LEGALINK CROSS-BORDER LAYOFFS QUESTIONNAIRE

The federal Workers Adjustment and Retraining Notification (“WARN”) Act requires a covered employer to give affected employees 60 days written notice of a plant closing or mass layoff.  The primary purpose of the WARN Act is to ensure that covered employees receive 60 days of their regular compensation before losing their jobs.

A covered employer is “any business enterprise that employs (A) 100 or more employees, excluding part-time employees; or (B) 100 or more employees who in the aggregate work at least 4,000 hours per week (exclusive of hours of overtime).”  29 U.S.C. § 2101 (a)(1).  Affected employees are those “who may reasonably be expected to experience an employment loss as a consequence of a proposed plant closing or mass layoff by their employer.”  29 U.S.C. § 2101(a)(5). 

A plant closing is “the 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 at the single site of employment during any 30-day period for 50 or more employees excluding any part-time employees.”  29 U.S.C. §2101(a)(2).  A mass layoff is a reduction in force which (A) is not the result of a plant closing;  and  (B) results in an employment loss at the single site of employment during any 30-day period for (i) (I) at least 33 percent of the employees (excluding any part-time employees); and (II) at least 50 employees (excluding any part-time employees); or (ii) at least 500 employees (excluding any part-time employees).

Where a sale of a business results in a plant closing or mass layoff, the seller is responsible for providing notice of the closing or layoff which occurs up to and including the date and time of the sale; the buyer is responsible for providing notice of any closing or layoff that occurs thereafter.
Many states have their own “WARN” Acts that have different requirements, e.g., numbers of employees, amount of notice required.

Under the federal WARN Act, an affected employee who did not receive the requisite amount of notice may be entitled to back pay and benefits (up to the 60 days of required notice).  In addition, an employer who fails to provide the required notice to a unit of local government is subject to a fine of up to $500 for each day of the violation.  The penalty can be avoided by the employer’s payment of all money owed to each employee within three weeks of the plant closing or layoff.

Under the various federal and state antidiscrimination laws, an employee who proves discrimination in the layoff may be entitled to back pay, front pay, compensatory damages (for emotional distress), punitive damages and an injunction prohibiting further discrimination.

In negotiating the purchase of a company, the purchaser should pay attention to ensuring that any post-purchase obligations it may have to the seller’s holdover employees (such as severance in the event of a post-purchase layoff) can be structured to satisfy the purchaser’s possible WARN Act obligation.

As a general matter, employers in the United States are prohibited by federal statutes from discriminating against persons with respect to employment decisions and terms and conditions of employment because of race, sex, age, disability, religion, or national origin.  Most states have similar statutes prohibiting such discrimination.  In implementing a reduction in force, an employer should exercise care to minimize the risks that affected employees may assert claims under these various statutes based upon allegations that they were selected for inclusion in the reduction in force because of their membership in one of the protected classes.  Even in circumstances in which there is no dispute that an employer has a legitimate business reason for implementing a reduction in force (e.g., due to a slow down in work), an employer could still be held liable for discrimination based upon the selection of the specific persons for layoff, in comparison to those retained.  For employers that are conducting reductions in force, therefore, it is critical to conduct adverse impact analysis of the group laid off and to make sure there are legitimate and specific criteria for selecting the individuals who are laid off.  Additionally, it is important for employers to consider offering severance payments in exchange for a release of claims by individuals impacted by layoff in an effort to reduce potential claims.