Hunton Employment & Labor Perspectives

Employers in the difficult position of making workplace reductions because of COVID-19-related business losses should spare a moment for consideration of layoff notice obligations under the federal Worker Adjustment Retraining Notification Act of 1988, 29 U.S.C. § 2100 et seq. (“WARN”) and its state counterparts (so-called “mini-WARN” laws). The “unforeseen business circumstances” exception in federal WARN and most analogous state laws may excuse strict compliance with notification requirements, but employers should take the time now to analyze the applicability of this exception rather than make assumptions about it.

Federal WARN Notice

Federal WARN requires employers of more than 100 employees to provide 60 days’ notice of plant closings and mass layoffs. 29 U.S.C. § 2101(a)(2) and (3).  An “employment loss” under this law means a termination, a layoff exceeding 6 months, or a reduction in hours of work of more than 50% during each month of a six-month period. 29 U.S.C. § 2101(a)(6). Thus, federal WARN notice will not be triggered by short-term furloughs.

Federal WARN “Unforeseen Business Circumstances” Exception

Federal WARN creates several exceptions to the 60-day notice requirement, including one for “unforeseen business circumstances” that is facially applicable to this pandemic. 20 C.F.R. 639.9(b).  Under this exception, notice requirements are relaxed when the employment loss is triggered by a “sudden, dramatic, unexpected action or condition outside the employer’s control.”  20 C.F.R. § 639(b)(1). Examples in the regulations include a key supplier’s inability to deliver goods due to a strike, government closing of an employment site, and an “unanticipated or dramatic economic downturn.” Id.   No single set of circumstances will create a per se exception; rather, the exception is fact-specific, applied on a case-by-case basis.  Employers asserting the exception as an affirmative defense to WARN litigation have the burden of proof, and must establish that they used commercially reasonable business judgment in predicting the demands of their particular business market.  20 C.F.R. § 639.9(b)(2).

While the economic downturn associated with the COVID-19 pandemic seems to fit comfortably within this exception, it is important to remember that the exception is narrowly construed by courts, and post hoc assertions of economic harm, unsupported by contemporaneous evidence of loss directly tied to the pandemic, will not be successful in later litigation.  A company must be able to prove objective facts tying business losses to the pandemic circumstances, rather than relying on assumptions made by Human Resources personnel about the effect on business.

Thus, in the absence of a government directive closing a business, it is worthwhile now to identify the information that will furnish proof of business losses – reports, canceled orders, unfulfilled requests, related correspondence – and memorialize in writing the reasons that workforce reductions are necessary. Evidence that the company has consulted with counsel will support a showing of commercially reasonable business judgment. And, do not dispense with notice entirely; provide all WARN notices as soon as practicable. 20 C.F.R. §639(b).

State Mini-WARN Laws

Nine states have robust mini-WARN laws that are analogous to the federal law:  California, Illinois, Iowa, New Hampshire, New Jersey, New York, Tennessee, Vermont and Wisconsin.  Most of these laws apply to businesses with fewer employees than the 100-employee federal WARN threshold.  The required notice periods range from 30 days (Iowa, Vermont) to 90 days (New York), although track the federal 60-day requirement. Some (California, Iowa, New York (for plant closings, but not mass layoffs), and Wisconsin) apply to even short furloughs, because they do not define the triggering event as one that lasts longer than six months, as does federal WARN. Employers in one of the mini-WARN states should consult with counsel to analyze whether their particular workforce reduction constitutes a triggering event under these laws.

 Of the nine mini-WARN states, California, New Jersey and Tennessee do not provide a safe harbor for unforeseen business circumstances, although California’s governor has reacted to the current emergency by issuing an order that creates one for layoffs relating to COVID-19 conditions. See our recent blog post on this development. New Jersey has an exception for “national emergencies,” which likely applies to current conditions. In general, there may be ways to mitigate the absence of the exemption in these states.  It is important to consult with counsel as you navigate all of these issues.