The Commerce Department recently reported on the most substantial three-month decline of the United States economy ever. In the second quarter of 2020, the gross domestic product decreased by 9.5%. From restaurants to shoe stores, the impact of the coronavirus pandemic has been felt throughout industries and economies. With many relief funds depleted and no definite timeline for predicting when the economy will recover, many business owners will have little choice other than to layoff workers and shut down certain facilities. For this reason, it is critical for employers to understand the role of the WARN Act as well as to realize that a corporate lawyer can help navigate these unprecedented and complex situations.
How the WARN Act Applies to Closings and Layoffs
Employers in Detroit as well as the rest of Michigan and the United States are required to comply with the Workers’ Adjustment and Retraining Notification (WARN) Act when it comes to closings and layoffs. This law only applies to employers who have either 100 employees, with the exclusion of part-time workers, or 100 workers including part-time workers who comprise work more than 4,000 regular hours weekly. Under the WARN Act, employers must issue a 60-day notice of either closings or layoffs if they involve “employment loss” of a certain magnitude. For layoffs, at least 33% of employees excluding part-time workers and at least 50 workers must experience a job loss in a 30-day period at a single employment location. For plant closings, at least 50 workers, excluding part-time employees, must experience employment loss in a 30-day period.
For the purposes of the WARN Act, an employment loss includes either an employment termination other than a discharge for cause/voluntary departure/retirement, a layoff greater than six months, or the reduction in hours of work by more than 50% during each month in a six-month period.
Limited Exceptions to the WARN Act
There are three limited exceptions to the WARN Act’s 60 days notice requirement. While one or several of these exceptions might apply to your situation, the assistance of an attorney is often necessary to prove it. These three exceptions include:
- Faltering company exemptions, which apply when a company sought new financing or funds to stay open and where providing 60-day notice would destroy that company’s opportunity to gain these new funds. This exemption only applies to plant closings, which means that it is the least likely to apply to companies disrupted by the pandemic.
- Natural disaster exemptions, which apply when a closing or layoff directly occur from a natural disaster. While floods, earthquakes, and other storms fall into this category, it remains uncertain if the pandemic would constitute a natural disaster. While the definition of a natural disaster does not include pandemics, the U.S. Department of Labor might extend this exemption at some point.
- Unforeseeable business circumstances exemptions, which apply to both closings and layoffs that occur when a business’s circumstances are not reasonably foreseeable. This exemption requires a significant and sudden unanticipated occurrence that substantially disrupts business operations. This exemption is likely to be the exemption most commonly utilized by companies who have incurred financial difficulties as a result of the pandemic.
Remember, in addition to claiming one of these exemptions, employers also must still provide as much as notice as is practicable, and when doing so provide a brief statement of why the notification period has been reduced.
Speak With a Corporate Law Attorney
If you have questions about the law including the WARN Act, it can help to speak with a knowledgeable corporate law attorney. Contact Resnick Law PC today to schedule a free case evaluation.