WARN Act
The Worker Adjustment and Retraining Notification (WARN) Act is a United States labor law that protects employees, their families, and communities by requiring most employers to provide 60 calendar days' advance notice of plant closings and mass layoffs. This federal legislation falls under the broader category of employment law and aims to mitigate the adverse effects of sudden job loss.
History and Origin
Before the WARN Act, workers often received little to no advance notice of impending job losses due to plant closings or significant layoffs. This left employees with minimal time to seek new employment, pursue retraining, or make necessary financial adjustments. The economic landscape of the 1980s, characterized by increased global competition and corporate restructuring, highlighted the need for greater worker protection in instances of widespread job displacement.19
Congress enacted the Worker Adjustment and Retraining Notification Act in 1988, with its provisions becoming effective on February 4, 1989.17, 18 The legislation sought to provide a crucial buffer period, enabling affected individuals to transition more smoothly. The U.S. Department of Labor (DOL) provides guidance and compliance assistance for the WARN Act, though enforcement is handled by U.S. District Courts.15, 16
Key Takeaways
- The WARN Act generally requires employers with 100 or more employees to provide 60 days' advance notice of a plant closing or mass layoff.
- Notice must be given to affected employees, their representatives (such as a labor union), the state dislocated worker unit, and the chief elected official of the local government.
- Violations of the WARN Act can result in back pay and benefits for affected employees, as well as civil penalties.
- Exceptions exist for unforeseeable business circumstances, faltering companies, and natural disasters, though some notice may still be required.
- Many states have "mini-WARN" acts that may offer greater protections or apply to smaller employers than the federal WARN Act.
Formula and Calculation
While the WARN Act does not involve a traditional financial formula for calculation, its applicability is determined by specific thresholds related to the number of employees and the scope of the employment loss.
The key thresholds for triggering a WARN Act notice are generally:
- Plant Closing: A permanent or temporary shutdown of a single site of employment, or one or more facilities or operating units within a single site of employment, that results in an employment loss for 50 or more employees (excluding part-time employees) during any 30-day period.14
- Mass Layoff: A reduction in force that is not the result of a plant closing and results in an employment loss at a single site of employment during any 30-day period for either:
The term "employment loss" for the purposes of the WARN Act refers to an employment termination (other than a discharge for cause, voluntary departure, or retirement), a layoff exceeding 6 months, or a reduction in hours of work of more than 50% during each month of any 6-month period.
Interpreting the WARN Act
Interpreting the WARN Act involves understanding its scope and exceptions. The primary goal is to ensure that employees and communities have adequate time to adjust to significant job dislocations. Employers must count both full-time and, in some cases, part-time employees to determine if they meet the threshold for a covered employer or a triggering event.10, 11
The 60-day notice period allows employees to seek new employment, apply for unemployment benefits, or pursue retraining programs. For the community, this notice provides time to prepare for the economic impact of reduced employment, such as decreased consumer spending and potential strains on social services. The Act also requires notice to public officials, enabling state and local workforce development agencies to offer rapid response services, including job search assistance and career counseling.8, 9
Hypothetical Example
Consider "Alpha Manufacturing Inc.," a company with 300 full-time employees at a single production facility. Due to an unexpected downturn in market demand, Alpha Manufacturing decides to temporarily shut down its operations, leading to the layoff of 100 full-time employees.
Under the WARN Act, Alpha Manufacturing would be required to issue a 60-day advance notice. Since 100 employees are being laid off, and this number exceeds the 50-employee threshold for a "plant closing" or meets the "mass layoff" criteria (100 employees is more than 50 and constitutes over 33% of the 300-person workforce), the WARN Act is triggered. The notice would need to be provided to the affected 100 employees, their union representatives (if applicable), the state dislocated worker unit, and the chief elected official of the city where the plant is located. This allows the employees time to look for other opportunities or prepare for a period of unemployment.
Practical Applications
The WARN Act has several practical applications across various business and economic scenarios:
- Corporate Restructuring: Companies undergoing corporate restructuring, such as downsizing or consolidation, must comply with the WARN Act if their actions result in qualifying layoffs or plant closings. This includes situations arising from mergers and acquisitions, where the responsibility for notice can shift between the seller and buyer depending on the effective date of the sale.7
- Economic Downturns: During periods of economic downturn, the WARN Act becomes particularly relevant as businesses may face financial pressures leading to widespread job reductions. The Act ensures that employees are not blindsided by such events, giving them time to prepare for potential job loss and seek severance pay or access unemployment benefits.
- Compliance and Risk Management: From a human resources perspective, compliance with the WARN Act is a critical aspect of risk management. Failure to provide proper notice can lead to significant financial penalties, including back pay and benefits for affected employees for the period of the violation, along with civil penalties.6 For example, major companies have faced class action lawsuits for alleged WARN Act violations during large-scale layoffs.5
Limitations and Criticisms
Despite its protective intent, the WARN Act has several limitations and has faced criticism:
- Threshold Requirements: The Act's thresholds mean that smaller employers (those with fewer than 100 employees) are generally not covered, nor are smaller layoffs that do not meet the numerical or percentage criteria. This can leave many employees unprotected by the federal law, though some states have "mini-WARN" acts with lower thresholds.4
- Exceptions: The exceptions for "unforeseeable business circumstances," "faltering companies," and "natural disasters" can be challenging to interpret and may allow employers to provide less than 60 days' notice or, in some cases, no notice at all, albeit with strict conditions. Critics argue that these exceptions can be broad, potentially undermining the Act's purpose if misapplied.
- Enforcement: The U.S. Department of Labor does not have enforcement authority under WARN; rather, employees or local governments must bring lawsuits in federal court to enforce the Act's provisions.3 This places the burden of legal action on aggrieved parties, which can be a significant hurdle, particularly for individuals facing job loss and potential bankruptcy.
- Lack of Proactive Measures: The WARN Act is primarily a notification law rather than a preventative one. It does not prevent layoffs or plant closings but rather provides notice after the decision has been made. While it aids in transition, it does not mandate alternatives like retraining programs or job placement services directly, though it does trigger access to state services.
WARN Act vs. Mass Layoff
While the WARN Act is directly related to a mass layoff, the terms are not interchangeable. A "mass layoff" is an event—a significant reduction in workforce—whereas the WARN Act is the federal law that governs the notification requirements surrounding certain types of mass layoffs and plant closings. Not every mass layoff triggers the federal WARN Act, only those that meet the specific thresholds concerning employer size and the number or percentage of affected employees at a single site of employment. For instance, a small business conducting a layoff that significantly impacts its workforce might constitute a mass layoff in common parlance, but it would not be subject to the federal WARN Act unless it meets the 100-employee minimum and the relevant layoff thresholds.
FAQs
What employers are covered by the WARN Act?
Generally, the WARN Act covers employers with 100 or more employees, not counting those who have worked fewer than six months in the last twelve-month period or those who work an average of less than 20 hours a week.
What happens if an employer violates the WARN Act?
An employer who violates the WARN Act may be liable to each affected employee for an amount equal to back pay and benefits for the period of the violation, up to 60 days. Additionally, a civil penalty of up to $500 for each day of violation may be imposed if notice is not provided to the local government.
##2# Does the WARN Act apply to remote employees?
The applicability of the WARN Act to remote employees can be complex. Generally, remote workers are covered if they report to or are assigned work from a single site of employment that is subject to a plant closing or mass layoff. The1 key is whether their employment loss is connected to a specific physical site that meets the Act's criteria.
Are there any exceptions to the 60-day notice requirement?
Yes, the WARN Act includes limited exceptions, such as for "faltering companies" actively seeking capital to avoid a shutdown, "unforeseeable business circumstances" (sudden, dramatic, and unexpected events), and "natural disasters." Even in these cases, employers are generally expected to provide as much notice as practicable and explain why the full 60 days could not be given.