HOW DOES THE LAW REGULATE MASS LAYOFFS AND PLANT CLOSINGS?
Recently, the Commerce Department disclosed the most devastating three-month collapse of the U.S. economy ever. In the second quarter of 2020, the gross domestic product fell by 9.5%. The effects of the coronavirus pandemic reached throughout the economy. Consumers cut their spending. Businesses reduced their investing. Global trade mostly ended. <<https://www.nytimes.com/2020/07/30/business/economy/q2-gdp-coronavirus-economy.html>>. Economic declines have real world consequences for businesses. Many must now consider large-scale layoffs and closing their facilities. Both federal law and some state laws regulate larger employers that conduct mass layoffs and plant closings. Before implementing such a strategy, employers must know their legal duties under these laws to implement such a layoff or plant closing without liability to their affected workers and civil fines.
A. Which laws regulate mass layoffs and plant closings?
Employers located in Missouri and Illinois face obligations, depending upon their location, under a federal law, the Workers’ Adjustment and Retraining Notification Act (“WARN Act”), and an Illinois statute, the Illinois Workers’ Adjustment and Retraining Notification Act (“Illinois WARN Act”). Both impose obligations on employers implementing layoffs and plant closings, depending on the number of employees that the employer employs. The federal law affects employers with, at least, either
a. 100 employees, excluding part-time employees or
b. 100 employees, including part-time employees, who in total work more than 4,000 regular hours weekly.
The law defines part-time employees as those employed for an average of fewer than 20 hours weekly or who the employer has employed for less than six of the 12 months before the date of a required notice. The Illinois WARN Act imposes its obligations on employers with either:
a. 75 or more employees, excluding part-time employees, or
b. 75 employees, including part-time employees, who, in the aggregate, work at least 4,000 non-overtime hours weekly.
B. How many employees must layoffs or plant closings affect for the WARN Act to apply?
The WARN Act requires an employer to issue notices of layoffs or plant closings if they involve an “employment loss” and the following numbers of employees: For a plant closing, at least 50 employees, excluding part-time employees, must suffer an employment loss during a 30-day period. For a layoff, at least, 33 percent of employees, excluding part-time employees, and, at least, 50 employees, excluding part-time employees, must experience an employment loss during any 30-day period at a single site of employment. In addition, if a layoff affects 500 employees, excluding part-time employees, during any 30-day period at a single employment site, an employer must issue WARN Act notices. The WARN Act defines an “employment loss” as follows:
a. an employment termination, other than a discharge for cause, voluntary departure, or retirement,
b. a layoff exceeding six months, or
c. a reduction in hours of work of more than 50 percent during each month of any 6-month period.
C. How many employees must the layoffs or plant closing impact for the Illinois WARN Act to require notices?
The Illinois statute reduces the number of employees affected by a mass layoff or a plant closing that must receive advance notice of such actions. For a plant closing, at least, 25 full-time employees must suffer an employment loss during a 30-day period. For a layoff, at least, 33 percent of employees, excluding part-time employees, and, at least, 25 employees, excluding part-time employees, must experience an employment loss at a single site of employment. If, furthermore, a layoff affects 250 employees, excluding part-time employees, during any 30-day period at a single employment site, an employer must issue Illinois WARN Act notices. The Illinois WARN Act defines “employment loss” in the same manner as the federal WARN Act.
D. How do the obligations of a Missouri employer implementing a mass layoff or plant closing differ from those of an Illinois employer?
A Missouri employer must satisfy only the federal WARN Act’s obligations. As a practical matter, a layoff or plant closing must cause, at least, 50 employees, excluding part-time employees, to suffer an employment loss before the employer has a duty to issue any WARN notices.
On the other hand, an Illinois employer must follow the Illinois WARN Act. If a layoff or plant closing causes 25 employees, excluding part-time employees, to experience an employment loss, then it must issue Illinois WARN Act notices. In either case, in the context of a layoff, the law measures an employment loss by a period of more than six months. In other words when implementing a mass layoff or plant closing, employers must look forward for a period of, at least, six months into the future and determine how many employees will experience the effects of either a layoff or plant closing.
E. What notice obligations do employers have?
Under both the federal WARN Act and Illinois WARN Act, an employer must give, at least, 60 days’ advance notice of either a mass layoff or a plant closing. The WARN Act requires an employer to issue notices to affected employees, unions, and state agencies designated to receive such notices, such as the Missouri Office of Workforce Development, and the unit of local government to which the employer pays the highest amount in local taxes. Under the Illinois WARN Act, the employer must provide the notices to affected employees, unions, the Illinois Department of Commerce and Economic Opportunity, and the municipal and county governments where the layoff or plant closing occurs.
F. What happens to the employer if it does not give the required notices?
Under either the federal law or the Illinois WARN Act, if an employer misjudges whether a layoff will exceed six months or whether it must close a plant, it incurs liability to workers who receive either no or less than 60 days’ notice before the layoff affected them. For example, if an employer conducts either a mass layoff or a plant closing that affects 75 employees and it gives only 30 days’ advance notice, then it incurs liability to each employee affected by the layoff or closing at the rate of one day’s wages for 30 days. If the employer paid daily wages to each employee in the sum of $100 daily, then its liability equals 75 employees times their daily wages of $100 times 30 days, which equals $225,000. Both the federal and state laws also allow the imposition of civil fines of $500 per day for violations of their obligations to issue notices to governmental authorities.
G. What exceptions to the notice requirements to these laws recognize?
Both the federal and Illinois law include partial exceptions to the notice requirement for natural disasters and if “business circumstances that were not reasonably foreseeable” when the employer implemented the layoff or plant closing. If an employer closed a plant or laid off more than 50 employees 60 days before March 31, 2020, it could make a good argument that no one knew the economic havoc that the coronavirus pandemic would cause. The further past the end of March that an employer tries to make such an argument, the less persuasive it becomes. An employer must issue notices for mass layoffs or plant closings covered by the unforeseen business circumstances exception as soon as practically possible, even if the employer issues the notices after the layoff occurs.
In addition, both the WARN Act and the Illinois WARN Act describe the natural disaster exception in terms of a flood, earthquake, or drought. Courts may construe that exception narrowly and find the coronavirus disease unlike any one or more of a flood, earthquake, or drought. Even if a court interpreted the natural disaster exception to apply to the coronavirus pandemic, it could limit the time during which it would do so. A court would do so long after the layoff or plant closing, and it could find that the natural disaster ended before the date of the layoff or plant closing.
In closing, the coronavirus pandemic has caused significant harm to the national economy. With much of the federal government’s emergency spending enacted in March and April 2020 because of the coronavirus pandemic exhausted and no additional emergency federal spending to offset the dramatic drop off in national economic activity in place, businesses will continue to suffer hard times. Many will have no choice other than to layoff employees and to close facilities. Such difficult measures may have serious adverse financial consequences to employers that lack knowledge of their WARN Act obligations or who ignore them. Employers considering a mass layoff or facility closing should discuss those measures with their labor and employment law counsel for specific legal advice. For more information about the laws regulating mass layoffs and plant closings, please contact Gerry Richardson, (314) 552-0453, email@example.com.