U.S. Department of Labor Issues Guidance on the WARN Act and COVID-19

By Adam R. Long on May 12, 2020

POSTED IN EMPLOYER LIABILITY, TERMINATION

Employers who have had to implement mass layoffs and facility closures in response to the ongoing COVID-19 pandemic must ensure that they comply with the requirements of the federal Worker Adjustment and Retraining Notification Act (WARN Act).  A failure to comply can result in significant potential liability in the form of class-based litigation.

The U.S. Department of Labor (DOL) recently issued a series of Frequently Asked Questions regarding the WARN Act in the context of the COVID-19 pandemic.  While the DOL’s guidance is not binding on courts, it provides useful compliance assistance for employers during these unprecedented times.

As background, the WARN Act requires employers with 100 or more full-time employees (not counting workers with fewer than six months on the job) to provide at least 60 calendar days of advance written notice of a worksite closing affecting 50 or more employees or a mass layoff affecting at least 50 employees and 1/3 of the worksite’s total workforce or 500 or more employees at the single site of employment during any 90-day period.  The WARN Act contains exceptions to its notice requirements when employers can show that mass layoffs or worksite closings occurred due to faltering companies, unforeseen business circumstances, and natural disasters.  In such instances, the WARN Act requires employers to provide as much notice to their employees as possible.  An employer who violates the provisions of the WARN Act may be liable for an amount equal to the amount of wages and benefits for each affected employee for each day of the period of violation, up to 60 days, and the affected employees’ costs and attorneys’ fees.

The DOL’s FAQs begin by addressing the issue of temporary layoffs and furloughs.  WARN Act notices must be given when there is a triggering “employment loss,” as defined under the Act.  Any temporary layoff or furlough that lasts less than six months is not considered an employment loss.

However, the FAQs explain that a temporary layoff or furlough without notice that initially is expected to last six months or less, but later is extended beyond six months, may violate the WARN Act unless:

1. The extension is due to business circumstances (including unforeseeable changes in price or cost) not reasonably foreseeable at the time of the initial layoff; and
2. Notice is given when it becomes reasonably foreseeable that the extension is required.

In other words, an employer who previously announced and carried out a short-term layoff or furlough (i.e., six months or less) and later extends the layoff or furlough beyond six months due to business circumstances not reasonably foreseeable at the time of the initial layoff is required to give notice at the time it becomes reasonably foreseeable that the extension is required.

The FAQs also discuss the unforeseeable business circumstances exception to the WARN Act’s 60-day advance notice requirement.  The DOL makes clear that, when invoking an exception to the 60-day notice requirement, a covered employer still must provide as much notice as practicable and include in that notice a brief statement of the reason(s) for giving less than 60 days of notice (along with the other required elements of a WARN Act notice).  Also, in the event of a legal challenge, the employer will bear the burden of proving that the requirements of the unforeseeable business circumstances exception are met.

For situations where the employer has email addresses for affected employees, the FAQs confirm that WARN Act notices may be sent via email, so long as the notices are specific to the individual employee and comply with all requirements of the WARN Act and its regulations regarding written notifications.

As we begin to enter the third month of large-scale disruptions caused by COVID-19, employers must remain vigilant to ensure WARN Act compliance.  Covered employers in Pennsylvania who temporarily laid off or furloughed employees at or near the time of the Governor’s business closure order in March should determine whether it is possible that such layoffs/furloughs may extend for more than six months and, if so, whether these actions may require WARN Act notices.  With the situation continuing to evolve and an unclear future ahead, the DOL’s FAQs are a timely reminder of the need to remember the WARN Act and its requirements.