As the current recession widens, both employees and employers can expect that their rights and the circumstances of their particular plant closing or layoff will end up being decided in federal court. Skilled legal representation will be essential.

The Worker's Adjustment and Retraining Act, or "WARN" Act for short, was enacted in 1988 in an effort to provide for notice and retraining opportunities for workers caught in the last major economic downturn. The basic provisions are really quite simple. Generally speaking, the WARN Act requires that workers in factories employ 100 or more workers provide 60 days notice to their employees before any plant closure. A sudden factory shutdown or layoff in violation of the WARN Act may also trigger other legal issues under the Employee Retirement and Income Security Act of 1976 ("ERISA").

The Department of Labor administers the WARN Act and provides guidance for employees and employers interested in their rights and obligations. Unfortunately, the agency has no enforcement authority and advises workers to seek private legal representation if they believe their rights have been violated. That means workers' rights under the WARN Act must be resolved by a federal court or not at all.

The WARN Act requires factory employers who employ 100 or more employees to provide ALL of its employees 60 or more days notice before a plant closing or mass layoff. An employer can meet its obligations by providing notice to a worker's representative, such as a Union. But the WARN Act obligations extend to salaried employees, other supervisory employees, and other non-union employees alike.

One issue that is likely to come up in litigation is the "faltering economy" exemption to the WARN Act. An employer will argue it is excused from its obligations under the WARN act because the layoff is a result of a "faltering economy." If an employer is actively seeking a capital infusion or business buyout and reasonably believes the advance notice would prevent such opportunities, the employer is excused from the notice requirements for a "reasonable period." Whether the exemption forgives an employer's failure to give 60 days notice and for how long is a factual question we are likely to see argued over and over again in the federal courts.

The WARN Act's 90 day aggregation period may apply to some "mass layoff" situations. Whether the typical 30 day window or the 90 day aggregation period applies will be another factual issue likely to result in litigation. Even where an entire plant is not shuttered, the WARN Act requires notice to workers who are the victim of a "mass layoff" - usually defined as a layoff of more than one-third of a factory's workforce within a 30 day time period. However, the Act also provides for a wider 90 day time period in some circumstances. The WARN Act's notice and liability provisions may be triggered even the layoff takes place over the longer period unless the layoffs are the result of separate and distinct causes.

The legal and factual disputes created by the WARN Act provisions means any plant closing is very likely to end up in federal court. In light of the current economic climate, both employers and employees will be depending on federal courts to resolve them. Michigan is particular flashpoint for these types of disputes, because there it is a nexus for America's manufacturing economy - and because Michigan manufacturers are teetering on the brink.

Of course, the big three auto-makers are trying to make ends meet and doing their best to come up with a bailout or some other capital infusion to get them through the current crises. Whether or not the federal government comes through with a bailout, Michigan factories will close. As more factories close at Ford, GM, and Chrysler, so will go the auto supplier and OEM manufacturing plants.

Tough times are ahead for other Michigan industrial manufacturers, like DOW Chemical, Whirlpool, Lear, and Steelcase. No doubt many of them, like the big three, will be hoping for the best. They will be seeking capital infusions and any other means of keeping the doors open and workers employed. The paradox of the WARN Act is that economic incentives will push optimistic manufacturers to put off notice while the seek capital. When the company is too optimistic; when the notices come to late and the sufficiency of those notices fall into the grey areas of the WARN Act, the decisions of these troubled manufacturers are likely to end up being fought out and eventually resolved in federal court.

If you are seeking representation regarding a plant closure or layoff, or for more information about your rights or obligations under the WARN Act, please contact us today. From our home office in Ann Arbor, we serve clients throughout Michigan, including Detroit, Southfield, Lansing, Jackson, Flint, Pontiac, Adrian, and the surrounding communities.