The WARN Act and COVID-19: What are Employers Obligated to Do?

Facing the many challenges posed by the COVID-19 pandemic, employers are considering their obligations to their workforce in the event of a reduction in force related to COVID-19 (“COVID-19”). This post provides an overview of an employer’s WARN Act obligations in the event a COVID-19-related closure or reduction in force.

What is WARN?

The federal Worker Adjustment and Retraining Notification Act (“WARN”) is a law that requires employers to provide advance notice and planning mechanisms to their workforce and communities, in the event of a qualified plant closing or mass layoff. The United States Department of Labor (“DOL”) has set guidelines for employers to properly follow WARN requirements. Certain states have analogous state laws, referred to as “mini-WARN acts,” which we touch on briefly at the end of this post.

What circumstances trigger WARN?

Under WARN, generally, employers with 100 or more full time workers (total) must provide written notice at least sixty (60) calendar days in advance of covered plan closings and mass layoffs, as described below.

Circumstances that trigger WARN notification requirements are as follows:

• Plant Closing: A covered employer closes a facility or discontinues an operating unit (as defined under WARN), permanently or temporarily, affecting at least 50 workers, not counting part-time workers, at a single site of employment. A plant closing also occurs when an employer closes an operating unit that has fewer than 50 workers but that closing also involves the layoff of enough other workers to make the total number of layoffs 50 or more.
• Mass Layoffs: (1) A layoff of 500 or more workers (not counting part-time workers) at a single site of employment during a 30-day period; or (2) layoffs of 50-499 workers (not counting part-time workers), when these layoffs constitute 33% of the employer’s total active workforce (not counting part-time workers) at the single site of employment.

In determining whether an employer meets the 50 full-time worker threshold to trigger WARN, an employer must analyze whether the workers were subject to an “employment loss” which can mean many different things, including in non-traditional settings currently at issue with COVID-19, such as:

• Temporary Layoff: (1) A temporary layoff exceeding 6 months that meets the criteria of a plant closing or mass layoff; or (2) a temporary layoff that initially planned for less than 6 months, and then the employer decides to extend the layoff for more than 6 months. If the extension occurs for reasons that were not reasonably foreseeable at the time the layoff was originally announced, notice need only be given when the need for the extension becomes known. Any other case is treated as if notice was required for the original layoff.
• Reduction in Hours: A reduction in work hours for 50 or more full-time workers by 50% or more for each month in any 6-month period. Again, the event need not be permanent to trigger WARN.

What Circumstances do not trigger federal WARN?

Circumstances that do not trigger federal WARN include the following:

• Closing of a temporary facility or completion of a temporary project, when employees were hired with the understanding that their employment would end with the facility or project.
• Closures of a facility or operating unit due to a union strike or lockout where the closing is not intended to evade WARN.
• Layoffs or closings that do not trigger the above WARN thresholds; for example:
  • If a plant closing or mass lay off results in fewer than 50 full-time workers losing their jobs at a single site of employment;
  • If 50-499 workers lose their job and that number is less than 33% of the employer’s total active workforce at a single site;
  • If a layoff is for 6 months or less; or
  • If worker hours are not reduced 50% in each month of any 6-month period.

How does an employer calculate the timeframe to decide when WARN notice is required?

The WARN Act applies to employment losses that occur over a 30-day period. However, WARN also applies to employment losses that occur over a 90-day period. An employer is required to give advance notice if it conducts a series of smaller layoffs that collectively would reach the WARN thresholds outlined above over 90 days. Notice is not required in this instance if an employer can show that the different layoffs occurred because of separate and distinct actions, and were not staggered to evade WARN.

What are the notice requirements under WARN?

Under WARN, employers must provide notice to (1) affected employees (if the employees are not represented by a union), (2) the state’s rapid response dislocated worker unit, and (3) the local chief elected official of the local government where the closing or mass layoff is to occur (note that the title of the chief elected official will vary according to local government structures). If employees are unionized, an employer is not required to provide individual employee notices under WARN (though may still be required to provide notice under a state mini-WARN act), though still may be required to provide individual notices to non-unionized employees. The contents of the notice will vary depending on the recipient. Employers are encouraged to consult with their counsel to construct proper notices.

Are there any exceptions to the WARN notice requirements?

Yes, there are three exceptions to WARN’s 60-day notice requirement, two of which may immediately apply to COVID-19.

• Faltering company: When, before a plant closing, a company is actively seeking capital or business and reasonably in good faith believes that advance notice would preclude its ability to obtain such capital or business, and this new capital or business would allow the employer to avoid or postpone a shutdown for a reasonable period.
  • This exception may become increasingly relevant for employers in the coming months, as a result of COVID19’s effect on the global market.
• Unforeseeable business circumstances: When the closing or mass layoff is caused by business circumstances that were not reasonably foreseeable at the time that 60-day notice would have been required (i.e., a business circumstance that is caused by some sudden, dramatic, and unexpected action or conditions outside the employer’s control, like the unexpected cancellation of a major order).
  • The WARN regulations provide examples and circumstances that may qualify as “unforeseeable business circumstances.” An important indicator that a business circumstance is not foreseeable is that it is caused by a “sudden, dramatic, and unexpected action or condition outside the employer’s control.” For example, a principle client’s sudden and unexpected termination of a major contract with an employer, a strike at a major supplier of the employer, or an unanticipated and dramatic, major economic downturn could all qualify. 20 C.F.R. § 639.9(b)(1).
  • The test for determining whether a business circumstance is reasonably foreseeable is based on an employer’s “business judgment.” Reasonable business judgment, not hindsight, dictates the scope of unforeseeable business circumstances. Loehrer v. McDonnell Douglas Corp., 98 F.3d 1056, 1061 (8th Cir. 1996). An employer must exercise “commercially reasonable business judgment as would a similarly situated employer in predicting the demands of a particular market.” 20 C.F.R. § 639.9(b)(2). Put differently, “a company will be excused from WARN liability if, when confronted with potentially devastating occurrences, it reacts as would reasonable employers within its own market.” Loehrer, 98 F.3d at 1061 citing Chestnut v. Stone Forest Indus. Inc., 817 F. Supp. 932, 936 (N.D. Fla. 1993). So long as the circumstance resulting in layoffs is caused by some “sudden, dramatic, and unexpected action or condition outside the employer’s control,” an employer may avoid WARN act liability. Id. citing 20 C.F.R. § 639.9(b)(2).
  • Whether a reduction in force prompted by COVID-19 would qualify as an “unforeseeable business circumstance” is a fact-specific inquiry, and will depend on the actions of employers compared to that of others in its market. Employers may be affected by COVID-19 differently. Case law makes clear however, that no employer is held to the standard of hindsight when evaluating whether a business circumstance is unforeseeable.
• Natural disaster: When a plant closing or mass layoff is the direct result of a natural disaster such as a flood, earthquake, drought, storm, tidal wave, or similar effects of nature. In this case, notice may be given after the event.
  • Floods, earthquakes, droughts, storms, tidal waves or tsunamis and similar effects of nature are natural disasters. 20 CFR 639.9 (c)(1).
  • The DOL makes clear that notice must still be given in the face of a natural disaster, whether in advance or after the employment loss caused by the disaster. Where a WARN triggering event occurs as an indirect result of natural disaster, this exception will not apply, but the “unforeseeable business circumstance” may be applicable. 20 CFR 639.9 (c)(3) - (4).
  • Currently, no case law addresses whether a pandemic such as COVID-19 would qualify as a “natural disaster” under WARN, and very few cases discuss the “natural disaster” exception generally. At least one court has stated that human involvement in the origins of an event would preclude it from being a natural disaster. Carver v. Foresight Energy, LP, 2016 U.S. Dist. LEXIS 90665, at *12 (C.D. Il. 2016) (any employer relying on this exception would be required to present facts and arguments that show a direct nexus between the virus and the WARN event, as opposed to an indirect one).

What if a WARN exception applies?

Regardless of whether an exception applies, any event that triggers WARN still requires notices to affected employees. That notice should include a statement as to why the employee did not receive the full 60-day notice. In this case, the employer would point to COVID-19 as an unforeseeable business circumstance that is sudden, dramatic and unexpected.

What are the penalties if an employer violates WARN?

Violating WARN can result in significant legal liability for employers, including back pay and benefits for each day of violation to each aggrieved employee up to 60 days, and $500 in civil penalties for each day an employer fails to provide notice to a unit of local government. Back pay and benefits can be reduced by wages and benefits paid during the violation period or by any other payments to the employees not legally obligated. An employer may avoid the $500 civil penalty if it provides back pay to each aggrieved employee within three weeks of separation. Note that an aggrieved employee, employee union representative or unit of local government all have standing to file suit in federal court for a WARN violation.

Because WARN provides that the maximum employer liability for damages (including back pay and benefits) is 60 days, providing employees with full pay and benefits precludes any damages, i.e., “pay in lieu of notice.” However, nothing in WARN permits pay in lieu of notice, nor do the regulations recognize such a concept.

Should employers be aware of any other laws related to WARN?

Yes. It is absolutely imperative that employers review state WARN laws (otherwise known as “mini-WARN” laws) as well as state notification requirements. Many states, including New York, California, Massachusetts, Illinois, and New Jersey, have their own mini-WARN acts, with varying thresholds and notice periods. An employer is not exempt from fulfilling the obligations of a state mini-WARN act simply because it has complied with federal WARN. The following is intended to provide an overview of the laws governing closings (temporary or permanent) and mass layoffs across the states. These state laws can be nuanced, however, and employers are advised to seek counsel prior to making decisions about closings and/or layoffs:

Is there a mini-WARN Act or other notice requirement for closings or mass layoffs in your jurisdiction?

The following states and the District of Columbia, do not have a mini-WARN Act or other notice requirements for group layoffs or closings:

• Alabama;
• Alaska;
• Arizona;
• Arkansas;
• Colorado;
• District of Columbia;[1]
• Florida;
• Idaho;
• Indiana;
• Kansas[2];
• Kentucky;
• Louisiana[3];
• Mississippi;
• Missouri;
• Montana;
• Nebraska;
• Nevada;
• New Mexico;
• North Carolina;
• Oklahoma;
• Oregon[4];
• Pennsylvania[5];
• Puerto Rico[6];
• Rhode Island;
• South Carolina;
• South Dakota;
• Texas;
• Utah;
• Virginia;
• Washington;
• West Virginia; and
• Wyoming.

The following states do have mini-WARN Acts or notification requirements for closings and/or group layoffs that employers should be aware of, in addition to the federal WARN Act:

California:  Under usual circumstances, the California Labor Code §§1400-1408 requires written, 60 days’ advance notice for closings and mass layoffs for losses that affect at least 50 employees in a 30-day period at any industrial or commercial facility that employs or has employed in the preceding 12 months 75 or more persons. Notice of a closing or mass layoff is not required in the event of a physical calamity or act of war. Importantly, the California Labor Code does not contain an exception for “unforeseen business circumstances” (like the federal WARN Act). However, in the wake of COVID-19, California has adopted this exception temporarily per Executive Order N-31-20 issued by Governor Gavin Newsom on March 17, 2020. Pursuant to the Executive Order, employers are still required to provide as much notice as practicable as required by the California Labor Code, and must include this phrase: “If you have lost your job or been laid off temporarily, you may be eligible for Unemployment Insurance (UI).” More information regarding California’s “suspension” of its mini-WARN Act can be found here. Additionally, employers should be aware that California also imposes administrative reporting requirements in the event of any mass layoff.

Connecticut:  In addition to complying with the federal WARN Act, there is an Insurance Notification Requirement when a business is sold (CGS §51s), and a Plant Closing Law that may apply. Under the Plant Closing Law certain employers that permanently shut down (or relocate) must pay continued group health insurance for one-hundred and twenty (120) days. (CGS §31-51o).[7]  A collective bargaining agreement that requires an employer to continue such coverage in the event of a closing supersedes the statute.

Delaware:  Delaware has expanded the federal WARN Act to have the state WARN law apply to all employers with at least 100 full-time employees who work an aggregate of 2,000 hours per week (rather than 4,000 hours per week under the federal WARN Act).

Georgia:  Georgia does not have a mini-WARN Act for group layoffs, and although Georgia does not have a law requiring advance notice, the Georgia Department of Labor (GDOL) requires that when an employer separates or lays off 25 or more employees in an establishment on the same day for the same reason, that employer must provide the GDOL (closest to the company’s place of business) with a mass separation notice in duplicate and a list of workers within 48 hours of those separations, if the separations are either: permanent; for an indefinite period of time; or for an expected duration of a least seven (7) days. (Ga. Comp. R. & Regs. 300-2-4-.10(1))

Hawaii: The Hawaii Dislocated Workers Act (DWA) requires employers with at least 50 employees to provide written notice 60 days before the closing or partial closing of a covered establishment due to: a sale, transfer, merger, other business takeover, or transaction of business interests, or any other close of business transaction that results in the layoff of employees. Employers must give notice to all affected employees and to the Hawaii Department of Labor and Industrial Relations (HRS §§ 394B-2 to 394B-9.)  The DWA does not have a counterpart to the federal WARN Act’s unforeseeable circumstances exception or natural disaster exception.

Illinois:  The Illinois mini-WARN Act requires covered employers (e.g., 75 or more full-time employees or 75 or more employees who in the aggregate work at least 4,000 hours per week exclusive of overtime) to provide written notice 60 days before ordering any mass layoff, relocation, plant closing, or employment loss (see 820 ILCS 65/1 to 65/99). An employer receiving economic development incentives may be required to provide additional notice. However, notice is not required in the event of a physical calamity or an act of terrorism or war. Under the state law, a “plant closing” is the temporary or permanent shutdown of an employment site that results in a loss during any 30-day period of 50 or more full-time employees, and a “mass layoff” results in a loss during any 30-day period of at least 250 full-time employees or at least 25 full-time employees who make up at least 33 percent of the workforce; or relocation. Further, an “employment loss” is an “employment termination other than a discharge for cause, voluntary departure, or retirement; a layoff exceeding six months; or a reduction in work hours of more than 50% during each month of any six-month period. Damages are capped at one-half the length of the employee’s tenure if that amount is smaller than 60 days’ worth of damages.

Iowa:  The Iowa WARN Act, also known as the Iowa Layoff Notification Law, requires 30 days' advance, written notice before a covered “business closing” (e.g. permanent or temporary closing of a single site of employment) or a “mass layoff” that will result in a loss of 25 or more full-time employees. (Iowa Code Ann. § 84C.3(1)(a)). Much like the federal WARN Act, the Iowa WARN Act provides notice exceptions for unforeseeable business circumstances and natural disasters, however, employers should keep in mind that both exceptions still require some notice.

Maine:  Maine has enacted notice requirements for certain group layoffs as part of the Maine Severance Pay Act (26 M.R.S. § 625-B). This is mitigated if a closing or mass layoff is necessitated by physical calamity or government order.

Maryland:  Maryland recently enacted mandatory WARN act obligations (even for smaller jobs), which appear to lack important protections present in federal WARN Act/other state WARN laws. This amendment is to Maryland’s Economic Stabilization Act and requires that an employer implementing a “reduction in operations” must provide 60 days’ advance notice to employees and others, and also provide continuation of health, pension, severance and/or other benefits to affected employees on terms yet to be developed by the state's secretary of labor. These obligations are triggered by the closure of all or a portion of operations affecting as few as 15 employees, as well as by relocations of operations. The change was enacted on May 7, 2020, and will be effective on October 1, 2020.  Further, this law implements fines for violations, contingent upon the severity of the violation, size of employer, and employer's good faith and history of previous violations. The Maryland law does not expressly address whether it authorizes private rights of action, or instead requires that all claims must be presented to the state's secretary of labor.

Massachusetts:  Massachusetts does not have a mini-WARN Act, but it does have two plant closing laws. Under the first, the Standards for Companies Financed by Quasi-Public Agencies Law, Massachusetts companies that receive financing from specified Massachusetts quasi-public agencies must accept voluntary standards of corporate behavior relating to plant closings. (M.G.L. c. 149 §182). Such companies must make a good faith effort to give every employee affected by a plant closing or partial closing as much practicable advance notice, and assistance with reemployment (if possible). The second law, the Massachusetts Plant Closing Law requires covered employers to provide notice of any plant closing (M.G.L. c. 151A, §§ 71A; 71B(a)). Notably, as of the date of this article, enforcement of the Plant Closing Law is not funded or enforced. Whereas, the Standards for Companies Financed by Quasi-Public Agencies Law does not address potential penalties for violation. The standards are enforced as terms and conditions of the employer's receipt of financing from the relevant quasi-public agency.

Michigan:  In addition to complying with the federal WARN Act requirements, under the Michigan Employment Security Act, Michigan requires written notice to the Workforce Development Agency and the State of Michigan Workforce Innovation and Opportunity Act Title I Section.

Minnesota:  In addition to following the federal WARN Act, State law encourages businesses considering a closing or substantial layoff to give notice as early as possible and requires employers providing WARN notice to report to the Workforce Development commissioner the names, addresses, and occupations of terminated employees. Minn. Stat. §116L.976.

New Hampshire:  In addition to following the federal WARN Act, New Hampshire requires fact-finding for temporary or permanent mass layoffs, and notice if an employer lays off (or expects to lay off) 25 or more individuals in the same calendar week for an expected duration of seven days or more. (N.H. Rev. Stat. Ann. 282-A:45-a)

New Jersey:  As of April 14, 2020, New Jersey's Governor signed into law two amendments to the New Jersey WARN Act that alleviate some of the burdens the Act and certain pending amendments placed on New Jersey employers during the COVID-19 public health emergency.  Specifically, New Jersey amended the definition of “mass layoff” under the Act to exclude layoffs due to "national emergencies." As a result, mass layoffs resulting from the COVID-19 pandemic (a national emergency) do not trigger the notice requirements of the New Jersey mini-WARN Act. This amendment is retroactive to March 9, 2020 (the date New Jersey declared a state of emergency). In addition, these amendments delay the effectiveness of the statutory changes that were passed on January 21, 2020, which were originally scheduled to take effect on July 19, 2020 (including requiring mandatory severance payments for all workers effected by a mass lay off (a closing affecting 50 or more employees), and increasing the minimum notice period from 60 days to 90 days).  

New York:  The New York mini-WARN Act requires 90 days’ advance written notice (rather than 60 days), to certain agencies and parties. The mini-WARN Act also applies to private businesses with 50 or more full time workers in the state (contrasted with federal WARN’s 100 full time employee threshold) and is triggered by a plant closing, mass layoff, relocation or 50% reduction in hours of 25 or more full time workers. (N.Y. Lab. Law §§ 860 to 860-I; 12 NYCRR § 921-1.0 to 921-9.1.).  However, in light of the COVID-19 crisis and potential concerns regarding WARN compliance for employers who bring back employees onto their active payroll with the Paycheck Protection Program ("PPP") funds, Executive Order No. 202.19 modifies the NY WARN Act from April 17 – May 17, 2020. This Order essentially creates an “unforeseeable business circumstances” exception, allowing businesses receiving PPP funding that cannot give the full 90-days’ notice to provide notice “as soon as practicable, but not necessarily within ninety days.”  This Order does not eliminate the notice requirement, but affects the length of the notice period.

North Dakota: North Dakota does not have a mini-WARN Act. However, the North Dakota Administrative Code requires employers to provide notice of mass layoffs: to the public employment service (closest to the place of employment) within forty-eight (48) hours prior to the date of the mass separation (e.g., layoff of 25 or more workers in a single establishment either for an indefinite period of time or a period expected to be more than seven (7) days for the same reason). (N.D. Admin. Code § 27-03-02-02.)  Further, after a worker has been separated, the employer must instruct the worker to report promptly, either in person or by mail, to the public employment service office most convenient to the worker.

Ohio: Ohio does not have a mini-WARN Act, however, under the notice provision of the Ohio Unemployment Compensation Law, employers must inform the Ohio Department of Job and Family Services of a layoff or separation of 50 or more employees because of a lack of work within any seven-day period. The employer must provide notice at least three working days before the first day of the separation or lay off. (R.C. 4141.28(C).)

Tennessee:  Tennessee’s Plant Closing and Reduction in Operations Act applies to partial or full closings or other management decisions that result in a reduction of at 50 employees over a three-month period within a factory, plant, office, or other facility in which employees produce goods or provide services. Tennessee follows all other federal legislation requirements of the federal WARN Act. (see T.C.A. §§ 50-1-601 to 50-1-604).

Vermont:  Vermont has two notice requirements for group layoffs: the Vermont Notice of Potential Layoffs Act (NPLA) and Vermont Notice of Potential Layoffs Act Rule; and the Vermont Mass Separation Notification Administrative Rule. Both add state-level notification requirements in addition to the federal WARN Act requirements.

Wisconsin:  Wisconsin’s mini-WARN Act (otherwise knowns as the Wisconsin Business Closing and Mass Layoff Law) requires, with certain exceptions, businesses with 50 or more employees in Wisconsin to provide written notice 60 days before implementing a temporary or permanent closing or mass layoff in the state. If an employer fails to provide notice, an employee can recover the pay or the value of any benefits he/she would have received during the recovery period, including the cost of medical treatment. (Wis. Stat. § 109.07; Wis. Admin. Code DWD §§ 279.001 to 279.13)

Federal WARN and its mini-WARN counterparts are highly complex and technical laws that should be considered in a potential downsizing. Employers are well-advised to consult with expert counsel to ensure compliance with applicable federal and state WARN requirements.

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