VOLUME I Chapter 17 Worker Adjustment and Retraining Notification Act

• Jurisdiction: South Carolina

Chapter 17 Worker Adjustment and Retraining Notification ActC. Edward Rawl, Jr.The Boeing Company

I. Introduction

The Worker Adjustment and Retraining Notification Act,¹ or WARN Act, was enacted in 1988 in response to a series of plant closings and mass layoffs around the country. The purpose of the WARN Act, which requires certain employers to give 60-days' advance notice of plant closings or mass layoffs, is to provide "workers and their families some transition time to adjust to the prospective loss of employment, to seek and obtain alternative jobs and, if necessary, to enter skill training or retraining that will allow these workers to successfully compete in the job market."² Damages and civil penalties can be assessed against employers who violate the provisions of the WARN Act.³

II. Coverage: Who Must Give WARN Act Notice?

The Act provides that "[a]n employer shall not order a plant closing or mass layoff until the end of a 60-day period after the employer serves written notice of such an order . . . ."⁴ Thus, an employer, as defined below, must provide the required notice, to the affected employees, of any large-scale reduction in workforce.

A. Employer

Under the Act, an "employer" is defined as any business enterprise that employs:

1. 100 or more employees, excluding part-time employees; or
2. 100 or more employees, including full-time and part-time employees (combined), who in the aggregate work at least 4,000 hours per week, exclusive of overtime.⁵

The term "employer" includes non-profit organizations that meet the size requirement. Federal, state, and local governments are not covered, but "employer" does include public and quasi-public entities which:

1. engage in business (take part in a commercial or industrial enterprise, supply a service or good on a mercantile basis, or provide independent management of public assets, raising revenue and making desired investments);
2. are separately organized from the regular government;
3. have their own governing bodies;
4. have independent authority to manage their personnel and assets.⁶

Two or more affiliated companies may be considered a single business enterprise for WARN Act purposes.⁷ Independent contractors and subsidiaries that are wholly or partially owned by a parent company may be treated as separate employers or as part of the parent company depending on their degree of dependence on the main employer. Some of the factors which may be used to make this determination are:

1. common ownership;
2. common directors and/or officers;
3. de facto exercise or control;
4. unity of personnel policies emanating from a common source; and,
5. dependency of operations.⁸

These same factors may be used when determining whether an employer's lender can be held liable under the WARN Act for the failure to provide adequate notice. In Pearson v. Component Technology Corp.,⁹ the lender loaned large sums of money to the employer, which later fell into default. The lender then installed a new board of directors and CEO, and after several years of the employer failing to earn a profit, the lender ceased loaning capital. The employer was forced to shut down its operations; however, neither the employer nor lender provided adequate notice under the Act. The Third Circuit found that the evidence did not demonstrate a "high degree of integration" between the lender and the employer to justify holding the lender liable.¹⁰ Other courts have held that a lender can become so involved and entangled with an employer's operation to result in WARN Act liability.¹¹

Questions also arise when a company goes bankrupt. The issue is whether the entity was "engaged in business" prior to the plant closing or mass layoff.¹² The U.S. Department of Labor opines that it is not appropriate to exclude all bankrupt companies from the definition of "employer": "[A] fiduciary whose sole function in the bankruptcy process is to liquidate a failed business for the benefit of creditors does not succeed to the notice obligations of the former employer because the fiduciary is not operating a "business enterprise" in the normal commercial sense. In other situations, where the fiduciary may continue to operate the business for the benefit of creditors, the fiduciary would succeed to the WARN obligations of the employer precisely because the fiduciary continues the business in operation."¹³

B. Counting Employees

To determine whether an entity has the requisite number of employees to be considered "an employer" under the Act, one must determine which employees are to be counted towards the 100-person requirement.

1. Workers on temporary layoff or leave are counted as employees if they have a reasonable expectation of recall, or understand through notification or through industry practice that the employment has been temporarily interrupted and that they will be recalled to the same or similar job.¹⁴
2. Temporary project workers, other than those considered part-time, are counted as employees.¹⁵ These are individuals hired with the understanding that their employment was limited to the duration of the facility, the project, or the undertaking.¹⁶
3. U.S. employees employed outside the United States are counted as employees.¹⁷
4. Foreign employees employed outside the United States are NOT counted as employees.¹⁸
5. Part-time workers are NOT counted as employees. Part-time employees are those employees who are employed for an average of fewer than 20 hours per week OR who have been employed for fewer than six of the 12 months preceding the date on which notice is required, including full-time workers, i.e., recent hires.¹⁹
6. Seasonal employees MAY be counted as employees. Employees whose work is seasonal or recurring, such as in agriculture or construction, are not included if the workers understood at the time they were hired that the work was temporary. However, permanent employees who work on a variety of jobs and tasks throughout the year should be counted as regular employees.²⁰

For the purpose of determining whether an employer is covered by the WARN Act, the 100-employee test is applied at the time the 60-day notice is due.²¹ However, "when all employees are not terminated on the same date, the date of the first individual termination within the statutory 30-day or 90-day period triggers the 60-day notice requirement."²²

C. Sale of All or Part of a Business²³

The seller is responsible for providing notice of any plant closing or mass layoff which takes place up to and including the time of the sale. And, the buyer is responsible for providing notice of any plant closing or mass layoff that takes place thereafter.²⁴

If the seller is made aware of any definite plans on the part of the buyer to carry out a plant closing or mass layoff within 60 days of purchase, the seller may give notice to affected employees as an agent of the buyer, if so empowered. If the seller does not give notice, the buyer is nevertheless legally responsible to give notice. If the seller gives notice as the buyer's agent, the responsibility for notice still remains with the buyer.²⁵

It is a best practice for the buyer and seller to determine the impact of the sale on workers and to decide between them for advance notice to be given the affected employees if a plant closing or mass layoff is planned.²⁶

III. Who is Entitled to Notice?

If an employer is planning a plant closing or mass layoff, it must give 60-days' advance notice to all "affected employees." Affected employees include all employees who may reasonably be expected to experience an employment loss. This includes individually identifiable employees who will likely lose their jobs because of bumping rights or other factors, to the extent that such individual workers can be reasonably identified at the time notice is required to be given.²⁷

Notice must be provided to:

1. Managerial and supervisory employees;²⁸
2. Part-time employees;²⁹
3. Employees on temporary layoff who have a reasonable expectation of recall prior to notice of the plant closing or mass layoff;³⁰
4. Permanent employees working at temporary facilities or on temporary projects;³¹
5. Employees likely to be bumped;³² and,
6. Seasonal employees who are considered to be part-time employees.³³

Notice need not be given to:

1. Business partners;³⁴
2. Consultant or contract employees who have a separate employment relationship with another employer and are paid by that employer;³⁵
3. Self-employed individuals;³⁶
4. Temporary project employees;³⁷
5. Seasonal employees who are considered temporary project employees;³⁸or
6. Recent hires, unless they are part-time employees.³⁹

IV. To Whom Must an Employer Provide Notice?

An employer must provide 60-days' advance notice of plant closings or mass layoffs to:

1. Representative of affected employees;⁴⁰
2. Each affected employee if there is no representative;⁴¹
3. State dislocated worker unit or the state Governor if there are no procedures for serving notice on the state dislocated worker unit;⁴² and,
4. Chief elected official of the unit of local government.⁴³

V. What is "Notice"?

WARN Act notices must contain the following information, which must be based on the best information available to the employer at the time notice is given. Errors in the information provided that occur because of subsequent changes or that are minor or inadvertent should not be the basis of a WARN Act violation.⁴⁴

A. Notices to Representatives of Affected Employees⁴⁵

1. Name and address of employment site where plant closing or layoff is to occur.
2. Name and telephone number of company official who may be contacted for further information.
3. A statement as to whether the planned event is to be permanent or temporary, and if the entire plant is to be closed, a statement to that effect.
4. Expected date of the first separation and the anticipated schedule for making separations.
5. Job titles of positions to be affected and names of workers currently holding the affected jobs.

A...