COVID-19 & THE EMPLOYMENT LITIGATION HORIZON: UPDATE #3—WARN ACT LITIGATION
As Georgia and other states begin to “open,” and employers in those states take their first tentative steps toward recalling furloughed workers to previously shuttered workplaces, they face a constantly shifting legal landscape and a host of litigation risks. As a litigation boutique that represents employers, executives and workers, our purpose here is not to wade into the debate over the wisdom of such re-openings but, rather, to provide some (hopefully) helpful information to those weighing such difficult decisions—and those impacted by them. This is the third in a series of posts addressing such issues, which we will update consistently over the coming weeks. This third installment addresses claims under the federal Worker Adjustment and Retraining Notification Act, or “WARN Act.”
WARN Act Claims. On March 30, 2020, Macy’s made national headlines when it announced that it would furlough most of its 125,000 employees. Macy’s is hardly alone. Shelter-in-place orders have required many employers to completely halt or substantially reduce their operations. Obviously, the total or almost total cessation of business places tremendous financial stress on employers, many of whom have responded, like Macy’s, by furloughing or laying off most of their workers. As of April 23, 2020, the U.S. unemployment rate grew to greater than twenty percent (20%). As of the date of this post, unemployment claims, nationwide, have surpassed 30 million. Here in Georgia, more than 1.3 million people have applied for unemployment benefits since mid-March—against a population of roughly 10.6 million and a labor force of approximately 5.1 million.
Which brings us to the WARN Act. The WARN Act is a federal law enforced by the U.S. Department of Labor (“DOL”). The law is highly technical, and DOL’s website includes useful reference guides for employers and workers, which we commend to our readers.
Generally, the WARN Act requires certain employers, in certain circumstances, to give employees 60 days advance notice of a “mass layoff” or “plant closing.” Covered employers are those with 100 or more full-time employees. The Act specifically defines what constitutes a mass layoff and plant closing. The Act also specifies the information that an employer-provided notice must include. The cost of non-compliance with the notice requirement can be steep: the WARN Act creates a private right of action in affected employees (which permits them to sue for WARN Act violations), and civil remedies for proven violations include up to 60 days of back pay and benefits, plus civil penalties of $500 per day.
In the age of COVID-19, one potential trap for employers is that a furlough, layoff, or closure initially thought to be temporary could, due to exigent circumstances, become a WARN Act-covered “mass layoff” or “plant closing,” thus triggering the Act’s notice requirement. In other words, as discussed here, “[a]n employer implementing a layoff because of COVID-19 [might] think[ ] it is announcing a short-term layoff, but if the coronavirus lasts longer than expected, the furlough or layoff could last more than six months.” The six month threshold is important because the Act’s notice requirement applies to those who suffer a covered “employment loss,” defined as (among other things) “a layoff exceeding 6 months.” An employer faced with this scenario is supposed to give notice once it becomes “reasonably foreseeable” that the six month threshold will be crossed—a somewhat nebulous standard, especially under the circumstances.
It is important to note that the WARN Act includes exceptions for “unforeseeable business circumstances” and “natural disasters”—both of which are defined terms. At first blush, the coronavirus pandemic seems like it would certainly qualify under one or both of these exceptions. That is, however, a legally untested proposition. Further, these exceptions do not operate to completely relieve employers from complying with the notice requirement; they only operate to relax the full 60-day notice requirement. Employers still must notify employees of covered layoffs or closures as soon as practically possible.
It is also important to note that 20 states—Georgia not among them—have their own “Mini WARN” laws. In states with Mini WARN laws, employers must comply with those laws in addition to the federal WARN Act. Georgia is not such a state; employers here need only comply with the federal WARN Act. Click here to download “Georgia’s Worker Adjustment and Retraining Notification Guide,” published by Georgia’s Department of Labor.