If You Have to Layoff Employees, Don’t Forget WARN and OWBPA
Labor & Employment Alert
In this unprecedented COVID-19 world, employers may need to consider layoffs, furloughs, or even closures to get through to the other side (whenever that comes). If you have done all you can to weather the government-mandated shutdowns and now have to consider letting people go, you are not alone. When making these decisions, not only do you need to be sure your selection of employees is defensible under the various discrimination laws, you also may need to keep the Worker Adjustment and Retraining Notification Act (WARN Act) and the Older Workers Benefits Protection Act (OWBPA) in mind.
Does WARN apply? Whether an employer has obligations under the WARN Act depends on the company’s size and how many employees are affected. Affected employers include those with (1) 100 or more employees excluding part-time employees (specifically defined by WARN) or (2) 100 or more employees, including part-time employees, who in the aggregate work more than 4,000 hours per week, exclusive of overtime. Don’t assume you meet the threshold without carefully considering WARN’s definitions of who you must count (which is not as simple as it sounds and may require your lawyer’s advice). If you meet that 100-employee threshold, then the question is whether your decision will result in the loss of employment, or a reduction in hours of more than 50% for at least 50 employees for a six-month period. If WARN applies, you must provide written notice prior to a plant closing or mass layoff.
Is this a plant closing or mass layoff under WARN? So, what constitutes a plant closing or a mass layoff? WARN provides specific definitions, so be sure your decisions actually meet those definitions before you send your notice. Specifically:
- A "plant closing" is the permanent or temporary shutdown of “single place of employment” or “one or more facilities or operating units within a single place of employment” that results in an employment loss during a 30-day period for 50 or more employees, excluding part-time employees.
- A "mass layoff" is an employment loss at a single site of employment for (1) at least 33%of the active employees (excluding part-time employees), and (2) at least 50 employees. When 500 or more employees are impacted, the 33% requirement does not apply, provided the other criteria are met.
If WARN applies, give notice. If you determine you meet all of the WARN definitions, you must give at least 60 days’ written notice to the affected employees (or their representative) and the state.
What happens if you don’t give notice? An employer who fails to meet the notice requirement may be liable to each affected employee for (1) back pay for each day of violation and (2) benefits under an employee benefit plan described in Section 3 of the Employment Retirement Income Security Act of 1974. Depending on the jurisdiction it may be 60 calendar days pay or pay for the number of workdays in that 60 day period.
Are there any exceptions to WARN? There are some exceptions that may apply: Unforeseeable Business Circumstances, Natural Disaster, and Faltering Company. While these may or may not apply, they are affirmative defenses and you cannot be sure that they apply until a court tells you. With that caveat:
- The Unforeseeable Business Circumstances Exception may apply when a plant closure or mass layoff is “caused by business circumstances that were not reasonably foreseeable.” U.S. Department of Labor guidance provides examples of circumstances that constitute unforeseeable business circumstances, including “sudden, dramatic, and unexpected actions or conditions outside the employer’s control” such as a “government ordered closing of an employment site that occurs without prior notice.” If this exception applies, it may permit you to give less than the full 60-day notice.
- Under the Natural Disaster Exception, no notice is required. The courts have not considered whether COVID-19 as a global pandemic is a natural disaster (although it may be).
- The Faltering Company Exception only applies to a plant shutdown (not a mass layoff). Under this exception, an employer must reasonably and in good faith believe that providing the 60-day notice to its employees would have jeopardized its ability to secure the needed capital or allow the business to remain open.
To comply with the WARN Act, employers should provide the full 60-day advance notice, or provide the notice as soon as practicable if an exception applies, and consult potentially applicable state-specific mini-WARN Acts.
Now that you have dealt with the WARN Act, are you going to offer departing employees severance agreements? If you are, will any of those agreements require one or more employees to release claims of age discrimination? If so, you should keep in mind the OWBPA, a part of the Age Discrimination in Employment Act (ADEA). The OWBPA requires specific provisions to be included in severance agreements if the employee is giving up the right to file an age discrimination claim. The release must be “knowing and voluntary.”
What are the specific provisions of the release? What does a “knowing and voluntary” release look like? According to the OWBPA, it must:
- Be in writing;
- Be written in a manner that the employee would understand;
- Be in plain, clear language that avoids technical jargon and long, complex sentences;
- Not mislead or misinform the employee executing the release;
- Not exaggerate the benefits the employee is to receive in exchange for signing the release, or the limitations imposed on the employee as a result of signing the release;
- Specifically refer to the ADEA;
- Specifically advise the employee to consult an attorney before signing the release; and
- Not require the employee to waive rights or claims arising after the date the employee signs the release.
What about the Consideration and Revocation Periods? After you have the release language, you need to give the employee time to consider the release and time to revoke it after he or she signs it. This part only applies to your employees in the protected age group (i.e., 40 years old or above) and it depends on how many of these older workers are getting the release.
- If you are only asking one employee to release age discrimination claims, you must give the employee 21 days to consider the release (Consideration Period) and seven days to change his or her mind after signing (Revocation Period).
- If you are asking more than one employee to release ADEA claims, the required Consideration Period jumps to 45 days and employees still get a seven-day Revocation Period. Also, you must provide detailed information about each of the other employees who have been offered severance and have been asked to sign a release. This may apply to a series of layoffs — it depends on whether they were all part of the same decision-making process. The information you must provide is a description of the class, unit, or group of employees that were covered by the exit program (voluntary or involuntary); the eligibility factors for the program; the job titles and ages of all of the individuals who are eligible for the program (if voluntary) or who were selected for the program (if involuntary); and the ages of all individuals in the same job classification or organizational unit who are not eligible for, or who were not selected for, the program. This is not a simple process so you should start early in collecting the information.
If you don’t provide all of these protections, the employee’s release of age discrimination claims may be invalid (i.e., you could pay the severance and still get sued for age discrimination).