with more seniority will not lose his job. Instead, the more senior employee will be able to bump a less senior employee and take his job, resulting in the less senior employee being laid off instead. Sometimes bumping rights exist pursuant to a company policy or pursuant to a collective bargaining agreement. Let's look at an example.
Fred has ten years of seniority, while Gus only has eight. If Fred's job is to be eliminated, but Gus' job is not, Fred could bump Gus. This will result in Fred taking Gus' job and Gus being laid off.
Under WARN, employers must provide notice to the employee who is going to be bumped if such employee can reasonably be identified by the employer. If the bumping rights exist pursuant to a collective bargaining agreement, the notice is issued to an employee union representative. In this situation, the employer doesn't have to identify the people being bumped. Instead, the union representative must determine who is getting bumped and notify the employees getting bumped.
The WARN Act is enforced through the court system by filing a lawsuit in U.S. District Court by affected employee and representatives, such as a union representative, or a unit of the state or local government. The court does not have any authority to stop plant closings or mass layoffs. However, employers who do violate WARN can be liable for back pay and benefits for each day that notice under the Act was not provided up to a maximum of 60 days. Additionally, employers may be subject to a $500 civil fine for each day of the 60 days it did not provide notice. However, if the employer pays each employee entitled to payment in full within three days of the plant closing or layoff, the employer is able to avoid the civil fines.
Let's review what we've learned. The Worker Adjustment and Retraining Notification Act requires that covered employers provide a 60-day notice to employees, state agencies and local communities that there will be a plant closing or massive layoff. WARN was enacted to help employees and local communities prepare and adjust to the economic fallout of such large-scale loss of jobs in a community under these circumstances. WARN does permit some exceptions to the 60-day notice requirement.
The WARN Act is enforced through the court system. An action can be brought in U.S. District Court against an employer who has violated the Act. An employer who violates the Act faces paying back pay and benefits for each day that notice was not provided prior to the layoff or closing up to a maximum of 60 days. An employer may also face fines for each day of the 60 days in which a notice was not provided.
By the end of this lesson you should be able to:
- Outline the WARN Act and what it requires
- List what types of employers are required to adhere to the WARN Act
- Describe what kinds of employees are covered under the Act
- State when a company is required to provide forewarning as per the WARN Act and some exceptions
- Explain how the Act is enforced