Consider WARN Act If Making Lay OffsAs COVID cases spike to record-setting levels here in Maine and across the country, mass immunization likely months away and talks of financial relief still a work-in-progress at the federal level, many businesses in the state may be facing challenging times and difficult choices — including laying off employees.

If your business finds itself in this unfortunate position, you should be aware of the Worker Adjustment and Retraining Notification (WARN) Act. Passed in 1988, this legislation was adopted to protect against the harshness of sudden job loss and help employees prepare to find new jobs — particularly if some training is needed to expand their employment opportunities. Failing to provide the required notification to laid off workers could result in serious legal issues.

In fact, one major law firm that represents employers in labor disputes recently alerted its clients that the next few months “may become a hurricane season of sorts as WARN Act litigation could flood the courts.”

Who Is Affected?

The WARN Act mostly applies to companies with at least 100 full-time employees (Note: some states, such as Wisconsin, Tennessee and New York, use a 50-employee threshold). Even if your business is currently under the threshold, it’s still beneficial to be aware of the implications of the WARN Act in the event you are subject to its rules in the future.

While the number of part-time employees doesn’t count towards the 100 person threshold, part-timers who are expected to be laid off must also be notified.

According to the Department of Labor (DOL), workers not entitled to WARN Act warnings include those on strike or locked out in a labor dispute, workers “on temporary projects or facilities of the business who clearly understand the temporary nature of the work when hired,” and “contract employees assigned to the business but who have a separate employment relationship with another employer and are paid by that other employer.”

When Is Noticed Required?

While it’s best practice to be as transparent as possible with employees in regards to their job status and your company’s plans, the WARN Act outlines specific criteria when notice is required.

According to the Maine Department of Labor, the WARN Act requires employers with 100 or more full-time employees to provide 60 days notice in advance of mass layoffs if they:

  • Close a facility of 50 or more workers
  • Discontinue an operating unit of 50 or more workers
  • Lay off 50 to 499 workers, and these layoffs constitute 33% of the total work force at a single employment site
  • Lay off 500 or more workers at a single employment site

When notifications are required, they go to impacted employees and to local “rapid response” offices within state employment offices. These offices work with the U.S. Department of Labor’s Employment Training Administration to assist laid-off workers. Such offices might also offer support for laid-off workers, even if their employers aren’t subject to the WARN Act.

Exceptions to the WARN Act

There are three important exceptions to the WARN Act’s notification requirements. The first is when a natural disaster forces operations to stop. The second applies to “faltering” companies that are “actively seeking capital in good faith” and believe giving a notice of an impending mass layoff would preclude their ability to secure financing. The third exception is particularly relevant given the current COVID-19 pandemic. It exempts employers due to “unforeseeable business circumstances” that are “sudden, dramatic, unexpected and outside of the employer’s control.”

The COVID-19 Factor

The forced shutdown of businesses in Maine and many parts of the nation during the early phase of the pandemic would likely fall under the third exception to the WARN Act. However, now that we’re over nine months into the pandemic (along with its associated shutdowns and impacts), its applicability may be less certain.

The law firm mentioned earlier that predicted the spike in WARN Act litigation offered this warning: “With every passing day, the viability of the unforeseen business circumstances exception becomes weaker.”

To be safe, if your business may have to make mass layoffs that would fall under the requirements outlined by the WARN Act, it’s best to contact your legal advisor to ensure your bases are appropriately covered.