WARN Act Requirements for Workforce Restructuring Caused by the Coronavirus Pandemic

April 21, 2020
April 21, 2020 Update.  On April 17, 2020, Governor Andrew Cuomo issued Executive Order No. 202.19, which, among other things, relaxes New York’s WARN Act requirements for small businesses that receive funding from the federal Paycheck Protection Program, rehire previously laid-off employees, and subsequently engage in a restructuring that would generally trigger a second WARN notice.  Under those limited circumstances, the employer need not comply with the 90-day notice requirement for the second restructuring, so long as the employer provided the required WARN notice when it initially laid off the employees and provides notice of the second restructuring as soon as practicable.  The Executive Order only applies to restructurings that occur between April 17 and May 17, 2020.

March 25, 2020 Update.  On March 23, 2020, the California Department of Industrial Relations, Division of Labor Standards Enforcement and the Employment Development Department (“EDD”) provided guidance concerning Executive Order N-31-20 issued by Governor Newsom on March 17, 2020.  That guidance generally summarizes the California WARN Act requirements and the executive order and provides considerations for interpreting the California WARN Act, as modified by the executive order.  First, the guidance notes that the newly created “‘business circumstances’ [exception] should be understood to be consistent with the identical exemption under the federal WARN Act.”  (citing to 29 U.S.C. § 2103(b)(2)(A) and 20 C.F.R. § 639.9(b))  According to the guidance, that includes the U.S. Department of Labor’s interpretation that “[a] government ordered closing of an employment site that occurs without prior notice” constitutes such business circumstances.  Second, the guidance reiterates that notice is required under the California WARN Act, and that the requirement of “as much notice as is practicable” also “be read to be consistent with its usage in the federal WARN Act.”  Cases interpreting the federal WARN Act provision concerning reasonable notice are therefore instructive in determining the amount of notice that is practicable in California.
 
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Given the unprecedented challenges to businesses arising as a result of the COVID-19 (“Coronavirus”) pandemic, including government-mandated closures of non-essential businesses, many businesses are considering layoffs or employment terminations.  As noted below, the extraordinary circumstances of the Coronavirus outbreak may excuse employers from the full statutory notice obligations; however, the statutory exclusions of the federal Worker Adjustment and Retraining Notification Act (the “WARN Act”) and state-law analogues may nevertheless require some notice and record-keeping and, thus, it is worth keeping in mind the obligations imposed by those statutes.  In addition, employers should also bear in mind other relevant state and local laws as well as employment contracts or collective bargaining agreements in taking any such actions.

Generally speaking, shorter-term layoffs are not subject to advance notice requirements.  Under the federal WARN Act, layoffs up to six months do not require advance notice.  Most state analogues have similar provisions.  In addition, the federal Act and most state analogues have an exception, exempting terminations resulting from “unforeseeable business circumstances” and, although there is little authority yet in the context of the Coronavirus outbreak, the general belief is that the exception will apply and that the 60-day advance notice requirements will not be applicable in this emergency.  Indeed, the “unforeseeable business circumstances” exception was recently added to the California WARN Act through an executive order issued by the Governor of California in order to aid California employers affected by Coronavirus—further suggesting that the outbreak should be considered an “unforeseeable business circumstance.”  As discussed below, employers invoking this exception should be mindful that certain notice requirements still apply.
 
Federal WARN Act
Under the federal WARN Act, certain employers are required to provide employees with 60-days advance notice prior to closing any employment site or conducting a mass layoff.

Covered Employer. Employers must comply with the WARN Act if, they employ:
  • 100 or more employees, excluding part-time employees (see below); or
  • 100 or more employees, including part-time employees, who collectively work at least 4,000 hours each week, excluding overtime.
  • Employees are classified as part-time if they have worked either (1) an average of less than 20 hours each week in the shorter of the full period of employment or the most recent 90-day period, or (2) less than 6 of the 12 months before the date on which notice is required.[1]
Triggering Events. Under the WARN Act, Employment Site Closings and Mass Layoffs (defined below) are events that trigger the notice requirement.
  • Employment Site Closing. An Employment Site Closing is any shutdown, whether permanent or temporary, resulting in Employment Loss (defined below) for at least 50 employees during a 30-day period of a single site of employment or facilities or operating units within a single site of employment.[2]
  • Mass Layoff. A Mass Layoff is any reduction in force that is not the result of an Employment Site Closing and results in an Employment Loss at a single site of employment during any 30-day period for either:
    • 50 or more employees that, collectively comprise at least 33% of all active employees; or
    • 500 or more employees.[3]
  • Temporary Disruptions Not Qualifying as Plant Closings. An employer does not need to provide notice under the WARN Act if:
    • Temporary Facility. An employer does not need to provide notice if an Employment Site Closing occurs at a temporary facility;
    • Project of Limited Duration. An employer does not need to provide notice if an Employment Site Closing or Mass Layoff occurs because a project is completed and the affected employees were notified in advance that their employment was limited to that project; or
    • Strike or Lockout. An employer does not need to provide notice if an Employment Site Closing or Mass Layoff constitutes a strike or lockout.
  • Employment Loss. An Employment Loss is any termination other than (1) a termination for cause; (2) a voluntary departure; or (3) a retirement.[4] An Employment Loss also includes any layoff that exceeds 6 months and any reduction in the employee’s work hours of more than 50% over a six-month period. Certain transfers or relocations may also be considered an Employment Loss[5] and, thus, any employer who is considering transferring employees in numbers that would otherwise trigger the requirements of the WARN Act should consult counsel about their specific circumstances.
  • For purposes of counting employees, part-time employees are not counted in determining whether an Employment Site Closing or Mass Layoff has occurred. In addition, to prevent employers from engaging in subsequent smaller layoffs to avoid the requirements of the WARN Act, employers must look forward and backward 90 days from the date of any Employment Loss to determine its duty to provide notice. If, in aggregate, the number of employees subject to an Employment Site Closing or Mass Layoff reach the required levels during any 90-day period, the employer has a duty to provide notice.
Notice. The employer must give notice to the employee or, if represented by a union, the chief union representative. Employers are also required to provide notice to certain state and local officials, such as the chief officer of the State or entity designated by the State to carry out rapid response activities and the chief elected official of the unit of local government within which such closing or layoff is to occur.

Exceptions. An employer may order an Employment Site Closing or Mass Layoff before conclusion of the 60-day notice period in certain circumstances, as outlined below. Because the employer bears the burden of proving that an exception exists, employers should provide notice if at all possible, even if one of the limited exceptions may be met.
  • Unforeseeable Business Circumstances. The Closing or Mass Layoff is caused by business circumstances that were not reasonably foreseeable as of the time that notice would have been required.[6]
  • Natural Disasters. The Closing or Mass Layoff is “due to any form of natural disaster, such as a flood, earthquake, or the drought currently ravaging the farmlands of the United States.”[7]
  • We are not aware of any cases or guidance that suggests that Coronavirus, or more generally a pandemic, constitutes an unforeseeable business circumstances or a natural disaster. However, given the rapidly changing information available about Coronavirus and its economic impacts, we think that citing unforeseeable business circumstances as an exception to the notice requirement would be reasonable. Indeed, the Department of Labor’s responses to public comments on WARN Act regulations state that “government-ordered closings may constitute unforeseeable business circumstances to which reduced notice applies.”[8]
  • As is also discussed below, in response to the pandemic, the Governor of California recently issued an executive order expressly stating that employers were excepted from the strict notice requirements of the California WARN Act if Coronavirus created “business circumstances that were not reasonably foreseeable,” even though California did not previously recognize the unforeseeable business circumstances exception to the notice requirement.[9] And, as is discussed below, California guidance interpreting the newly adopted business circumstances exception under the California WARN Act also states that a government ordered closing of an employment site constitutes unforeseeable business circumstances.
  • Even if an exception is claimed, an employer is still required under the federal WARN Act to “give as much notice as is practicable and at that time shall give a brief statement of the basis for reducing the notification period.”[10]
  • Faltering Company. The employer was actively seeking capital or business that, if obtained, would have enabled the employer to avoid or postpone the shutdown and the employer reasonably and in good faith believed that giving the notice required would have precluded the employer from obtaining the needed capital or business.
Failure to Comply. Covered employers who do not comply with the WARN Act may be liable to affected employees for back pay and benefits.
 
State-Law Analogues
As noted above, employers may also be subject to state-law analogues to the WARN Act, which in many ways mirror the WARN Act but, in some instance, may be more onerous on employers. Employers should consult counsel to determine the impact of state laws on their operations. Below are summaries of state-law WARN Acts in California and New York.
 
California WARN Act
Similar to the federal WARN Act, the California WARN Act requires covered employers to provide 60-days advance notice to affected employees of any Mass Layoff, Relocation, or Termination.

Coronavirus & WARN. On March 17, 2020, Governor Newsom signed an executive order suspending the strict notice requirements of the California WARN Act for companies affected by Coronavirus; however, the executive order requires that employers comply with certain criteria, including:
  • Notice. While employers do not need to comply with the regular 60-day notice requirement outlined below, employers must give as much notice as is practical to all affected employees. The notice must:
    • Be in writing;
    • Include a statement of the employer’s justification for the reduced notification period; and
    • Advise employees that they may be eligible for unemployment insurance.[11]
On March 23, 2020, the California Department of Industrial Relations, Division of Labor Standards Enforcement and the Employment Development Department (“EDD”) issued guidance pursuant to Governor Newsom’s executive order.  That guidance generally summarizes the California WARN Act requirements and the executive order, and lists a few key considerations worth noting.

First, the newly created “‘business circumstances’ [exception] should be understood to be consistent with the identical exemption under the federal WARN Act.”  (citing to 29 U.S.C. § 2103(b)(2)(A) and 20 C.F.R. § 639.9(b))  According to the guidance, that includes the U.S. Department of Labor’s interpretation that “[a] government ordered closing of an employment site that occurs without prior notice” constitutes such business circumstances.

Second, the guidance reiterates that notice is required under the Act, even if such notice is not 60 days prior to the restructuring, and that the requirement of “as much notice as is practicable” also “be read to be consistent with its usage in the federal WARN Act.”  Therefore, cases interpreting the federal WARN Act provision on reasonable notice are instructive in determining the amount of notice that is practicable in California.  Employers should review this guidance as well as the general requirements of the California WARN Act, as outlined below, when conducting reductions in workforce in California.

Covered Employer. Employers must comply with the California WARN Act if they employ at least 75 employees, including full-time and part-time employees.[12]
  • Employees who have been employed for less than 6 months of the 12 months preceding the date of the required notice are not counted.
Triggering Events. Under the California WARN Act, Mass Layoff, Relocation, and/or Termination (defined below) are events that trigger the notice requirement.
  • Mass Layoff. A Mass Layoff is “a layoff during any 30-day period of 50 or more employees at a covered establishment.”[13]
    • Under the California WARN Act, even a temporary work stoppage can qualify as a layoff for purposes of the Act.[14]
  • Relocation. A Relocation is “the removal of all or substantially all of the industrial or commercial operations in a covered establishment to a different location 100 miles or more away.”[15]
  • Termination. A Termination is “the cessation or substantial cessation of industrial or commercial operations in a covered establishment.”[16]
  • Temporary Disruptions Not Qualifying as Plant Closings. In certain circumstances, an employer is not required to provide notice under the California WARN Act, including:[17]
    • Projects of Limited Duration. “[T]he closing or layoff is the result of the completion of a particular project or undertaking of an employer subject to Wage Order 11 (regulating the Broadcasting Industry), Wage Order 12 (regulating the Motion Picture Industry), or Wage Order 16 (regulating Certain On-Site Occupations in the Construction, Drilling, Logging and Mining Industries) of the Industrial Welfare Commission, and the employees were hired with the understanding that their employment was limited to the duration of that project or undertaking”; or
    • Seasonal Employment. The employees who are employed in seasonal employment where the employees were hired with the understanding that their employment was seasonal and temporary.
Notice. Under the California WARN Act, the employer is only required to give notice to the employee.

Exceptions. “[A]n employer is not required to provide notice if a mass layoff, relocation, or termination is necessitated by a physical calamity or act of war.” As discussed above, the March 19 executive order temporarily added the unforeseeable business circumstances exception for Coronavirus related business circumstances.[18] While California employers who cite the unforeseeable business circumstances exception must provide notice as soon as practical, we recommend that employers also give notice of closures if faces with a physical calamity or act of war, even though it may not be strictly required.
 
New York WARN Act
Like the California WARN Act, the New York WARN Act provides greater protections to affected employees than the federal WARN Act. The New York WARN Act requires covered employers to provide 90-days advance notice to affected employees of any Employment Site Closing, Mass Layoff, Reduction in Work Hours, or Relocation of Substantially All Facility Operations.[19]

On April 17, 2020, Governor Cuomo issued Executive Order No. 202.19, which, among other things, partially suspends Section 860-b(1) of the New York Labor Law until May 17, 2020.  Specifically, the Executive Order relaxes New York’s WARN Act requirements for small businesses that receive funding from the federal Paycheck Protection Program, rehire previously laid-off employees, and subsequently engage in a restructuring that would generally trigger a second WARN notice.  Under those limited circumstances, the employer need not comply with the 90-day notice requirement for the second restructuring so long as the employer provided the required WARN notice when it initially laid off the employees and provides notice of the second restructuring as soon as practicable.

Covered Employer. Employers must comply with the New York WARN Act if they employ:
  • 50 or more employees located in New York State, excluding part-time employees (see below); or
  • 50 or more employees, who collectively work at least 2,000 hours each week in New York State, including overtime hours earned by employees on a regular basis.[20]
  • Employees are classified as part-time if they have worked either (1) an average of less than 20 hours each week; or (2) less than six of the 12 months before the date on which notice is required.[21]
Triggering Events. Under the New York WARN Act, an Employment Site Closing, Mass Layoff, and/or Relocation (defined below) are events that trigger the notice requirement.
  • Employment Site Closing. An Employment Site Closing is any “permanent or temporary shutdown of a single site of employment, or one or more facilities or operating units within a single site of employment, if the shutdown results in an employment loss during any 30-day period at such site for 25 or more employees, excluding any part-time employees.”[22]
  • Mass Layoff. A Mass Layoff is any reduction in force that (1) is not the result of an Employment Site Closing; and (2) results in an employment loss at a single site of employment during any 30-day period for either:
    • 25 or more employees that, collectively, comprise at least 33% of all active employees (excluding part-time employees); or
    • 250 or more employees (excluding part-time employees).[23]
  • Relocation. A Relocation is “the removal of all or substantially all of the industrial or commercial operations of an employer to a different location 50 miles or more away from the original site of operation where 25 or more employees, excluding part-time employees, suffer an employment loss.”[24]
  • Temporary Disruptions Not Qualifying as Plant Closings. An employer need not provide notice under the WARN Act under certain circumstances, including:
    • Projects of Limited Duration. Employers do not need to provide notice if the “employees were hired with the understanding that their employment was limited to the duration of the project or undertaking”; or
    • Seasonal Employment. Employers do not need to provide notice if the employment was seasonal in nature.[25]
Notice. Under the New York WARN Act, the employer is required to give notice to:
  • The New York Commissioner of Labor;
  • The local Workforce Investment Board;
  • Each affected employee; and
  • Each representative of an affected employee.[26]
Exceptions. An employer is excepted from the 90-day advance notice requirement under the same circumstances that would except the employer under the federal WARN Act, as discussed above and reiterated below. Because the employer bears the burden of proving that an exception exists, employers should provide notice if at all possible, even if one of the limited exceptions may be met.
  • Faltering Company. The employer was actively seeking capital or business that, if obtained, would have enabled the employer to avoid or postpone the shutdown and the employer reasonably and in good faith believed that giving the notice required would have precluded the employer from obtaining the needed capital or business
  • Unforeseeable Business Circumstances. The closing or mass layoff is caused by business circumstances that were not reasonably foreseeable as of the time that notice would have been required; or[27]
  • Natural Disasters. The Closing or Mass Layoff is due to any form of natural disaster, such as a flood, earthquake, or the drought currently ravaging the farmlands of the United States.[28]
  • As noted above, we are not aware of any cases or guidance that suggests that Coronavirus falls under one of the above exceptions but we think that citing unforeseeable business circumstances as an exception to the notice requirement would be reasonable.And, as noted, government-ordered closings may constitute unforeseeable business circumstances.As we discussed, the Governor of California recently issued an executive order stating that Coronavirus related closings or layoffs constitute unforeseeable business circumstances and provide an exception to the notice requirement.And the subsequent guidance issued interpreting the Governor’s executive order confirmed that a government-ordered closing of an employment site also constitutes unforeseeable business circumstances. Even if an exception is claimed, an employer is still required to give notice as soon as practicable, which must include a statement of the basis for the delayed notice.
Failure to Comply. In addition to liability for back pay and benefits, employers may also be subject to a civil penalty of up to $500 for each day that the employer is in violation.
 
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As employers continue to assess the impact of the Coronavirus on their workforce needs, they should consider whether any workforce decisions will trigger the notice requirements under the WARN Act or state-law analogues. Employers should consult with counsel regarding their specific circumstances and obligations.
 
[1] 29 U.S.C. § 2101(a)(8).
[2] 29 U.S.C. § 2101(a)(2).
[3] 29 U.S.C. § 2101(a)(3); 20 C.F.R. § 639.3(h).
[4] 29 U.S.C. § 2101(a)(6).
[5] 20 C.F.R. § 639.3(f)(2)–(3).
[6] 29 U.S.C. § 2102.
[7] Id.
[8] 54 FR 16042-01.
[9] Cal. Exec. Order No. N-31-20 (Mar. 17, 2020).
[10] 29 U.S.C. § 2102(b)(3).
[11] Cal. Exec. Order No. N-31-20 (Mar. 17, 2020).
[12] Cal. Lab. Code § 1400(a), (h).
[13] Cal. Lab. Code §§ 1400(c)–(f), and 1401.
[14] The Int’l Bhd. Of Boilermakers v. NASSCO Holdings Inc., 17 Cal. App. 5th 1105, 1117-18 (2017).
[15] Cal. Lab. Code §§ 1400(c)–(f), and 1401.
[16] Id.
[17] Cal. Lab. Code § 1400.
[18] Cal. Lab. Code § 1401.
[19] N.Y. Lab. Law §§ 860 to 860-I; 12 NYCRR § 921-1.0 to 921-9.1.
[20] N.Y. Lab. Law § 860-a(3); 12 NYCRR § 921-1.1(e)(1)(ii).
[21] Id.
[22] 12 NYCRR § 921-1.1(m).
[23] 12 NYCRR § 921-1.1(i).
[24] 12 NYCRR § 921-1.1(n).
[25] 12 NYCRR §§ 921-5.1, 5.2.
[26] 12 NYCRR § 921-2.2(d), (g).
[27] 29 U.S.C. § 2102.
[28] Id.

Executive Order/EO DOL