The WARN Act: Advance Notice of Layoffs and Plant Closings
The Worker Adjustment and Retraining Notification (WARN) Act of 1988 requires employers with 100 or more employees to provide at least 60 calendar days advance written notice before plant closings and mass layoffs. For HR professionals preparing for the SHRM exam, understanding the WARN Act's specific thresholds and exceptions is essential for managing workforce reductions in compliance with federal law.
Covered Employers
The WARN Act applies to employers with 100 or more employees, excluding part-time employees, or employers with 100 or more employees (including part-time employees) who work a combined total of at least 4,000 hours per week (exclusive of overtime). Part-time employees are defined as those who work an average of fewer than 20 hours per week or who have been employed for fewer than 6 of the 12 months preceding the date on which notice is required.
Triggering Events
The WARN Act is triggered by two types of events:
- Plant closing: The permanent or temporary shutdown of a single site of employment, or one or more facilities or operating units within a single site of employment, if the shutdown results in an employment loss of 50 or more employees (excluding part-time employees) during any 30-day period.
- 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 at least 500 employees (excluding part-time employees), or for 50 to 499 employees if they represent at least 33% of the active workforce at the site.
Definition of "Employment Loss"
An "employment loss" under the WARN Act includes termination (other than for cause, voluntary departure, or retirement), a layoff exceeding 6 months, and a reduction in hours of work of more than 50% during each month of any 6-month period. However, an employment loss does not occur when the closing or layoff results from the relocation or consolidation of the business and the employer offers to transfer the employee to another site within reasonable commuting distance, or the employee accepts a transfer to any other site, regardless of distance.
Aggregation of Employment Losses
The WARN Act contains an important aggregation provision. If an employer conducts multiple rounds of layoffs, each of which falls below the WARN thresholds, but the total employment losses over any 90-day period meet the threshold, WARN notice is required unless the employer can demonstrate that each separate layoff was the result of a separate and distinct action and not an attempt to evade the WARN Act's requirements.
Notice Requirements
When the WARN Act is triggered, the employer must provide written notice to the following parties at least 60 days before the plant closing or mass layoff:
- Affected employees (or their union representatives if they are covered by a collective bargaining agreement).
- The state dislocated worker unit.
- The chief elected official of the local government where the employment site is located.
The notice must include specific information, such as the name and address of the employment site, whether the action is permanent or temporary, the expected date of the first employment loss, the job titles of affected positions, and the names of affected employees.
Exceptions to the 60-Day Notice Requirement
The WARN Act provides three exceptions that allow shorter notice periods:
- Faltering company: Applies only to plant closings. An employer may give less than 60 days notice if the company was actively seeking capital or business that, if obtained, would have enabled the employer to avoid or postpone the shutdown, and the employer reasonably believed that giving notice would have precluded the ability to obtain the capital or business.
- Unforeseeable business circumstances: Applies to both plant closings and mass layoffs. The closing or layoff is caused by business circumstances that were not reasonably foreseeable at the time notice would have been required.
- Natural disaster: Applies to both plant closings and mass layoffs. The closing or layoff is a direct result of a natural disaster, such as a flood, earthquake, drought, or storm.
Even when an exception applies, the employer must still give as much notice as is practicable and must include a brief statement of the reason for reducing the notice period.
Penalties for WARN Act Violations
Employers who fail to provide required WARN Act notice may be liable for back pay and benefits to each affected employee for each day of the violation (up to 60 days), a civil penalty of up to $500 per day to each local government that did not receive notice (which can be avoided if the employer pays all back pay within three weeks of the closing or layoff), and reasonable attorney's fees to prevailing plaintiffs.
SHRM Exam Tips
For the SHRM exam, know the coverage threshold (100 employees), the notice period (60 days), the plant closing threshold (50 employees), the mass layoff thresholds (500 employees, or 50 to 499 if 33% of the workforce), the 90-day aggregation rule, and the three exceptions (faltering company, unforeseeable business circumstances, natural disaster). Many state "mini-WARN" laws have lower thresholds and longer notice periods.