The recent outbreak of COVID-19 has a significant and ongoing impact on not only healthcare professionals, but also global economies, governments, and business leaders. Construction companies within the U.S. are also experiencing this impact and are left grappling with key decisions for their businesses and employees amidst unprecedented uncertainty. When making business and workforce decisions, it is important that construction companies understand the relevant laws and requirements, including the requirements set forth in the federal Worker Adjustment and Retraining Notification (WARN) Act and its equivalent state laws.
WARN Act: Basics
If a “covered” employer intends to institute a mass layoff or plant closing, the WARN Act essentially requires the employer to provide at least 60 days’ advanced notice to all its affected employees before proceeding with the mass layoff or plant closing. During these 60 days, all affected employees must continue receiving compensation and benefits according to the terms of their employment relationship. To be considered a “covered employer,” and therefore be bound by the requirements of the WARN Act, an employer must have at least 100 full-time employees who work at least 20 hours per week. The purpose of the WARN Act is to give employees who are subject to sudden mass layoffs or plant closings time to adjust and retrain before re-entering the job market.
Mass Layoffs and Plant Closings
While the WARN Act generally applies to all “plant closings” and “mass layoffs,” the definitions of what constitutes a “plant closing” or “mass layoff” can be confusing. The Act defines a “plant closing” as either a permanent or temporary shutdown of a single site of employment resulting in “employment loss” of more than 50 employees within a 30-day span. “Employment loss” under the Act includes termination, layoffs for a period of more than six (6) months, or a 50% or more reduction in hours for a period of more than six (6) months.
A “mass layoff” under the Act occurs when there is employment loss within a 30-day period of (a) at least 500 employees (including part-time employees) at a single employment site, or (b) at least 50 employees constituting at least 33% of the workers at that employment site. While these definitions can be confusing, the bottom line is that when an employer with at least 100 full-time employees terminates or significantly reduces the hours of at least 50 of its employees, the employer should be mindful of the WARN Act and should consult an attorney to determine whether the Act applies and, if so, what steps need to be taken to ensure compliance with the Act.
It is important to note that an employee who is unable to work due to complications or circumstances associated with the COVID-19 outbreak is not considered to have undergone “employment loss” under the WARN Act and is not included in the employee calculation to determine whether the Act’s notice requirements are triggered. In other words, the employees considered to have experienced “employment loss” under the Act are those employees who would otherwise be able to work but for the mass layoff or plant closing.
Unforeseeable Business Circumstance Exception
Even employers that are covered under the Act may fall under an exception that allows some relief from the Act’s notice requirements. One important exception given the current COVID-19 pandemic is the “unforeseeable business circumstances” exception found in 29 USC § 2102(b)(2)(A). This exception provides that the Act’s 60-days’ notification period is reduced when “the closing or mass layoff is caused by business circumstances that were not reasonably foreseeable as of the time that the notice would have been required.” While it remains to be seen whether the current COVID-19 outbreak would be considered an unforeseeable business circumstance under the Act, it is at least a reasonable argument for employers that may not be financially able to provide 60-days’ notice before instituting mass layoffs or plant closings. It is important to note, however, that even if the unforeseeable business circumstance exception does apply to employment loss resulting from COVID-19, employers are still required to provide “as much notice as is reasonably practicable” given the circumstances. Courts have held that what is considered “reasonably practicable” is based on whether the employer “exercised such commercially reasonable business judgment as would a similarly situated employer.” Pena v. Am. Meat Packing Corp., 362 F. 3d 418 (7th Cir. 2004).
Costs of Violation
If an employer covered under the WARN Act fails to provide either the 60-days’ notice contemplated for mass-layoffs or plant closings or the “reasonably practicable” notice required under the unforeseeable business exception, the employer may be liable for damages suffered by its affected employees, including the employees’ attorneys’ fees and costs incurred in any litigation that results from such a violation of the Act.
While any decision regarding mass layoffs or plant closings is an understandably difficult, many employers are forced to contemplate such measures amidst the current economic climate arising from the COVID-19 pandemic. If you are contemplating a possible mass layoff or plant closing, you should review the requirements of the WARN Act, as well as any potential state equivalents of the federal WARN Act (so called “mini-WARN Acts”), and consult with a labor and employment attorney.
Author’s note: The information contained in this article is for general educational purposes only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.