Mass Layoffs and Plant Closings Under the WARN Act | Chugh LLP

Mass Layoffs and Plant Closings Under the WARN Act

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By: Nishita Patel and Varduhi Danielyan

When facing mass reduction in workforce, employers need to comply with the Federal Worker Adjustment and Retraining Notification (WARN) Act ( and respective State WARN Acts.

The main objective of the WARN Act is to protect employees and their families and in a broader perspective the entire community by making it mandatory for employers  to give a 60-day notice to those employees who will be effected by the plant closing and mass layoffs as also to state and local representatives, prior to the closing and layoffs.

Which companies are covered by Federal WARN Act and CA WARN Act?

Federal WARN Act applies to businesses that have more than a hundred full-time employees without counting workers that have been with the company for less than six months and have worked fewer than 20 hours per week. Federal WARN Act also covers businesses with 100 or more full-time and part-time employees who work in aggregate at least 4,000 hours per week.

California and many other states have similar WARN Acts.

CA Warn Act applies to companies that employ at least 75 employees, including full-time and part-time employees, who have worked at least 6 months of the 12 months preceding the date on which a WARN notice is required.

What constitutes reduction of workforce under the Acts?

Federal WARNAct applies to plant closings and mass layoffs. According to the Act, plant closing is a permanent or temporary shutdown of a single site or unit of employment during a 30-day period that results in reduction of 50 or more employees. Mass layoff is a reduction of workforce, other than in case of a plant closing, that leads to employment loss at a single site of employment during any 30-day period of either 50 employees who constitute at least 33% of the active workforce or at least 500 employees.

CA WARN Act defines a mass layoff as that of 50 or more employees during any 30-day period.

Notice Requirements under both Acts

Both acts have notice requirements that employers need to adhere to.  

The Federal WARN Act requires an employer to provide a 60-day written notice before a plant closing or mass layoff, to non-union employees (or the representatives of the unions of the unionized employees), as well as some governmental agencies. Employers must give notice to employees who they reasonably believe will experience an employment loss including employees who will lose their jobs because of bumping rights (right of an employee with contractual seniority to take the job of a junior employee when the senior employee’s job is eliminated) or other factors. Employers should not count part-time employees in plant closing or mass layoff determinations, but they must provide part-time employees with notice to the same extent they provide notice to full-time employees. The WARN Act requires additional notice when the date or schedule of dates of a planned plant closing or mass layoff is extended beyond the date in the original notice.

In California, an employer is required to provide a 60-day notice to any affected employees, the Employment Development Department (EDD), the Local Workforce Development Board, and the chief elected official of each city and county government in which the termination, relocation, or mass layoff occurs.

 Due to the COVID-19 pandemic and the lockdown in the state, California Governor Newsom issued Executive Order N-31-20, which temporarily suspends the 60-day notice requirement in the California WARN Act for those employers that give written notice to employees and satisfy other conditions. The suspension was intended to permit employers to act quickly in order to mitigate or prevent the spread of coronavirus.

Document reasons for closure/layoffs

When having a mass layoff or plant closing, companies should have valid business reasons for the same and have them  documented in a proper way, in accordance with applicable bylaws and internal policies, as well as an objective criterion of layoffs. Such measures will help in the future in case former employees decide to dispute the validity of layoffs on discriminatory grounds.

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