Question of the Month - February 2010

What is the WARN Act and What Does It Require?
The Worker Adjustment and Retraining Notification Act (WARN) is a federal law requiring employers with 100 or more employees to provide 60 day's notice in advance of plant closings and mass layoffs. Federal, state, and local government entities that provide public services are not covered. A plant closing occurs when an employment site (or one or more facilities or operating units within an employment site) shuts down, and the shutdown will result in an employment loss for 50 or more employees during any 30-day period. A mass layoff occurs when a layoff results in an employment loss at the employment site during any 30-day period for 500 or more employees, or for 50-499 employees if they make up at least 33% of the employer's active workforce. Employees who have worked less than six months in the last 12 months or employees who work an average of less than 20 hours a week are not counted.

WARN requires covered employers to provide notice to all employees, employees' representatives, local chief elected officials, and the state dislocated worker unit. This notice is intended to provide workers time to adjust to the prospective loss of employment, to seek and obtain other jobs, and, if necessary, to enter skill training or retraining that will help them find replacement employment. The Department of Labor (DOL) administers WARN at the federal level and some states have their own plant closure laws.

Employers who violate WARN can be sued for back pay and other reimbursement. Recently former employees of Arrow Trucking Co. filed such a suit in Oklahoma federal district court. The former employees allege that Arrow violated WARN by shutting down operations without giving drivers adequate notice. Smith v. Arrow Trucking Co. (N.D. Okla. 2009).

The lawsuit alleges that on December 21, 2009, Arrow informed its approximately 1,400 drivers that their employment was terminated immediately and that they should drop vehicles at the nearest freight liner location and "figure out how to get home." The lawsuit also alleges that the company "knew or should have known at least 60 days prior to the Dec. 21, 2009, layoffs that it was likely that defendants would be required to shutdown or have significant mass layoffs because of the economic climate and business trends." In addition to back pay and reimbursement, the drivers are seeking bonuses, accrued holiday pay, and accrued vacation for the 60 working days following their terminations. The drivers are also suing for pension and 401(k) contributions, health insurance coverage, and other required employee benefits.

Last summer, Congress introduced the Federal Oversight, Reform, and Enforcement of the WARN Act (Forewarn) which would amend WARN increasing the number of entities and individuals who must receive notices and requiring 90 day's notice. Employers with 75 employees (down from 100) would be covered. A plant closing would be one affecting at least 25 workers (down from 50). A "mass layoff" would be one that affects at least 25 workers (down from 33% of full-time workers amounting to at least 50 workers, or 500 workers).

In addition to private suits, Forewarn would allow the Secretary of Labor to investigate violations, issue subpoenas, and bring civil actions to recover back pay, interest, benefits, and liquidated damages. Employers could be liable for double back pay for each day the employer was required to provide notice before the closing or layoff, but failed to do so, along with interest.

MSEC will keep members updated on the status of Forewarn. Contact MSEC with questions about WARN or see our FYI WARN Act - Overview for more information and sample notices.