The WARN Act - What Is It and How Does it Work

The WARN Act - What Is It and How Does it Work

WARN Act:  The Worker Adjustment and Retraining Notification Act

That's a mouthful!  In general, this statute is designed to require employers to provide employees with 6o days notice of layoffs due to plant closings, sale of business or financial hardship.  It is a complicated statute, filled with nuances and exceptions, so click here to read a more complete analysis on the Act issued by the United States Department of Labor.

Here is a general synopsis of the Act, and a few important tips to remember:

1) WARN only applies to employers that have 100 or more full-time workers;

2) WARN applies to all private and publicly-trade companies, whether they are for profit or not for profit;

3) WARN notice must be provided to all affected employees, whether hourly or salary, management or line personnel;

4)  WARN notice must be given if there is a plant closing or "mass layoff" employers;

For plant closings, the test is:  if one or more facilities or operating units in a given location anticipate a shut down that will affect more than 50 workers AND last more than 30 days, WARN Act notice must be given.

For mass layoffs, the test is:  if  a series of layoffs over a 30 day period will result int he loss of 500 or more employees, Warn Act Notice must be given.  Also, if a series of layoffs of more than 50 or less than 500 employees over a 30 day period will result in a loss of 1/3rd of the workforce, WARN notice must be given.

The Act applies to the above situations and targets situations involving "loss of employment."  Terminations for cause, voluntary resignations and retirements are not considered "loss of employment" under the statute.

In addition, employees who refuse a transfer to a different work site "within a reasonable commuting distance" are are not deemed to have suffered a "loss of employment."

Employers who fill to give WARN Act notice are required to pay affected employees all wages and compensation to which they would have been entitled over a 60 day period.  However, employers are entitled to a set-off equal to the amount of compensation/benefits they paid to the employee over his/her last 60 days of employment. 

Private parties (i.e. workers) are allowed to bring WARN Act cases in federal court, and may be entitled to an award of attorneys fees and costs if they win.

The WARN Act:  A Paper Lion

As a practical matter, the WARN Act is a bit of a toothless tiger.  As long as an employer pays its employees up to the last day of work, their liability for violations of the WARN Act are pretty insignificant, and thus their exposure to potential WARN Act litigation is pretty minimal.  Consider:

Company employs all of its workers until suddenly giving notice on a Friday that it was closing operations, effective immediately. It had been paying them on time throughout the final 2 months of their employment, and on the Friday following the shutdown issues its final payroll to all employees.

What is the harm to employees?  Well, there is no direct, immediate financial harm because they have been paid in full for their labor.  But....it is easier to get a job when employed than when unemployed.  In addition, they have suffered a sudden and unexpected loss of income for which they were unable to plan.  In smaller towns, or in more specialized industries, they are now immediately competing with 500 co-workers at exactly the same time. They are understandable angry at the company's failure to give WARN Act notice, and what to take action against their (former) employer.

They call a lawyer, who tells them that, indeed, WARN has been violated,. it's clear, but she doesn't have any interest in taking the case. 

Why?

Because, given that they have all been paid for their labor, the employees do not have any direct financial damages.  A federal statute has been violated, that is true, and people have been hurt, that is true, but the employees cannot prove any financial damages, and under the WARN Act they are not entitled to recover for anything else.

The WARN Act:  A Toothless Tiger

The WARN Act is a paper lion because it limits employees' damages to their loss of wages and benefits over the last 60 days of their employment. Thus, an employer who fails to give notice under the Act is essentially immune from any liability as long as they pay all compensation due their employees through their last day of work. Companies figure, 'Why give the notice, and risk a mass exodus of workers, when violation of the Act will not result in any penalty?' Thus, the Act's lack of "teeth" significantly undermines its true purpose: to give employees a reasonable, 60-day opportunity to find work in advance of their loss of employment.

Read more articles about employment law issues at Philadelphia Area Employment Lawyer, a blog by John A. Gallagher.

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