L. Plant Closings

Be aware of the ramifications of the federal Worker Adjustment and Retraining Notification Act (WARN) when contemplating closing a plant or discharging workers en masse. This law requires employers with more than 100 workers to give employees and their communities at least 60 days notice, or comparable financial benefits, of plant closings and large layoffs that affect 50 or more workers at a job site. The law is unique in its provisions that deal with retraining of displaced workers. It is also extremely technical and must be thoroughly understood before you take action. The following text highlights important aspects of the act together with analysis of the law's possible effects on companies throughout the United States.

Section 3(a) of WARN prohibits employers from ordering a plant closing or mass layoff until 60 days after the employer has given written notice of this to:

• Affected employees or their representatives;
• The state dislocated worker unit; and
• The chief elected official of the unit of local government where the closing or layoff is to occur.

Employers are defined as business enterprises that employ more than 100 full-time workers (part-timers are characterized as those working fewer than 20 hours per week or less than six months in the preceding year), or who employ more than 100 employees who in the aggregate work at least 4,000 hours per week, excluding overtime.

The act calls for covered employers to give notice of a plant closing or mass layoff. A plant closing is defined as 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 if the shutdown results in an employment loss at the single site of employment during any 30-day period for 50 or more employees excluding part-time employees." Employment loss is defined under the law as "a termination other than for cause, voluntary departure or retirement, or a layoff for more than six months or a reduction in hours of work of more than 50 percent during each month of any six month period."

The term "mass layoff" means a reduction in force different from a plant closing resulting in employment loss during any 30-day period for 50 full-time employees who constitute at least 33 percent of the full-time employees at a single site of employment, or 500 employees.

The law does not affect government, nonprofit and service organizations. Also, many layoffs of small and very large companies may not be affected by the act's requirements due to the numbers of persons. In addition, if the plant closing or massive layoff was caused by a natural disaster (e.g., flood, earthquake or severe drought), or the closing of a temporary facility or completion of a project whose employees were hired with the understanding that their work was of limited duration, the law will not adversely affect the employer. The same is true for problems caused by strikes, lockouts or permanent replacement of economic strikers. Other exceptions include: the 60-day rule does not have to be strictly followed if the employer, reasonably and in good faith, is forced to shut down the plant more quickly to obtain needed capital or business, or if the closing or mass layoff is caused by business circumstances not reasonably foreseeable at the time the required notice was to be given.

Finally, the law apparently does not protect workers who lose their jobs less than 60 days after the effective date of a sale because the act was intended to protect workers only from closings or layoffs prior to a sale. The law appears merely to obligate the seller to give notice until the sale is completed.

Any employer who orders a plant closing or mass layoff without furnishing appropriate notice may be liable in a civil action to each affected employee for:

• One day's back pay for each day of violation up to 60 days. This amount is calculated at the higher of the employee's average regular rate or final regular rate of pay less any wages paid during the layoff period and any voluntary or unconditional payments (e.g., severance) paid to the affected worker which were not legally required;
• The value of medical expenses and other benefits paid directly to the affected employee; and
• The value of actual payments made to third parties on behalf of the affected employee.

Employers are also subject to fines not to exceed $500 per day to the appropriate unit of local government where the closing or layoff occurs unless the employer continues to pay benefits to affected employees as described above within three weeks of the shutdown or layoff. However, this fine may be reduced by a showing that a "complaint of wrongful act or omission" was in good faith and that the employer had reasonable grounds for believing that the act or omission was not a violation of law.

TIP: Companies covered by the law must now carefully orchestrate all moves before closing marginally profitable plants. Obviously, affected workers and the community must be notified properly and additional benefits will have to be given to comply with the act's provisions. All of these considerations, and others, should be reviewed before action is taken.