This morning I had the opportunity to attend a presentation on Contract Terminations given by Tom Ringwood from the National Contract Management Association. The discussion was quite lively which was a bit of a surprise for a 7:30 A.M. event. During the discussion, several questions came up regarding the WARN Act and how it applied to government contractors. Based on the discussion, I thought it would be helpful to review the WARN Act and its requirements.
The Worker Adjustment and Retraining Notification Act of 1988 (the “WARN Act”) requires that certain employers who are preparing for mass layoffs of employees or plant closings provide 60-days notice to employees of the possible employment loss. The reason for the Act is to provide notice so that employees will be able to prepare for the transition. Employers required to provide notice who fail to do so can be subject to civil liability and attorneys’ fees.
The WARN Act made headlines this past summer when the possibility of sequestration was becoming more of a reality. During 2012, questions arose as to whether government contractors were required to provide WARN notices to employees. During the summer, the Department of Labor issued a guidance letter urging government contractors not to issue WARN notices. I disagreed with the DOL’s position and wrote an article discussing the letter and my disagreement with it. You can find that article here.
For now I thought it would be a good idea to take a look at the WARN Act and its requirements.
The WARN Act
What is the WARN Act?
The WARN Act (“WARN”) provides protection to workers and their families by requiring employers to provide notification in advance of plant closings and mass layoffs. According to the regulations, notice is necessary in order for employees to (1) adjust to the prospective loss of employment, (2) seek and obtain alternative work, and (3) begin obtaining new skills to assist in future employment.
To Whom Does the WARN Act Apply?
WARN applies to employers with employment levels that fall into one of two categories:
- 100 or more employees, excluding part-time employees
- 100 or more employees, including part-time employees, who in the aggregate work at least 4,000 hours per week, exclusive of hours of overtime
When Are Employers Required to Issue WARN notices?
WARN notices are required when a covered employer plans to enact mass layoffs or plant closings. Under the Act, a mass layoff occurs when employment loss is experienced during any 30-day period by:
- 33 percent of all employees with the 33 percent equaling at least 50 employees, or
- 500 or more employees
Note that Part-time employees are not included in the calculation.
Additionally, under the WARN Act, employment loss is further defined as:
- Employment termination, other than a discharge for cause, voluntary departure or retirement; or
- A layoff exceeding 6 months; or
- A reduction in hours of work of individual employees of more than 50 percent during each month of any 6-month period.
To Whom Do Employers Have to Provide Notice Under the WARN Act?
When WARN is triggered, employers must notify:
- representative of the employees;
- the employees themselves if there is no representative; and
- the state dislocated worker unit or other state designee
What Information Does An Employer Provide in the WARN Act Notice?
The required contents of WARN notice are provided for in the regulations. Generally, notices must provide the following information:
Notice to the employee representative:
- name and address of the site where closing or layoffs will occur
- name and telephone number of the company contact
- statement of whether the action will be temporary or permanent
- expected date of the first separation
- job titles of the affected positions and the names of the workers currently holding affected jobs
Notice to individual employees:
- statement of whether the action is temporary or permanent
- expected date when layoffs will begin
- indication of whether or not bumping rights exist
- name and telephone number of company contact
Notice is also required to be given to the state. You can read about state notice requirements here.
Exceptions
As with many laws, there are exceptions. WARN Act notice is not required for the following situations:
- Faltering Company: If, before the closing, the company is seeking capital to stay in business or keep a plant open and the company has a reasonable belief that it will get the needed capital
- Unforeseeable business circumstance: closing or mass layoff is due to circumstances that were not reasonably foreseeable
- Natural Disaster: closing comes as a result of a natural disaster
A Word About The Department of Labor Position on WARN Notices and Sequestration
Last year, when sequestration was looming, the Department of Labor (“DOL”) issued guidance which stated that not only is WARN notice not required, but employers would be incorrect if they provided notice prior to sequestration. DOL’s rationale was that even though layoffs were possible, government contractors did not know who was going to be laid off, and they didn’t know if they would even be affected. Because of that, they would not have sufficient information to provide proper WARN notice and doing so would only create unnecessary stress.
I disagree with this rationale as I believe it contradicts the stated purpose of the Act. In my opinion, I would prefer companies to provide notice to workers of the possibility of layoffs so workers can adequately prepare. After all, it is not as if sequestration has not been covered on almost a daily basis by every major news outlet. I found particularly disturbing the government’s position that if it were determined that companies should have given WARN notice prior to sequestration, the costs to companies would be considered reasonable termination costs and thus paid for by the federal government.
Finally, despite my disagreement with the DOL guidance letter, I do like the guide they produced for employers and employees regarding the WARN Act. Here is the link.
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