A WARNing for Employers Conducting Reductions in Workforce
March 30, 2009
New Jersey Law Journal
With the collapse of the global economy, news of mass layoffs has been rampant as some of the largest employers have been forced to reduce expenses and downsize their workforce. In 2008, Citibank slashed over 73,000 jobs, General Motors laid off nearly 34,000 employees, and other Fortune 100 corporations were forced to conduct staff reductions. Not surprisingly, this unpleasant trend has carried over into 2009 as January was one of the worst months for layoffs ever, with nearly a quarter million job cuts grabbing headlines. Given the grim prospects for 2009, many employers undoubtedly will be forced to conduct additional reductions. Those employers, however, must comply with the federal Worker Adjustment and Retraining Notification Act ("WARN"), as well as some recently enacted state laws, known as "mini-WARN" acts, which were intended to close the loopholes in the federal statutory scheme. Some of these new state laws, including those enacted by New York and New Jersey, impose additional obligations upon employers. Thus, the unwary employer may be subjected to substantial penalties, including statutory severance payments, for even inadvertent violations.
WARN mandates that employers with 100 or more employees (with certain narrowly tailored exceptions) provide advance written notice of a "plant closing" or "mass layoff' to its employees and various governmental officials. Under WARN, a "plant closing" is the "permanent or temporary shutdown of a single site of employment. . . if the shutdown results in an employment loss at the single site of employment during any 30-day period for 50 or more employees..." A "mass layoff" is a reduction in force that results in an employment loss at a single site of employment during any 30-day period for at least 33 percent of employees and at least 50 employees, or at least 500 employees. Under WARN, employment losses as a result of a plant closing or mass layoff will be aggregated if the number of job losses reaches the threshold level during any 90-day period, unless the employer demonstrates that the employment losses are the result of separate and distinct actions. Depending upon the circumstances, even the sale of a business can trigger WARN's notice requirements.
Under WARN, an employer must provide written notice of the job loss at least 60 days prior to a plant closing or mass layoff to the affected employees bargaining unit or to each affected employee, the State, and to the chief elected officer in the municipality. Although there are several carefully crafted exceptions from the notice requirement, the burden is on the employer to demonstrate that one of these exceptions applies: (1) it is a faltering company; (2) there are unforeseeable business circumstances; or (3) there was a natural disaster.
Em who fail to provide appropriate written notice of a plant closing or mass layoff are liable to each aggrieved employee for, among other things, back pay and benefits for up to 60 days. An employer who fails to provide notice to a unit of local government is subject to a civil penalty not to exceed $500 for each day of violation.
Recognizing certain gaps in the federal statutory scheme, some states have enacted their own protectionist legislation, which are designed to afford additional safeguards to workers, their families and communities in the event of a plant closing or mass layoff. For instance, in late 2007, New Jersey enacted the Millville Dallas Airmotive Plant Job Loss Act ("NJ WARN"), which was precipitated by the closing of one of the largest South Jersey employers that greatly impacted the local economy. The New York State Worker Adjustment and Retraining Notification Act ("NY WARN") only became effective as of February 1. In addition to these state laws, certain local governments have enacted ordinances to mandate advance notice of plant closings or mass layoffs.
Interestingly, NJ WARN diverges substantially from WARN in that it only applies to businesses in New Jersey that have been in operating for at least three years. Although the federal and state statutes apply in similar circumstances, the written notice required by NJ WARN is significantly more detailed inasmuch as it must include, among other things, a "statement of any employment available to employees at any other establishment operated by the employer." New Jersey employers must provide such notice to the affected employees, the Commissioner of Labor and Workforce Development, the chief elected official of the municipality where the establishment is located, and any collective bargaining unit.
There are other more subtle distinctions between the two statutes. While NJ WARN has a narrowly tailored exemption from the notice requirements for a termination of operations caused by certain unforeseeable disasters, war or the revocation of a license to operate, it does not permit any reduction to the 60-day notice requirements for unforeseeable business circumstances or economic disasters that may impact a faltering business. In addition, NJ WARN provides additional benefits to the dislocated worker as New Jersey has established a Response Team that is available to provide information and counseling to employees who receive layoff notices. For each transfer or termination of operations (but not for mass layoffs), the State Response Team must (1) offer to meet with management representatives to discuss available programs to prevent or delay the transfer or termination of operations; and (2) offer to meet with workers to provide information and counseling regarding programs or benefits available to them as well as their rights under NJ WARN or other laws with respect to wages, benefits, or severance pay.
New Jersey employers will also be subject to substantial penalties if they fail to provide the requisite notice. Pursuant to NJ WARN, an employer which fails to provide the required notice must pay each affected employee severance equal to one week's pay for each full year of service in addition to any severance provided for by any other policy or collective bargaining agreement.
NY WARN, although based upon WARN, is more expansive than both the federal act and NJ WARN. For instance, NY WARN is significantly broader as it defines a covered employer as an entity with 50 or more full-time employees. Further, under NY WARN, a covered employer must provide 90 days advance written notice, whereas WARN and NJ WARN only require 60 days advance written notice. NY WARN requires that an employer provide notice of mass layoffs, relocations or employment losses to affected employees, their representatives, the New York State Department of Labor and local workforce investment boards.
Inexplicably, although NY WARN defines the term "plant closing," it does not include "plant closing" as an event triggering the notice requirement, which appears to be an oversight as the term is referred to in other sections of the act. In any event, under NY WARN, a plant closing occurs when as few as 25 employees are affected - a threshold much lower than its federal counterpart. A mass layoff under NY WARN.occurs if it affects at least one-third of the company's employees at a single worksite and at least 25 employees, or at least 250 employees.
Although WARN does not refer to "relocation" as an event which triggers the notice requirements, NY WARN provides that an employer must provide written notice of a "relocation," which is defined as the "removal of all or substantially all of the industrial or commercial operations of an employer to a different location fifty miles or more away." A strict interpretation of the term "relocation" as defined under NY WARN could require an employer with a site with only one employee to give notice if it determines to consolidate that small office with another facility.
NY WARN, however, also borrows several concepts from its federal counterpart. By way of example, NY WARN adopts the exceptions for notice under WARN. NY WARN also provides an exception to the notice requirement if the "employment loss is necessitated by a physical calamity or an act of terrorism or war." As with its federal counterpart, under NY WARN, an employer who fails to provide appropriate notice will be liable for back pay and benefits for up to 60 days and a civil penalty of $500.00 per day of violation.
In addition to state specific statutes, employers must be further warned that, although their state may not have passed such an act, certain cities have enacted ordinances similar to the state mini-WARN acts. For example, although neither the state of Delaware nor the Commonwealth of Pennsylvania has enacted such legislation, the City of Philadelphia has passed an ordinance which imposes notification requirements upon Philadelphia employers. Consequently, employers, particularly in municipalities or geographical areas with substantial business, should review local law to determine if there are any notice requirements in advance of any workforce reductions.
Given that developments in the law vary substantially from state to state, and even from locale to locale, attorneys counseling employers confronted with the need to downsize their workforce should carefully review WARN and any applicable mini-WARN acts, such as those passed by New York, New Jersey and the City of Philadelphia.
Catherine P. Wells is the Chairperson of the Employment Law Department of Wolff & Samson PC of West Orange, New Jersey. She can be reached by phone at (973)530-2051 or by email at: firstname.lastname@example.org. Margaret O'Rourke Wood is a member of the firm and can be reached by phone at (973)530-2063 or by email at: email@example.com. Denise J. Pipersburgh is an associate and can be reached by phone at (973)530-2090 or by email at: firstname.lastname@example.org.
Reprinted with permission from the March 30, 2009 edition of the New Jersey Law Journal. ©2009 Incisive Media US Properties, LLC. All rights reserved. Further duplication without permission is prohibited.