Have You Thought About ... Impending WARN Act Issues?

Have You Thought About ... Impending WARN Act Issues?

Aug 31, 2020

Client Alert

Brownstein Client Alert, August 31, 2020

Furloughs and reductions in employee hours necessitated by the initial COVID-19 outbreak earlier this year may seem like a distant pandemic memory. At the time, many employers decreased labor budgets by furloughing their workforces and/or reducing employees’ scheduled hours in response to business closures or slowdowns.

However, now that we are approaching the six–month mark from the initial COVID-19-related workforce adjustments, employers should remember that the federal Worker Adjustment and Retraining Notification (WARN) Act and companion state WARN Acts may be triggered in the near future if the furloughs or reduction in hours extend beyond six months. Similarly, to the extent employers are making staffing plans that anticipate further slowdowns/closures in the fall and winter, such plans should account for the fact that a furlough or reduction in hours of six months or longer (or expected to last six months or longer) may trigger WARN Act requirements. Specifically, the WARN Act requires covered employers to provide 60 days’ advance notice to employees and government officials of a “mass layoff.” A mass layoff is the termination of 50 or more employees (comprising at least 33% of active employees) or at least 500 employees. Critically, a furlough or reduction in hours constitutes a “layoff” for WARN Act purposes to the extent employees’ work hours are reduced 50% or more (including being fully furloughed) for six months or longer. To further complicate matters, in order to determine whether the various layoffs, terminations, furloughs and reduction in hours constitute a “mass layoff,” such actions are aggregated within a 90-day period, so staffing adjustments that were—or are being—made on a rolling basis may be combined to trigger the WARN Act.

To the extent a covered employer previously announced and carried out what was intended to be a short-term adjustment to the workforce (six months or less), but then later extends the layoff, furlough or reduction in hours beyond six months, then that adjustment, even if still expected to be temporary, is considered a “permanent job loss” under the WARN Act. Therefore, notice requirements may be triggered if a sufficient number of employees are affected, absent an exception. Such notice is required to be given at the time it becomes reasonably foreseeable that the extension beyond six months is required.

The WARN Act exception most applicable to earlier COVID-19-related layoffs is the “unforeseeable business circumstances” exception; i.e., business circumstances that were not reasonably foreseeable precluded the employer from providing the full 60-day notice period with respect to covered employment losses (including furloughs and certain reductions in hours lasting more than six months). If an employer can prove the exception applies, then the full 60 days’ notice is not required; rather, employers must provide as much notice as practicable when the likelihood of job loss becomes reasonably foreseeable. Notably, a layoff or furlough extending beyond six months for any reason other than unforeseeable business circumstances is treated as an employment loss from the date it commenced.

The federal WARN Act remains untested in this context; courts have not yet reviewed the various facts giving rise to COVID-19-related WARN Act claims to define what circumstances satisfy—or fail to satisfy—the WARN Act exceptions. Indeed, the U.S. Department of Labor (DOL) affirmed in recent guidance that courts, rather than the DOL, will be expected to provide such interpretations, stating that any “dispute regarding the interpretation of the WARN Act[,] including its exceptions[,] will be determined on a case-by-case basis in a court proceeding.”

Affected employees will doubtless argue that job losses resulting from COVID-19 were—or at some point became—foreseeable, given the ongoing government actions taken to contain the spread and the predictions of a resurgence. Employers will argue that compliance with the WARN Act’s full 60-day notice provision was not required due to the “unforeseeability” of the COVID-19 circumstances. However, as described in our prior article addressing the unforeseeability of COVID-19 for purposes of the WARN Act, the more time that passes from the onset of the pandemic, particularly with a potential resurgence predicted, the more difficult it will be for employers to argue that the need for layoffs, furloughs and reductions in hours was “unforeseeable.” (See “Have You Thought About . . . the Foreseeability of a COVID-19 Resurgence for WARN Act Purposes?” linked here.)

Therefore, we recommend that employers proactively evaluate (preferably with legal counsel’s assistance) potential WARN Act implications of staffing decisions, past, present and future, on a regular basis. This analysis should include identifying the number of affected employees at each worksite whose layoffs, furloughs and/or reduction in hours would count as a “permanent” job loss under the WARN Act within the designated time frame to determine whether notice requirements have been or will be triggered, and if so, whether any exceptions would apply. The analysis should be carefully documented.

To the extent employees will not be returned to the workplace (or have their hours returned close to normal) within six months, employers would be well-advised to provide WARN Act notices to employees and government agencies, even if such notices are “conditional” (that is, advising employees that if and when there is a coronavirus resurgence, or governmental action or economic circumstances that impact staffing needs, further furloughs or job losses may occur).

Employers also should be cognizant of state-specific WARN Acts, many of which have lower “trigger” thresholds and varying notice requirements, and not all of which recognize the “unforeseeable business circumstance” or “faltering company” exceptions available under the federal WARN Act. For example, Maryland enacted new and more stringent WARN Act requirements that become effective Oct. 1, 2020.

Many lawsuits already have been filed under federal and state WARN Acts, and we expect the number to increase exponentially by year-end. Employers should ensure that they are well-versed in federal, state and local requirements to avoid these and other pitfalls.

(Note that there are other exemptions under the federal WARN Act that may be applicable. In addition, employers must review state WARN Act requirements, which can vary significantly, where applicable.)

This document is intended to provide you with general information regarding updates related to coronavirus. The contents of this document are not intended to provide specific legal advice. If you have any questions about the contents of this document or if you need legal advice as to an issue, please contact the attorneys listed or your regular Brownstein Hyatt Farber Schreck, LLP attorney. This communication may be considered advertising in some jurisdictions. The information in this article is accurate as of the publication date. Because the law in this area is changing rapidly, and insights are not automatically updated, continued accuracy cannot be guaranteed.

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