College of Business Administration

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Margaret M. Clark

Employers Fail To Give Required Notice In Majority of Mass Layoffs and Closures Hrmagazine Alexandria:Dec 2003. Vol. 48, Iss. 12, p. 34

During 2001, employers gave their employees 60 days advance notice of a "mass layoff" of plant closure in just one-third of the situations where it was required under the federal Worker Adjustment and Retraining Notification (WARN) Act. The notice requirement is intended to provide workers and their families with some transition time to seek new employment or get skills training to help them compete successfully in the job market. On the basis of interviews, the General Accounting Office (GAO) found that both employers and employees find WARN's definitions and calculations difficult to apply, in particular with respect to the layoff threshold - that is, whether the required number of employees has been laid off within the prescribed time frame. Confusion also arises from inconsistencies among courts in determining who the responsible employer is when two closely related employers, for example, a parent and subsidiary, are involved.

Full Text (749 words)

Copyright Society for Human Resource Management Dec 2003

During 2001, employers gave their employees 60 days advance notice of a "mass layoff" or plant closure in just one-third of the situations where it was required under the federal Worker Adjustment and Retraining Notification (WARN) Act.

According to estimates in a U.S. General Accounting Office (GAO) report released Oct. 20, just under 2,000 of a total 8,350 mass layoffs and plant closures during 2001 appeared to be subject to WARN's notice rules, but employers gave notice in only 717 of these cases.

In conducting its analysis, GAO relied on data compiled by the Bureau of Labor Statistics Mass Layoff Statistics program and compared that information with the collected WARN notices received from all 50 states and the District of Columbia.

Among those complying with the rules, most of the employers gave at least the required 60 days notice, and almost all the notices included the elements outlined in the U.S. Department of Labor's explanatory regulations, according to the report.

The report recommended that the DOL immediately make revised educational materials available to employers and employees and suggested that Congress make legislative fixes to clarify employer responsibilities and employee rights.

By the time the GAO report was published, DOL already had posted a new 36-page Employer's Guide to Advance Notice of Closing and Layoffs on its web site. A Worker's Guide to Advance Notice of Closing and Layoffs also is available.

Subject to certain exceptions, the WARN Act requires employers with 100 or more workers to give 60 days notice for mass layoffs and plant closures that involve 50 or more employees. The notice requirement applies to mass layoffs of 50 to 499 employees, but only if they involve at least a 33 percent reduction in the employer's workforce.

The notice requirement is intended to provide workers and their families with some transition time to seek new employment or get skills training to help them compete successfully in the job market.

Although employers with 100 or more full-time workers account for less than 2 percent of all employers, they employ 64 percent of the labor force, the report noted.

Confusing, Calculating, Conflicting 4

On the basis of interviews, GAO found that both employers and employees find WARN's definitions and calculations difficult to apply, in particular with respect to the layoff threshold-that is, whether the re- quired number of employees has been laid off within the prescribed time frame.

Particular confusion arises when multiple layoffs occur within a 90-day period. If the result is an aggregate layoff of 50 or more employees and one-third of the workforce, the combined events may be subject to WARN. If the employer fails to aggre- gate multiple events, the employer's must, if challenged, show that they are separate and distinct events, not attempts to evade WARN requirements, the report explained.

Lawyers told GAO that "the difficulties in applying the layoff thresholds allow some employers to manip- ulate numbers to qualify under the one-third rule or lay off workers in waves over a period of time so that WARN thresholds do not apply dur- ing a 90-day period said the report.

Some employers have difficulty applying the standards, but others ares "so savvy at manipulating the num- bers that it is difficult for employees to know if and when their rights have been violated," both employer and employee lawyers told GAO investi- gators.

Among the 68 court decisions interpreting WARN reported through 2002, some are conflicting. This adds to the difficulty involved in compliance, as well as in calculating the correct monetary remedy for noncompliance, said the report.

WARN provides for up to 60 days backpay for violations, but it does not say whether that means 60 calendar days or the typical number of workdays in a 60-day period. Only the 3rd U.S. Circuit Court of Appeals has accepted the full 60-day remedy, while others that have ruled on the issue used 42 days pay as the measure of a complete remedy. So, much litigation involves calculation of backpay, the report said.

Confusion also arises from inconsistencies among courts in determining who the responsible employer is when two closely related employers, for example, a parent and subsidiary, are involved.

Suggested legislative fixes include simplifying the calculation of layoff thresholds, clarifying the calculation of damages, defining the term employer to include closely related cor- porations and establishing a uniform federal statute of limitations instead of relying on a variety of analogous state statutes of limitations, as currently is the case.

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