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Understanding the Worker Adjustment and Retraining Notification (WARN) Act

The Worker Adjustment and Retraining Notification (WARN) Act helps ensure advance notice in cases of qualified plant closings and mass layoffs.

What are examples of WARN Act?

Mass tech layoffs and major retailers closing shop are examples of the large job loss incidents behind WARN Act legislation.

How many employees trigger coverage under the WARN Act?

In general, employers are covered by WARN if they have 100 or more employees, not counting employees who have worked less than 6 months in the last 12 months and not counting employees who work an average of less than 20 hours a week.

Private, for-profit employers and private, nonprofit employers are covered, as are public and quasi-public entities which operate in a commercial context and are separately organized from the regular government. Regular Federal, State, and local government entities which provide public services are not covered.

What are the consequences of WARN Act?

Companies must provide 60 days’ notice to employees before any mass layoff.

Job cuts are considered “mass layoffs” if they include the following during any 30-day period of time:

  • Job cuts of 33% or more of the workforce at one site and at least 50 employees (excluding any part-time employees)
  • Job cuts of at least 500 employees at one location (excluding any part-time employees)
  • A plant closure that involves job cuts of 50 or more employees (excluding part-time employees)

What happens to employees when a company shuts down?

Employees find themselves out of a job. The idea behind the WARN Act is that it gives people a chance to find work. When a great number of people are laid off in the same sector, they compete for the same jobs and place an economic strain on the community.

What is the 90 day look back in the WARN Act?

Job losses within any 90-day period will count together toward WARN threshold levels, unless the employer demonstrates that the employment losses during the 90-day period are the result of separate and distinct actions and causes.

Are universities covered under the WARN Act?

Yes. Universities are considered employers. In some states, school boards are separate quasi-governmental entities with certain governmental powers, such as the ability to raise revenue; these may not be covered. Private universities are not government entities, so they are always covered.

Are hospitals covered under the WARN Act?

Yes. Unless it is a municipal hospital run as a government agency, hospitals are covered.

Is an economic crisis considered to be an unforeseen business circumstance?

If an employer believes their situation is the result of an economic crisis, it may apply the unforeseen business circumstance exception; however, there could be a burden on the employer to prove why it could not plan 90 days in advance.

Faltering economy exemption means an employer is excused from its WARN act obligations because the layoff results from 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, then the employer is excused from the notice requirements for a reasonable period— what constitutes a “reasonable period” is a fact question that will differ case-by-case.

(1) Faltering company. This exception, to be narrowly construed, covers situations where a company has sought new capital or business to stay open and where giving notice would ruin the opportunity to get the new capital or business, and applies only to plant closings.

(2) Unforeseeable business circumstances. This exception applies to closings and layoffs that are caused by business circumstances that were not reasonably foreseeable at the time notice would otherwise have been required.

(3) Natural disaster. This applies where a closing or layoff is the direct result of a natural disaster, such as a flood, earthquake, drought, or storm. If an employer provides less than 60 days advance notice of a closing or layoff and relies on one of these three exceptions, the employer bears the burden of proof that the conditions for the exception have been met.

Does the WARN Act allow employees time off with pay or “severance pay” to look for another job during the notice period?

No. WARN allows workers time to make appropriate arrangements for a new job or retraining. It is within the employer’s discretion to give the worker paid time off to look for another job.

Reach Out To NachtLaw, P.C.

If you have a WARN Act-related legal issue, do not hesitate to reach out to our experienced Michigan employment attorneys. Call 866-965-2488 or contact us online.