Layoffs / WARN Act

Laid off Massachusetts employees may be entitled to advance notification pursuant to the federal Worker Adjustment and Retraining Notification (“WARN”) Act. Under this law, covered employers must provide 60 days written notice to both hourly and salaried employees, including managerial and supervisory staff, in the event of a plant closing or mass layoff. The WARN Act generally applies to employers with 100 or more employees. Employees who have worked for the company less than 6 months over the preceding one year period and employees who average less than 20 hours per week do not count towards this threshold.

The WARN Act is applicable to private employers, whether for-profit or non-profit, as well as public and quasi-public organizations operating in a commercial context and separately organized from government. The Act exempts federal, state, and local government entities that provide public services from coverage.

A company must notify employees of an upcoming layoff in the event of a “plant closing” or “mass layoff,” each of which are discussed in more detail below:

• Plant Closing: Where an employment site, or at least one facility within the site, is expected to be shut down, employees must be provided with 60 days notice if the closing will result in an “employment loss” for at least 50 employees in any 30 day period.

• Mass Layoff: Even without a plant closing, an employer must still provide 60 day notice if a layoff is expected to affect: (1) at least 500 employees in any 30 day period; or (2) under 500 employees, but no less than 50 employees, if the total number of laid off workers equals at least 33% of the employer’s active workforce.

• Combining Groups: Employers must also provide advance notice if employment losses of two or more groups of workers combined reaches the above-described employee thresholds of either a plant closing or mass layoff during any 90 day period, unless the employer can show the layoffs of each group are the result of separate and distinct actions and causes.

In all scenarios, employees who have worked at the site or facility for less than 6 months or employees who work an average of less than 20 hours can not be used to satisfy this threshold, but are still entitled to receive such notice.

The WARN Act defines “employment loss” as any one of the following occurrences: (1) an employment termination, other than a discharge for cause, voluntary departure, or retirement; (2) a layoff exceeding 6 months; or (3) a greater than 50% reduction in an employee’s work hours in each month of any 6 month period.

Exemptions apply. An employee, for example, does not suffer an employment loss where she or he turns down a transfer to a different employment site within reasonable commuting distance. Also, there is no employment loss if an employee accepts a transfer, even if beyond a reasonable commuting distance, within 30 days after the later of the: (1) transfer is offered, or (2) plant closing or mass layoff occurs. In both scenarios, the employer must offer the transfer before the mass layoff or plant closing is effectuated. In addition, the transfer can not: (1) result in a break of employment of more than six months, or (2) rise to the level of a constructive discharge.

Several exceptions to the 60 day notice period can apply. Three main scenarios predominate:

1. Faltering Company: This exception applies solely to a plant closing and is intended to be narrowly construed. Companies that have sought new capital or business in order to remain in business are exempted from providing advance notice where doing so would jeopardize the opportunity to raise capital or garner business;

2. Unforeseeable Business Circumstances: This exception can be very fact-specific and applies to both mass layoffs and plant closings. Under this exception, companies need not provide notice if the downturn was caused by business circumstances that were not reasonably foreseeable at the time notice would otherwise have been required; and

3. Natural Disaster: This exception also applies to mass layoffs and plant closings and exempts business downturns caused by a natural disaster (e.g., flood, earthquake, drought, or major storm).

In relying on any of these exceptions, the employer carries the burden to prove the exception applies. Moreover, even where an exception is applicable, a company must still give as much notice as practicable. The notice must include a brief statement of the reason for the reduced notice period.

Under the WARN Act, laid off employees who do not receive proper notice may recover lost pay and benefits for the period of violation up to 60 days. Because WARN Act cases naturally tend to affect a large number of workers, these cases are sometimes filed as a class action. Any wages paid by the employer during the notice period must be unconditional. An employer, for example, may not condition payment on an employee’s release of legal claims.

As lawyers concentrating in employment law located in the heart of Boston, we look forward to meeting with you and addressing your layoff concerns.

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