Company Layoffs

 

Even in the strongest economic times, there’s no assurance that a company won’t have to adjust its workforce.

Today, 70 percent of economic experts are forecasting a recession by 2021. This means American businesses must understand the legal implications of having to let go of a portion of their workforce.

 

To avoid violating federal and state labor laws, a layoff requires more than simply notifying your employees that they’re losing their job. Here’s what employers need to do to ensure their compliance.

 

Federal Layoff Law: The Worker Adjustment and Retraining Notification (WARN) Act

The WARN Act requires employers to provide advance written notice of an impending mass layoff or plant closing at least 60 days before the event.

 

It is important to know that not all employers are subject to the WARN Act. To fall within its coverage, an employer must have 100 or more employees, not counting any employee who has worked less than 6 of the last 12 months and not counting any employee who works less than 20 hours a week. The law does not cover federal, state, or local government entities that serve the public.

 

To qualify as a mass layoff, the layoff must affect at least 500 employees at a single employment site during a 30-day period. For a smaller employer, layoffs between 50 and 499 employees that make up at least 33% of your active workforce,  must be given notice.

 

Also note that if you try to space out the layoffs or closings to avoid WARN, the law may still apply: if you lay off 2 or more groups of employees that reach the threshold notice level within any 90-day period, you are subject to WARN unless you can show that there are separate reasons for each loss of employment.

 

So, for example, if your company has 180 employees and you follow this layoff schedule, you would be subject to the WARN Act:

 

  • Layoff 1, Day 1: Terminate 30 employees
  • Layoff 2, Day 30: Terminate 29 more employees
  • Layoff 3, Day 60: Terminate 5 employees
  • Layoff 4, Day 90: Terminate 6 employees

 

What Should the WARN Notice State?

The federal WARN Act requires employers to provide a written notice with the following information:

 

  • whether the layoff is permanent or temporary,
  • when the layoff or closing will occur,
  • when the employee will lose their job,
  • whether any “bumping” rights exist (meaning whether a more senior employee would have the right to take a junior employee’s job), and
  • who to contact for further information.

 

In addition to notifying affected employees, the company must also notify any employee representative, such as a union, the state government agency responsible for dislocated workers, and the chief official of the appropriate unit of local government.

 

There are certain exceptions to the notice requirement when layoffs happen as the result of business circumstances that were not foreseeable, such as a natural disaster like a flood or earthquake, but these exceptions are few and far between. If you have questions about whether the law applies to your situation, we encourage you to seek advice from an experienced employment lawyer.

 

Check for Differences in Your State’s Layoff Laws

Be aware that several U.S. states have their own versions of the WARN law. For example, New York requires employers to give notice 90 days in advance of a layoff or plant closing. In California, the law applies only to employers who have at least 75 employees and at least 50 of those employees will be affected by a plant closing, mass layoff, or business relocation.

 

Why Compliance with Labor Laws Like the WARN Act Is Important

Failing to follow the WARN Act can be costly. Companies that violate this federal labor law may be required to pay each affected employee back pay and benefits for the entire period of the violation, plus a penalty of up to $500 per day for failing to give notice to the appropriate local government unit.

 

For additional information about your obligations under federal and state labor laws, visit the Poster Compliance Center website.

 

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