June 03, 2020

Pandemic Furloughs in Place? Time to Assess Your WARN Obligations

The Coronavirus pandemic business closings started in mid-March by orders of the governors of many states. Some closings were a consequence of customer demand suddenly drying up. It has now been over two months since some of those closings began, and almost every state in the United States is now fully allowing the reopening of businesses. It is time to assess: is there to be a reopening? If yes, please view our extensive alert regarding Return to Work issues. If not, or if you are considering a reopening with less than a full complement of the workforce that was in place in early March, it is time to start assessing compliance with the federal Workers Adjustment and Retraining Notification Act, or WARN, 29 U.S.C. §§ 2101 et seq, (FED WARN) and its states’ counterpart laws, or “mini-WARN” laws. 

The Federal WARN Act

Under FED WARN, 60 days’ advance notice of a mass layoff or plant closing must ordinarily be given in advance of “ordering” a certain number of employment losses due to a plant closing or mass layoff. First, a “plant closing” occurs where 50 or more (not counting so-called “part-time” employees) employees experience an employment loss when there is a cessation of operations at a site, or a cessation of operations of an operating unit within a site. 29 U.S.C. § 2101(a)(2). Alternatively, a “mass layoff” occurs where there is not a plant closing but there are: (1) employment losses of 500 or more employees regardless of the percentage of the workforce at a single site, or (2) 50 or more employment losses at a single site, if those employment losses constitute 33 percent or more of the active work force at the same site (again, not counting in any of these calculations so-called “part-time” employees). 29 U.S.C. § 2101(a)(3). Eleven states and one territory have similar laws. 

Under FED WARN, a layoff does not become an “employment loss” for an individual until the layoff lasts for more than six months. 29 U.S.C. § 2101(a)(6). The current unpaid furloughs that many employers have implemented since mid-March are the same thing as unpaid layoffs for purposes of FED WARN, but such layoffs/furloughs caused by the Coronavirus pandemic have not yet lasted for six months. Now, after furloughs have lasted several weeks — in some cases more than two months — and as the reopening of businesses begins, it is prudent, if not necessary, to assess where we are, and where we are going with our workforces. 

Here is what the FED WARN regulations have to say about short-term layoffs that become longer than six months: 

(b) An employer who has previously announced and carried out a short-term layoff (6 months or less) which is being extended beyond 6 months due to business circumstances (including unforeseeable changes in price or cost) not reasonably foreseeable at the time of the initial layoff is required to give notice when it becomes reasonably foreseeable that the extension is required. A layoff extending beyond 6 months from the date the layoff commenced for any other reason shall be treated as an employment loss from the date of its commencement.

20 CFR § 639.4.

A separate section of FED WARN allows for shortened notice when a plant closing or mass layoff is due to an unforeseeable business circumstance. 29 U.S.C. §2102(b)(2)(A). Courts have indicated that in the situation of the unforeseeable business circumstance, which allows shortened notice, the notices must go out when the plant closing or mass layoff becomes “probable.” 

Here, we have occasion … to join our Sister Circuits in holding that the WARN Act is triggered when a mass layoff becomes probable—that is, when the objective facts reflect that the layoff was more likely than not. This standard strikes an appropriate balance in ensuring employees receive the protections the WARN Act was intended to provide without imposing an “impracticable” burden on employers that could put both them and their employees in harm's way. In Re: AE Liquidation, Inc., 866 F.3d 515, 530 (3rd Cir. 2017) (footnote omitted). 

Employers should now assess whether the unpaid furloughs that went into effect since mid-March will last for more than six months, and whether the number of those six-month layoffs will trip the plant closing or mass layoff thresholds under FED WARN. It is advisable that employers should preserve a record of the evaluation, and what conclusions are reached and why. For example, an employer may conclude that it is too soon to tell what the future will bring. In that case, a record of that decision-making process should be preserved, so it can be used as a defense if there is a later assertion in a WARN lawsuit that a mass layoff or plant closing was probable at a time when an employer took no action to give any FED WARN notices. On the other hand, sufficient information may be available to cause an employer to conclude that the layoffs will last longer than six months, in which case, the employer should not delay sending out the notice contemplated by FED WARN. 

Employers should also assess whether unpaid furloughs will be converted into employment losses as a result of workforce reductions that may occur before the six-month anniversary of the start of such furloughs, and whether the number of such employment losses will trigger plan closing or mass layoff thresholds under FED WARN.

In a FED WARN case where the employer asserted the unforeseeable business circumstance defense for giving shortened notice, the employer received notice on February 22, 1990 that its service agreement with a customer was being terminated effective March 31. Wholesale & Retail Food Distribution Local 63 v. Santa Fe Terminal Servs., Inc., 826 F. Supp. 326 (C.D. Cal. 1993) (Santa Fe). The company sent out its notice on March 1. The court held that while the contract termination was an unexpected business circumstance, allowing a notice of less than 60 days, the company did not get out its notice when it should have: “The 7 day delay in sending out notice (February 22, 1990 through March 1, 1990) does not constitute ‘notice as soon as practicable.’  … The Court finds that [the company] should have sent out WARN notification on February 23, 1990. Accordingly, [the company] is in violation of WARN for six (6) days.”  Santa Fe, 826 F. Supp. 326 (C.D. Cal. 1993). The takeaway from the Santa Fe case is to not delay giving notice once there is a basis for an employer to reasonably conclude that layoffs are probable. 

As noted above, eleven states and one territory have mini-WARN laws requiring notices, similar to FED WARN. Some states have squarely addressed the Coronavirus pandemic by amending the law, or by governors’ directives, and some have not. Most state laws, but not all, have an unforeseeable business exception similar to WARN. The following is a summary, state by state. 

California Cal-WARN Act

In California, any mass layoff – which includes a furlough of any duration – affecting 50 or more employees at a covered establishment in a 30-day period triggers a 60-day notice requirement. Cal-WARN applies to all facilities that employ 75 or more persons. Employers are not required to provide the requisite notice when a physical calamity or act of war causes a mass layoff. Unlike FED WARN, there is no unforeseeable business circumstance or natural disaster exception. Although the Cal-WARN Act does not specifically define “physical calamity,” in March the California Governor provided specific coronavirus pandemic guidance to the Cal-WARN Act via executive order.

Executive Order N-31-20 suspends the 60-day advance notice requirements of the Cal-WARN Act until the end of the State of Emergency proclaimed because of the coronavirus pandemic. Employers must still comply with the rest of the Cal-WARN Act including all the written notice requirements. The executive order also embraces FED WARN. When an employer falls within unforeseen business circumstances exception of FED WARN due to the coronavirus, the employer must give as much notice as is practicable and provide a brief statement of the reason for reducing the notification period. The California Employment Development Department further explains the notice written notice must be given as soon as “reasonably possible.”

Hawaii Dislocated Workers Act (DWA)

Hawaii’s DWA requires 60-day notice for closings or partial closings due to a sale, merger, transfer, business takeoff, bankruptcy or any other transaction that results in loss of employment. The statute covers employers with as few as 50 employees. There are three exceptions to the notice requirement: a business failure, bankruptcy, or a loss of lease or contract. During the coronavirus pandemic, it is more likely that an employer would need to lay off workers due to operational adjustments rather than as part of a sale or transaction. Hawaii suspended the DWA notice requirements in response to the coronavirus pandemic through Executive Order No. 20-02. The suspension remains in place for the remainder of the emergency. Employers should remain aware of the notice requirements for any post-pandemic transactions that may occur after the governor lifts the state of emergency.

Illinois WARN Act

The Illinois WARN Act covers employers with 75 or more employees. Illinois WARN triggers a 60-day notice requirement when a plant closing causes 50 or more employees to experience an employment loss or when there is a mass layoff.  Similar to FED WARN, Illinois WARN defines a mass layoff as layoff of 250 or more employees or a layoff of 25 or more employees if those employees represent at least 33 percent of the workforce at that site. Also like FED WARN, Illinois WARN carves out several exceptions to their notice requirements.

Like the Cal-WARN Act, the Illinois WARN act does not require advance notice when a physical calamity, an act of war, or an act of terrorism causes a mass layoff, relocation, or employment loss. In addition, the Illinois WARN Act carves out an exception when the Illinois Department of Labor (IDOL) determines that, at the time notice would have been required, the notice would not have been reasonably foreseeable. In order to fall into this second exception, an employer must file an application with the IDOL that includes a written record explaining why notice was not reasonably foreseeable and an affidavit verifying the contents of that explanation. The IDOL website indicates that the IDOL will make individual determinations about employers who file applications to fall under the second exception due to the coronavirus pandemic. Where an employer falls under either exception, the employer much provide notice as soon as possible including a brief statement explaining the reason for not providing the typical advance notice.

Iowa Layoff Notification Law

The Iowa Layoff Notification Law imposes a 30-day notice on layoffs of 25 or more employees at a single site. The law covers employers with at least 25 employees. The Iowa Layoff Notification Law provides an explicit exception for short-term layoffs that last longer than expected. It does not require employers to provide the advance notice of a mass layoff when the employer initiates a mass layoff of less than six months that ends up lasting longer than six months due to business circumstances not reasonably foreseeable at the time of the layoff. Under those circumstances, the employer must provide notice as soon as it becomes reasonably foreseeable that an extended layoff will be required. Like FED WARN, Iowa’s Layoff Notification Law also carves out notice exceptions for unforeseeable business circumstances and natural disasters.

Iowa Workforce Development provided coronavirus-specific guidance at the Iowa Workforce Development website for the Layoff Notification Law. The guidance does not give many details beyond reiterating the notice exceptions. According to the Iowa Workforce Development’s coronavirus guidance, Layoff Notification Law notice is not required because the department does not expect layoffs to last more than six months. In the event that layoffs do last longer than six months, employers should give notice at least 30 days prior to the extension of the layoff. To be safe, the employer should give as much notice as possible by giving notice as soon as it becomes probable that any triggering layoff will extend beyond six months.

Maine Severance Pay Statutes

Maine has a mini-WARN provision requiring advanced notice in the event of a relocation, termination, or mass layoff tucked away in its severance pay statutes. The severance pay statutes cover facilities employing 100 or more persons during the twelve months preceding a relocation or termination of operations. When triggered, Maine’s mini-WARN requires 90 days’ notice to both the state and the affected employees for all closing and relocations. Any mass layoff requires seven days’ notice as well as severance pay for the affected employees. The statute includes an exception to the notice requirement when a physical calamity or an order of a government agency causes the mass layoff. Unlike the Cal-WARN Act, Maine’s Severance Pay Statutes define “physical calamity” as a fire, flood or other natural disaster. The Maine Department of Labor issued no coronavirus-specific guidance with regard to advance notice requirements for mass layoffs. It would be prudent for employers to provide notice as soon as it becomes probable that the coronavirus pandemic will necessitate a mass layoff.

New Hampshire WARN Act

The New Hampshire mini-WARN Act applies to employers with 75 or more employees. Plant closings causing 50 or more employment losses and mass layoffs trigger the New Hampshire mini-WARN. Like Illinois WARN, New Hampshire defines a mass layoff as employment loss for 250 employees or more employees, or a loss of employment for at least 25 employees if those employees represent 33% or more of the workforce. When triggered, New Hampshire’s mini-WARN requires 60 days’ notice.

New Hampshire’s mini-WARN incorporates two exceptions that mirror those of FED WARN.  In the event of a mass layoff or plant closing, employers need to comply with the notice requirements if: (1) the need for notice is not reasonably foreseeable at the time notice would have been required, or (2) a physical calamity, natural disaster, act of war, or act of terrorism causes the mass layoff or plant closing. The New Hampshire Labor Commissioner is the officer responsible for determining the application of these exceptions. On April 21, 2020, the Commissioner released guidance on the New Hampshire WARN Act declaring the coronavirus pandemic “an emergent, exceptional event.” Any employer that satisfies the requirements of these exceptions must provide as much notice as practicable and include a statement as to why it provided less than the required notice. Although the Commissioner’s analysis provides employers some degree of leeway, the safest course of action is to give notice as soon as it appears probable that a mass layoff will occur.

New Jersey Millville Dallas Airmotive Plant Job Loss Notification Act (NJ WARN)

On January 21, 2020, New Jersey significantly expanded the NJ WARN Act. The amended NJ WARN Act benefits employees by expanding coverage, simplifying triggering requirements, increasing the notice period, and requiring employers to pay additional severance. Under NJ WARN, employers with 50 or more employees must provide affected employees 90 days’ notice and pay those employees one week of severance pay for every year of service with the company.

New Jersey delayed the enactment of the new amendments in response to the coronavirus pandemic. The new amendments will take effect 90 days after the termination of the New Jersey Executive Order declaring a state of emergency. Unlike FED WARN, NJ WARN does not include exceptions for unforeseeable business circumstances.  Recent emergency legislation, however, adjusted the definition of mass layoff.

While the January amendments did not alter the exceptions to advance notice, New Jersey enacted additional legislation on April 14, 2020 that created an exception from the definition of mass layoff. If a fire, a flood, a natural disaster, a national emergency, an act of war, civil disorder or industrial sabotage necessitates the mass layoff, the employer does not have to provide advance notice. The legislation also exempted mass layoffs caused by decertification from the Medicare and Medicaid programs as well as mass layoffs caused by license revocations under New Jersey licensing statutes. These exemptions were made effective retroactively to March 9, 2020. Pursuant to the April 14, 2020 amendments, closings and layoffs associated with the coronavirus pandemic do not trigger NJ WARN’s notice requirements.

New York State WARN Act

The New York State WARN Act covers employers with 50 or more employees. Employers must provide 90 days’ notice when layoffs affect 25 or more employees. The New York State WARN Act carves out exceptions for plant closings when business circumstances causing the closing were not reasonably foreseeable at the time notice would have been required. The Act goes on to exempt plant closings or mass layoffs caused by “any form of natural disaster, such as a flood, earthquake, or drought.” Although the unforeseeable business exception only explicitly mentions plant closings, guidance indicates that notice for both plant closing and mass layoffs may be exempted for unforeseeable business conditions. Where any of the exceptions to notice apply, the employer must give as much advance notice as possible and include the reason and a factual explanation for the reduced notice period as part of that notice.

New York has not suspended the New York State WARN Act notice requirements in response to the coronavirus pandemic. Guidance on the New York Department of Labor (NY DOL) website seemingly indicates that a plant closing or mass layoff would fall into one of the enumerated exceptions. Per the NY DOL website, New York did not suspend the notice requirements because “the WARN Act already recognizes that businesses cannot predict sudden and unexpected circumstances beyond an employer’s control, such as government-mandated closures . . . or other specific circumstances due to the coronavirus pandemic.” Accordingly, the NY DOL asks employers who must close their facility or lay off employees to provide as much notice as possible and identify the reasons for closing.

Tennessee Plant Closing and Reduction in Operations Act

Tennessee’s Plant Closing and Reduction in Operations Act applies to employers with at least 50 but not more than 99 full-time employees. The Act defines a “reduction in operations” of 50 or more employees experiencing employment loss in a three-month period. Unlike FED WARN, the Tennessee Plant Closing and Reduction in Operations Act does not carve out an exception for unforeseeable business circumstances. Fortunately for employers, Tennessee’s mini-WARN Act does not impose a notice period or even address the contents of the notice. Employers must give the Tennessee Department of Labor and Workforce Development notice via telephone when the employer notifies its employees of the plant closing or mass layoff. The Act does not impose a time requirement on when employers must give that notice. The Tennessee Plan Closing and Reduction in Operations Act did not implement any adjustments in response to the coronavirus pandemic however, the Act does not impose penalties on employers who fail to give adequate notice. Accordingly, employers in Tennessee should give adequate notice to abide by FED WARN law but need not worry about additional state requirements.

Vermont Notice of Potential Layoffs Act

Vermont’s Notice of Potential Layoffs Act applies to employers with 50 or more employees who individually work 1,040 or more hours per year. The Act requires employers to give 45 days’ notice to the state and 30 days’ notice to employees for any business closing regardless of the number of employment losses and mass layoffs. Vermont defines a mass layoff as employment losses for 50 or more employees in the state during a 90-day period. Vermont’s Notice of Potential Layoffs Act incorporates exceptions for notice of business closings or mass layoffs caused by unforeseen business circumstances as well as disasters beyond the control of the employer. In either situation, the employer must provide as much notice as practicable and submit a brief statement to the Vermont Department of Labor (VT DOL) explaining the circumstances for not providing requisite notice. In response to the coronavirus pandemic, the VT DOL issued guidance explaining that they do not intend to enforce the provisions of the Notice of Potential Layoffs Act against employers who are forced to lay off employees during the pandemic. The VT DOL still recommends employers reach out to the VT DOL to seek assistance for any mass layoff or business closing.

Virgin Islands Plant Closing Act

In the Virgin Islands, layoffs of as few as 10 employees can trigger a notice obligation. Any layoff of 10 or more employees or 50 percent or more of a facility’s workforce triggers a 90-day notice requirement. Section 472 of the Virgin Islands Plant Closing Act includes an exception to the advance notice requirements for a mass layoff or plant closing. When a physical calamity, an act of war, or an act of terrorism causes a mass layoff, necessitates a relocation, or causes an employment loss, employers are not required to comply with the advance notice requirements. In addition to the exception, the governor of the Virgin Islands suspended the advance notice requirements for at least 120 days in response to the coronavirus pandemic.

Wisconsin Business Closing and Mass Layoff Law

The Wisconsin Business Closing and Mass Layoff Law applies to employers with at least 50 employees in Wisconsin. The law requires a 60-day notice when a closing causing layoffs of 25 or more employees at a single site or collection of sites in a municipality or a mass layoff involving 500 or more employees or at least 25 employees that represent at least 25 percent of the employer’s workforce. The Business Closing and Mass Layoff Law incorporates an unforeseeable business exception and a natural disaster exception similar to those of FED WARN. Employers need not comply with the advance notice requirements when business circumstances not foreseeable at the time notice would have been given or a natural disaster beyond the control of the employer causes the mass layoff or business closing. Additionally, Wisconsin carves out a second exception for suspended operations. Employers are exempt from the advance notice requirements of the law when the employer must temporarily cease operations as long as the employer recalls the employees on or before 60 days. As of the date of this Insight, Wisconsin has not provided guidance specific to the Business Closing and Mass Layoff Law and the coronavirus pandemic.

As employers prepare to return to work following coronavirus-induced closings, it is crucial to be aware of the notice requirements of FED WARN and the state mini-WARN Acts. With potential notice dates looming, employers should assess their workforce needs and determine if any adjustments made in response to the coronavirus pandemic will trigger any notice obligations. For questions on FED WARN or any of the state mini-WARN Acts, please contact Jerry Hathaway, Dan Prokott, or any other member of the Faegre Drinker labor and employment team.

 

Faegre Drinker’s Coronavirus Resource Center is available to help you understand and assess the legal, regulatory and commercial implications of COVID-19.
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