Employers May Be Able to Avoid WARN Notices for Furloughs Under Six Months

With numerous furloughs and layoffs occurring around the country because of COVID-19 fallout, employers may have the ability to avoid cumbersome WARN Act notice requirements. 

Specifically, if employers furlough employees with the expectation of returning the employees to work in under six months, there are circumstances under which WARN Act notices may be avoided.

The federal Worker Adjustment and Retraining Notification Act (WARN Act) was enacted in 1988.  The purpose of the WARN Act is to allow employees and their families and communities to prepare for a plant closing or mass layoff by requiring employers to provide 60 days advance notice of termination of employment and by imposing penalties for noncompliance.

An employer must give notice of a plant closing if it results in 50 or more employees suffering an “employment loss” at the site during any 30-day period.  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.  A mass layoff is any reduction in force that, within a 30-day period, results in employment loss at a single site of either (1) one-third or more of the site’s active employees, but at least 50 employees, or (2) at least 500 employees.

The act provides that a furlough or layoff of more than six months that, at its outset, was announced to be a layoff of six months or less, is not subject to immediate WARN notice and is not treated as an employment loss if:

(1) The extension beyond six months is caused by business circumstances (including unforeseeable changes in price or cost) not reasonably foreseeable at the time of the initial layoff; and

(2) Notice is given at the time it becomes reasonably foreseeable that a furlough beyond six months will be required.

Companies furloughing employees for less than six months should therefore analyze two key issues:

(1) Whether business circumstances exist that could cause the current temporary layoffs to last beyond six months are foreseeable now; and

(2) If not, what action should occur when it becomes reasonably foreseeable that the furlough could last six months or more.

The bottom line is employers should not simply wait until 60 days prior to the end of the six-month period to determine if business circumstances could reasonably extend the furlough beyond six months. 

Instead, employers should weekly analyze the likelihood of whether the furlough triggering WARN notices may reach beyond six months.  As soon as the answer goes from “No” to “Maybe,” the employer should issue WARN notices.

Finally, employers should take note that the six-month period is a product of the federal WARN Act.  A number of states have enacted their own “mini-WARN Acts,” many of which have different criteria and requirements than the federal law.  As a result, whether and under what circumstances an employer may avoid notice obligations for a less-than-six-months layoff may vary depending on the state.  During these challenging times, employers considering a mass layoff or workforce reduction should consult with counsel to ensure compliance with WARN and other legal obligations.               

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