Since last fall, news of layoffs in the technology sector have set off a ripple effect in a variety of other industries. Companies engaging in layoffs must be thoughtful and prepared when it comes to taking such action. While the construction industry generally has one of the highest layoff rates, and human resource personnel may be very knowledgeable with regard to related risks and exposure, there are a number of additional issues to consider when there are mass layoffs or closings. Further, expensive litigation awaits if companies are not meticulous in complying with state and federal laws regarding such large scale reductions in force.

Under federal law, the primary legislation governing mass layoffs and closing is the Worker Adjustment and Retraining Notification (“WARN”) Act which generally covers employers with 100 or more employees. This law was enacted to protect employees by requiring companies to provide 60 days’ notice to employees in advance of certain plant closings and mass layoffs. In addition, many states, such as California, Connecticut and New York, have enacted similar state laws, referred to as “mini-WARN” laws, which impose additional requirements, including increasing the length of the required advance notice and broadening the scope of employers to which the law applies.

What Does the WARN Act Require?

When a company intends to conduct a mass layoff or close a plant, the WARN Act may be triggered. When planning to close an employment site (or multiple facilities or operating units within a site) where the closure will result in a loss of employment for 50 or more employees during any 30-day period, the company must notify employees. Employees who have worked for less than six months in the last 12-months or employees who work an average of less than 20 hours a week for that employer do not count toward the 100-employee threshold; however, these employees are still entitled to notice.

Employers must also provide employees with the mandatory 60-days notices if they are conducting mass layoffs. Mass layoffs are defined in two ways, as follows: (1) At a single site, laying off 500 or more employees during any 30-day period; or (2) Laying off 50-499 employees if they make up at least 33% of the employer’s active workforce.

In addition, there are other rules that may apply including instances where employee layoffs that occurred over time may be aggregated for purposes of determining whether WARN is triggered. The notice required by WARN is specific and must contain certain information. In addition, employers that operate unionized sites should seek counsel to ensure they comply with any notice obligations set forth in a collective bargaining agreement.

Does the WARN Act Apply to the Company?

Almost all private for-profit and non-profit employers are subject to the WARN Act, as are many public and quasi-public entities which are separate from government entities. Most state, federal and local government entities are not covered under the WARN Act.

In addition to determining whether the WARN Act applies to an employer, companies should review the state requirements to ensure they do not run afoul of separate, state obligations. Issues in the process of conducting mass layoffs can be avoided by planning and preparing. For example, human resources teams are bound to be inundated with questions and concerns, both from employees being laid off and employees who remain. Employers should consider preparing information in advance and making it accessible to employees who may be searching for information. Frequently asked questions, unemployment insurance benefit information, and job search resources are examples of information employers can provide. 

What Happens if the Company Does Not Provide Notice?

WARN Act violations may expose companies to significant liability depending on how many employees were not properly notified. If a company does not provide proper notice, each aggrieved employee may be entitled to back pay and benefits for the period of the violation, up to 60 days. Employers may be able to offset their liability if they continued to pay the employee wages during the 60 day period. Employers may be subject to other monetary penalties and penalties under state laws.

Conducting a Layoff with Respect

In addition to complying with the WARN Act and state mini-WARN Act requirements, employers should find ways to support employees who remain employed as well as those who are being laid off. 

Employers should be as transparent as possible and maintain respect throughout the layoff process. A key example relates to communications around how employees learn about layoffs. For example, notification of layoffs via mass email containing “corporate speak” may be a misstep, depending on the workplace culture and employee expectations, that may create employee relations issues and increase legal risk. Instead, managers should attempt to meet employees face to face, if possible, to explain the decision and to show employees that these decisions are also difficult for those supervising them. For those employees who are being laid off, employers can provide assistance including by offering career and outplacement services and making other resources available.

Simply by being organized and responsive, companies can maintain good relations with former employees, even in difficult times. In addition, even though job loss can be difficult, companies should continue to treat the employees that remain with understanding and respect.

Employers may wish to consult with competent legal counsel regarding preparation for layoffs and advice on compliance with the WARN Act, mini-WARN Acts and other labor and employment laws related to termination of employment.