Common Clauses

What should I know about the WARN Act for Layoffs?

Dec 5, 2023

The Worker Adjustment and Retraining Notification (WARN) Act was passed in 1988 to protect workers and employees in cases of plant closings and mass layoffs. The last few years has seen a roller coaster economy fraught with layoffs, often catching people off guard as to what their rights are. This week, we’re diving into all the FAQs when it comes to the WARN Act at a federal and state level.

What does the federal WARN Act require?

WARN requires a 60-day notice to plant closings and mass layoffs. Employers must inform employees and their local government official. The detailed guide provided by the Department of Labor (DOL) is summarized below of when WARN applies:

  1. Any business with 100 or more full-time or full-time equivalent (by hours) workers.

  2. Plant closings with 50+ employees during a 30-day period.

  3. Layoffs within a 30-day period of 50-499 full-time employees if they’re at least 33% of the full-time workforce at a single location.

  4. Layoffs of 500 or more are covered regardless of percentage of workforce.

  5. Layoffs are at least 6 months long or reduce salary by 50% for at least 6 months.

What are state and local government WARN requirements?

From the federal requirements above, you can see there are still many cases when a significant layoff may not be covered by WARN (e.g. 150 people laid off in a 500 employee company). As such, state and local governments have requirements that take the WARN Act further:

The above list is not exhaustive, with similar requirements in states such as Illinois, Iowa, New Jersey, and Wisconsin.

What happens if your employer doesn’t comply?

The federal penalty for WARN violations is backpay and benefits for the period of violation (up to 60 days) and civil penalty of up to $500 for each days of violation. The leniency in financial penalties begs the question of whether ‘Pay In Lieu’ is a valid interpretation of WARN, where there’s no additional financial deterrent to not following WARN.

While the DOL specifically does not recognize ‘Pay in Lieu’, it does confirm that providing employees full pay pay and benefits satisfies all penalties of violating WARN. Again, state and local laws can play a part in additional penalties. California, for example, specifically requires employers to be liable for medical expenses that would’ve otherwise been covered with insurance.

What are the exceptions to WARN?

On the federal level, there are 3 exceptions to WARN:

  1. Faltering Company: Companies actively seeking capital to avoid or delay a shutdown.

  2. Unforeseeable Business Circumstances: Sudden conditions outside of the company’s control.

  3. Natural Disaster: Plant closing or mass layoff as a direct result of flood, earthquake, or similar natural disasters.

At first glance, these exceptions seem to cover the majority of reasons why a business may face a closure or layoff in the first place. However, both federal and state governments have been very narrow in their interpretations of these exceptions. For example, Easom v. US Well Services (2020) ruled the Covid-19 pandemic as not an exception to the WARN Act. Even in cases where exceptions are valid, companies must still provide as much notice as possible and will be held in violation if they wait till the last moment.

We hope this post has been helpful in breaking down the basics of the WARN Act at the federal level and how state and local laws may impact individuals. There’s obviously much more complexity, particularly when it impacts the employment status for individuals on a work visa. We encourage everyone to take a look at the fine print for each individual situation.

For advocacy and beyond,
The Ask Ginkgo Team

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