"WARN Watch--
Employers Laying Off Workers Must Follow Notice Requirements"
by Richard S. Rosenberg and Eric C. Schwettmann

Employers contemplating facility closings or reductions in force as a means of coping with the current business downturn must be aware of their legal obligations under the federal Worker Adjustment and Retraining Notification Act ("WARN"), 29 U.S.C. Sections 2101, et seq., and interpretative regulations promulgated by the U.S. Department of Labor, 29 C.F.R. 639.1-10.

Overview. Generally, WARN provides that larger employers (those with 100 or more employees) may not order a "plant closing", or "mass layoff" until at least sixty calendar days after giving written notice to the affected employees, their bargaining representative (if any), the State Dislocated Worker Unit, and the chief elected official of the local government where the WARN event is to occur. 29 U.S.C. ? 2102(a).

For the WARN act to apply, there must be a so-called employment loss which results in either a plant closing or mass layoff. "Employment loss" is defined as (1) a layoff of more than six months; (2) a termination (excluding terminations for cause, voluntary terminations, or retirement); or (3) the reduction of work hours of more than fifty percent during each month of any six month period. "Plant closing" is defined as an action resulting in an employment loss within a 30 day period for at least 50 or more employees at a single site of employment or one or more facilities or operating units, within a single site of employment. The term "facility" refers to a building or buildings, while the term "operating unit" refers to an organizationally or operationally distinct product, operation, or specific work function (such as an organizationally distinct department or operating division) within or nearby facilities at a single site. "Mass layoff" is defined as a layoff at a single site of employment where at least 33% of the workforce and at least 50 employees are laid off for a period of six months or more.

In determining the applicable WARN threshold, not every employee is counted. WARN specifically excludes part-time employees from the calculation. "Part-time" employee under WARN includes those employees working less than twenty (20) hours per week and those employees who work more than 20 hours, but who are employed for a total of less than six of the twelve months preceding the day on which notice otherwise is required.

WARN has a ninety day look back rule to capture non-WARN events which, in the aggregate, exceed the WARN threshold where separate employment losses occur within a ninety day period, each of which involves fewer than the number of employees necessary to trigger coverage, but which add up to the WARN minimum, WARN notices must be given to all employees who have or will suffer an employment loss. This is so, unless the employer can demonstrate that the individual actions arose from entirely separate and distinct causes. 29 U.S.C. ? 2103(d). The aggregation rule requires the WARN notice even where there was no contemplation at the time the individual events occurred that the layoff would trigger WARN.

Notice. The regulations under WARN contain specific notice requirements, both in terms of the content of the notice and to whom the notice must be sent. Note also that part-time employees are due the requisite notice if they are to be laid off or terminated as the result of any plant closing, even though they are not counted when determining the WARN act trigger levels. There are four elements required in the employee notice, which must be written in a language understandable to the employee: (1) a statement as to whether the planned action is expected to be permanent or temporary and, if the entire plant is to be closed, a statement to that effect; (2) the expected date when the plant closing or mass layoff will commence and the expected date when the individual employee will be separated; (3) an indication of whether or not seniority ("bumping") rights exist; and (4) the name and telephone number of a company official to contact for further information. The notice also may include additional information useful to the employee such as information on available dislocated employee assistance, transfer opportunities, severance entitlement, retention bonuses and, if the planned action is expected to be temporary, the estimated duration, if known. Notice to the State Dislocated Worker Unit and to the chief local elected official have similar (but not the same) required elements.

There are times when a full sixty day notice is not possible or desirable. While WARN does not contain any express exclusions, it does provide for a truncated notice where an employer's business is faltering, or if the WARN event is a result of unforeseeable business circumstances or a natural disaster. 29 U.S.C. ? 2102(b); 29 C.F.R. ? 639.9. In such an event, the employer bears the burden of proof that conditions for the exception have been met. The faltering company exception requires the employer to prove that the employer was actively seeking capital or business which if obtained, would have enabled the employer to avoid or postpone the shutdown and the employer reasonably and in good faith believed that giving the notice required would have precluded the employer from obtaining the needed capital or business. 29 U.S.C. ? 2102(b). The natural disaster exception includes floods, earthquakes, droughts, storms, tidal waves or tsunamis and similar effects of nature. 29 U.S.C. ? 2102(b)(2); 29 C.F.R. ? 639.9(c). An unforeseen business circumstance is a business circumstance that was not reasonably foreseeable as of the time the notice would have been required. 29 U.S.C. ? 2102(b). The relevant regulations go on to state that the unforeseen circumstances must be some sudden, dramatic and unexpected action or condition outside the employer's control, such as a principal client's sudden and unexpected termination of a major contract, a strike in a major supplier, an unanticipated and dramatic major economic downturn, or a government ordered closing of an employment site that occurs without prior notice. 29 C.F.R. ? 639.9(b) The test for determining when business circumstances are reasonably foreseeable states that the employer must exercise such commercially reasonable business judgment as with similarly situated employers in predicting the demands of its particular market. The employer is not required, however, to accurately predict general economic conditions that also may affect demands for its products or services. 29 C.F.R. ? 639.9(b).

There is no case which has addressed anything like the September 11 terrorist attacks and the resultant economic collapse in certain industries. Cases which have reviewed this exception seem to support a WARN exception. See Loenhrer v. McDonnell Douglas Corporation, 98 F.3d 1056 (8^th Cir.1996); Halkias v. General Dynamics, 137 F.3d 333 (5^th Cir. 1998). Both courts held that unforeseeable business circumstances existed under WARN when the defendants gave much less than sixty days notice immediately following the United States Government's cancellation of their A-12 fighter jet contract. The courts concluded that although the employer was aware that the government had concerns with the contract, the actual cancellation of the contract was not foreseeable a full sixty days before the cancellation occurred. Similarly, in Hotel Employees and Restaurant Employees International Union v. Elsinore Shore Association, 173 F.3d 175 (5^th Cir. 1998), the court found that unforeseeable business circumstances existed when the New Jersey Casino Control Commission ordered the defendant casino to close, despite the fact that the casino already was subject to the Commission's control and a conservatorship had been appointed because of financial difficulties experienced by the Casino. Notably, in each of these cases, the employer had advance knowledge at some level that certain adverse circumstances existed. The court nevertheless held that these employers met the unforeseen business circumstances exceptions to WARN's sixty day notice requirement.

Remedies. Non-compliance with WARN can be expensive. WARN provides for a civil action by an employee or group of employees, or their union. Damages include backpay (including tips for tipped employees) to each employee who did not receive the requisite notice for each day of the violation, benefits under their employee benefit plans, attorneys' fees and court costs at the court's discretion. There is also a $500 per day civil penalty. However, employer good faith can be a mitigating factor for the penalty assessment.