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WARN (Worker Adjustment and Retraining Notification Act)

The WARN Act: What Employers and Employees Need to Know About Mass Layoffs

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Mass lay­offs and plant clo­sures are tough for every­one involved. Employ­ees lose their jobs, and busi­ness­es face finan­cial and legal con­se­quences. The Work­er Adjust­ment and Retrain­ing Noti­fi­ca­tion (WARN) Act is a fed­er­al law that pro­tects work­ers by requir­ing advance notice of large-scale lay­offs. If you’re an employ­er plan­ning work­force reduc­tions or an employ­ee won­der­ing about your rights, here’s what you need to know.

What Is the WARN Act?

The WARN Act, passed in 1988, requires cer­tain employ­ers to pro­vide 60 days’ notice before a mass lay­off or plant clos­ing. The goal is to give employ­ees time to pre­pare for job loss, seek new employ­ment, and access retrain­ing oppor­tu­ni­ties (29 U.S.C. § 2101 et seq.).

This law applies to pri­vate employ­ers with 100 or more full-time employ­ees. It cov­ers two main scenarios:

  1. Plant Clo­sures – A full shut­down of a work­site that affects at least 50 full-time employees.
  2. Mass Lay­offs – A work­force reduc­tion affect­ing at least 50 employ­ees and one-third of the work­force at a sin­gle loca­tion, or any lay­off of 500 or more employ­ees regard­less of per­cent­age (29 U.S.C. § 2101(a)(2)-(3)).

Exceptions to the WARN Act

Not every lay­off requires 60 days’ notice. The WARN Act pro­vides excep­tions for:

  • Fal­ter­ing com­pa­nies: If an employ­er was active­ly seek­ing cap­i­tal or busi­ness that would have pre­vent­ed lay­offs, notice require­ments may be excused.
  • Unfore­see­able busi­ness cir­cum­stances: Events like sud­den mar­ket crash­es or nat­ur­al dis­as­ters may jus­ti­fy short­er notice.
  • Nat­ur­al dis­as­ters: Lay­offs caused direct­ly by hur­ri­canes, floods, or earth­quakes may not require full WARN Act com­pli­ance (20 C.F.R. § 639.9).

Even when these excep­tions apply, employ­ers must pro­vide as much notice as possible.

Consequences for Violating the WARN Act

Employ­ers who fail to com­ply with the WARN Act can face:

  • Back pay for each affect­ed employ­ee for the num­ber of days notice was not provided.
  • Civ­il penal­ties of $500 per day for fail­ing to noti­fy local gov­ern­ment offi­cials (29 U.S.C. § 2104(a)).
  • Law­suits from employ­ees seek­ing com­pen­sa­tion for lost wages and benefits.

Does bankruptcy shield an employer from WARN Act liability?

Courts have ruled that employ­ers can­not nec­es­sar­i­ly use bank­rupt­cy as an auto­mat­ic shield against WARN Act lia­bil­i­ty (Unit­ed Steel­work­ers of Am. v. North Star Steel Co., 5 F.3d 39 (3d Cir. 1993)).

Here are some key cas­es that address this issue:

1. In re United Healthcare System, Inc., 200 F.3d 170 (3d Cir. 1999)
  • The Third Cir­cuit ruled that the WARN Act applies even when a com­pa­ny is in bank­rupt­cy if the com­pa­ny con­tin­ues oper­at­ing as a busi­ness rather than mere­ly liq­ui­dat­ing assets.
  • The court found that if the employ­er remains an oper­at­ing enti­ty at the time of lay­offs, it is still sub­ject to WARN Act obligations.
2. In re Jevic Holding Corp., 496 B.R. 151 (Bankr. D. Del. 2013)
  • The court reject­ed the argu­ment that bank­rupt­cy auto­mat­i­cal­ly shields employ­ers from WARN Act liability.
  • The court deter­mined that if employ­ees were ter­mi­nat­ed while the com­pa­ny was still engaged in busi­ness oper­a­tions (as opposed to liq­ui­da­tion), the com­pa­ny could still be liable under WARN.
3. In re APA Transp. Corp., 541 F.3d 233 (3d Cir. 2008)
  • The court not­ed that the liq­ui­dat­ing fidu­cia­ry doc­trine can lim­it WARN lia­bil­i­ty if a com­pa­ny is in pure liq­ui­da­tion mode (i.e., shut­ting down and not oper­at­ing as a business).
  • How­ev­er, if the employ­er is still con­duct­ing busi­ness and has some oper­a­tional func­tion, WARN lia­bil­i­ty may still apply.

WARN Act in West Virginia

West Vir­ginia fol­lows fed­er­al WARN Act guide­lines but does not have addi­tion­al state-lev­el notice require­ments. How­ev­er, employ­ers should be aware of poten­tial law­suits under state con­tract and wrong­ful ter­mi­na­tion laws if they fail to pro­vide ade­quate notice.

Unlike states such as Cal­i­for­nia (Cal-WARN Act) or New York (NY WARN Act), West Vir­ginia does not impose stricter notice require­ments beyond the fed­er­al WARN Act.

The West Vir­ginia Work­force Devel­op­ment pro­gram may offer help in WARN settings:

  • The Work­Force West Vir­ginia Rapid Response Pro­gram assists work­ers affect­ed by mass lay­offs and plant closings.
  • Employ­ers plan­ning lay­offs can coor­di­nate with Work­Force West Vir­ginia for com­pli­ance and work­er support.
  • Web­site: Work­Force West Virginia

Best Practices for Employers

  • Plan Ahead: If work­force reduc­tions are on the hori­zon, eval­u­ate whether WARN applies and pro­vide time­ly notice.
  • Com­mu­ni­cate Clear­ly: Explain the rea­sons for lay­offs and pro­vide infor­ma­tion about sev­er­ance, ben­e­fits, and job place­ment assistance.
  • Con­sult Legal Coun­sel: Giv­en the risks of non­com­pli­ance, get­ting legal guid­ance ear­ly can pre­vent cost­ly mistakes.

What Employees Should Know

  • Check Your Notice Rights: If you are laid off with­out 60 days’ notice, deter­mine whether WARN applies.
  • Seek Com­pen­sa­tion: If your employ­er vio­lat­ed WARN, you may be enti­tled to back pay and benefits.
  • File a Com­plaint: You can report vio­la­tions to the U.S. Depart­ment of Labor or file a law­suit if necessary.

Conclusion

The WARN Act plays a cru­cial role in pro­tect­ing employ­ees from sud­den job loss while help­ing employ­ers man­age work­force reduc­tions respon­si­bly. Under­stand­ing the law ensures both par­ties can nav­i­gate lay­offs legal­ly and fair­ly.

Drew M. Capuder
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