Workforce reductions and changes in operations are an inevitable part of conducting business. These decisions are never taken lightly but often lack visibility into state separation and other laws that could create serious consequences. Sarah Rodehorst, CEO and co-founder of Onwards HR, reviews federal and state separation compliance and why employers need to consider them carefully when conducting layoffs.
Founded in 1906, transportation holding company Yellow Corp. employed more than 30,000 people. Once a dominant provider in its field, its sudden demise earlier this summer is being considered the end of an era in the trucking industry. Questionable business decisions and labor practices aside, operations screeched to a halt July 30, when it was announced that all of the company’s employees would be laid off.
Two days later, a class-action suit was filed against Yellow Corp. because it failed to provide the required 60 days’ layoff notice to its employees. A separation agreement that was sent to employees referenced this WARN Act violation directly saying, “The Company was not able to provide earlier notice of the shut down as it qualified under the ‘unforeseeable business circumstances’ ‘faltering company’ and ‘liquidating fiduciary’ exceptions set forth in the WARN Acts.”
The WARN Act, or the Worker Adjustment and Retraining Notification, went into effect in 1989 with the intention of providing protection to workers, their families and communities by requiring employers to provide 60 days advance notice for plant closings and mass layoffs. The goal was to give workers and their families enough time to seek other employment and, if necessary, enter skills training/retraining programs to compete in the job market. Sixty days is the minimum notice; the WARN Act does not discourage providing longer periods of advance notice.
Not every employer is covered by the federal WARN Act. By definition, the term “employer” means any business enterprise that employs 100 or more people, excluding part-time workers, or 100 or more employees, including part-timers who in the aggregate work at least 4,000 hours per week, exclusive of hours of overtime. An employer may have one or more sites of employment under common ownership but might be defined as only one employer with multiple plants. Closing a plant refers to permanent or temporary shutdown that results in employment loss for 50 or more employees. Affected employees must receive notice detailing whether a shutdown is permanent or temporary, the expected date of separation and the company official to contact for more information.
Federal WARN requirements are further complicated by state separation – or mini-WARN acts. In the case of Yellow, the class-action suit seeks wages and benefits for the required notification period, which is 60 days in most states but 90 days in the state of New Jersey. New Jersey also has a severance pay requirement of one week for each full year worked for those employees. Added to the liability is New Jersey’s statute entitling employees to an additional four weeks of severance pay when companies fail to provide advance notice.
Simply put, ignorance of the federal WARN Act and state separation laws isn’t a defense. As examples, consider the requirements set forth by these states:
There is a series of specific WARN Act triggers for Georgia employers:
- Closes a facility or discontinues an operating unit permanently or temporarily, affecting at least 50 employees, not counting part-time workers, at a single employment site. A plant closing also occurs when an employer closes an operating unit that has fewer than 50 workers but that closing also involves the layoff of enough other workers to make the total number of layoffs 50 or more;
- Lays off 500 or more workers (not counting part-time workers) at a single site of employment during a 30-day period; or lays off 50-499 workers (not counting part-time workers), and these layoffs constitute 33% of the employer’s total active workforce (not counting part-time workers) at the single site of employment;
- Announces a temporary layoff of less than six months that meets either of the two criteria above and then decides to extend the layoff for more than 6 months. If the extension occurs for reasons that were not reasonably foreseeable at the time the layoff was originally announced, notice need only be given when the need for the extension becomes known. Any other case is treated as if notice was required for the original layoff; or
- Reduces the hours of work for 50 or more workers by 50% or more for each month in any six-month period. Thus, a plant closing or mass layoff need not be permanent to trigger WARN.
Maine follows the parameters of the federal WARN Act with one significant difference: Maine requires a 90-day notice of a covered establishment that is closing or relocating. “Covered establishment” means any industrial or commercial facility that employs or has employed at any time in the preceding 12-month period 100 or more individuals.
The Maine mini-WARN act states that any employer who closes or engages in a mass layoff at a covered establishment is liable to eligible employees of the covered establishment for severance pay at the rate of one week’s pay for each year and partial pay for any partial year, from the last full month of employment by the employee in that establishment. The severance pay to eligible employees is in addition to any final wage payment to the employee and must be paid within one regular pay period after the employee’s last full day of work, notwithstanding any other provisions of law.
Effective April 10, legislation amends New Jersey’s law, NJWARN. Amended NJWARN includes a new provision that provides, “For purposes of this section [the section requiring notice and severance pay], ‘employer’ includes any individual, partnership, association, corporation, or any person or group of persons acting directly or indirectly in the interest of an employer in relation to an employee, and includes any person who, directly or indirectly, owns and operates the nominal employer, or owns a corporate subsidiary that, directly or indirectly, owns and operates the nominal employer or makes the decision responsible for the employment action that gives rise to a mass layoff subject to notification.”
This language expands the range of individuals and businesses that can be held liable for mandatory severance pay, including potential managers involved in the decision to lay off employees, corporate officers and private equity firms involved in the sale or purchase of a shuttered business.
Like Maine, New Jersey also requires 90-day notice. Amended NJWARN provides that employees who are denied the required 90 days’ notice are entitled to four weeks of severance pay as a penalty, in addition to the greater of (i) one week of severance pay for each year of service, or (ii) any severance pay to which they are otherwise entitled under a collective bargaining agreement or other policy/plan of the employer.
Layoffs are fraught with last-minute changes, emotional conversations and management friction. Regardless, employers cannot risk failure to comply with WARN and state separation obligations. Planning well enough in advance of terminations to ensure sufficient notice is a must to ensure alignment with mandatory severance and other requirements.