Have You Thought About ... Potential WARN Act Traps?

Have You Thought About ... Potential WARN Act Traps?

Jun 05, 2020

Client Alert

Brownstein Client Alert, June 5, 2020

Employers subject to the federal Worker Adjustment and Retraining Notification (WARN) Act and companion state laws should be aware of certain potential traps.

Furloughs and Reductions in Hours Can Trigger WARN Act Requirements: Many employers have implemented furloughs or significantly reduced employee hours in the face of business closures. Entities are slowly reopening, but in a limited or gradated manner; many employees therefore are remaining on furlough or continue to work reduced hours. Employers should keep in mind that WARN Act notification requirements may be triggered if the layoffs extend beyond six months. An employer who previously announced and carried out a short-term layoff (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. Notably, a layoff or furlough extending beyond six months for any other reason is treated as an employment loss from the date it commenced. Similarly, a reduction of 50% or more in employees’ work hours for each of six consecutive months can trigger WARN Act obligations.

Workforce Reduction Events Can Be Aggregated: Employers should also be aware that a series of workforce reduction events that, individually, would not trigger WARN Act notice requirements can be aggregated if they occur within any 90-day period, thus triggering WARN Act requirements. This reduces the ability of employers to avoid applicability of the act by spreading out the layoffs or furloughs. Employers therefore should examine the 90-day period surrounding any planned reduction events (including the six-month anniversary of furloughs—potentially looking back to the date it commenced—or reduction in work hours).

State Laws Create Additional Perils: State WARN Acts often have lower “trigger” thresholds and varying notice requirements. Moreover, not all such mini-WARN Acts recognize the “unforeseeable business circumstances” or “faltering company” exceptions available under the federal WARN Act. Some do, but impose specific requirements for employers to take advantage of the exceptions. For instance, California recently issued an Executive Order allowing use of the unforeseeable business circumstances exception for coronavirus-related layoffs, subject to specified conditions; failure to comply dooms the applicability of the exception.

Some jurisdictions also treat furloughs as layoffs after a certain time period. For instance, California requires payout of accrued wages and PTO if a furlough will extend beyond a pay period. Many jurisdictions also require timely written notice of reduced hours, adjustments to compensation, or other changes in employment status. Employers would be well-advised to review the laws of the applicable jurisdictions when making such changes, and keep in mind that states are frequently updating requirements in the face of the current crisis.

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.

Information is changing daily and some of the content included in this alert may have changed or been updated since publication.

Click here to read more Brownstein alerts on the legal issues the coronavirus threat raises for businesses.

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.

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