COVID-19 Workforce Reductions and the WARN Act
COVID-19 Workforce Reductions and the WARN Act

Over the last couple of weeks, the Bowles Rice CARES Act/COVID-19 Team has fielded a lot of questions from companies trying to understand their legal duties under the Families First Coronavirus Response Act and whether permanent layoffs, reductions of hours or temporary furloughs are appropriate for their business under these unique circumstances.  While no one wants to let valued employees go during this time of so much uncertainty, companies must do what is necessary to ensure that their employees have work to return to once this pandemic is over.

Recognizing this necessity for so many businesses, both the State of West Virginia and the federal government have taken steps to pass emergency legislation to help those finding themselves unemployed during this difficult period.  While these relaxed unemployment rules make things easier for employees facing a layoff, there are still important notice provisions for the employer to consider when making the decision to substantially reduce business or shut down entirely.

The federal Worker Adjustment and Retraining Notification (WARN) Act generally requires employers to provide at least 60 days’ notice to workers before a plant closure or mass layoff that will last more than six months.  Employers that violate the WARN Act may be liable for back pay, benefits and civil monetary penalties of $500 per day.

Employers must be aware of their WARN Act obligations, even if their employees have been ordered to stay at home and/or their business was deemed non-essential and ordered to close.  As a rule, the WARN Act’s notice requirements are triggered by a “mass layoff,” meaning a layoff that involves either (i) the closing of a facility or discontinuing of an operating unit with 50 or more full-time workers; (ii) laying off 50-499 full-time workers (and these workers comprise at least 33% of the total work force at a single site of employment), or (iii) laying off 500 or more full-time workers at a single site of employment.  These employee thresholds are based on the employees at a particular worksite, and not necessarily for the company’s total employees across all locations.  For WARN Act purposes, there is no difference between terminations and furloughs (temporary layoffs), if the furlough is expected to last more than six months.

The WARN Act’s notice requirements include exceptions.  For purposes of this discussion, however, we will focus on the exception for “unforeseen business circumstances.”  While the courts have not yet had a chance to consider our current circumstances, it seems extremely likely that a pandemic situation, like this current COVID-19 outbreak, would qualify as an unforeseen business circumstance triggering this exception.

Still, the coronavirus outbreak does not end the question of whether notice is required.  There still must be an analysis of what the employer knew and when they knew it.  A company cannot simply use this outbreak as an excuse to close a facility that they were talking about closing before the start of this crisis.  If the closure was foreseeable without the COVID-19 crisis, then the WARN Act would likely require the 60-day notice, even if the COVID-19 crisis is the straw that broke the camel’s back.  Furthermore, it may even be possible for layoffs related to this COVID-19 outbreak to become foreseeable at some point, particularly as more time goes by.  In other words, the longer a company waits to make a decision regarding its layoffs or a closure, the less likely it will be able to prevail on the foreseeability argument if it does not provide prior notice.

To be safe, companies still should send out notices of the decision to implement layoffs, even if the exception applies to COVID-19-related layoffs.  The reason for this advice is because the “unforeseen business circumstances” exception reduces the required notice period – not the requirement to give notice.  Instead, employers must give notice as soon as practically possible.  This is true even if the notices are given at the moment of the layoff itself.

One of the other questions we have addressed is the impact of the WARN Act on partial layoffs or reduction in hours situations.  Generally speaking, employers can reduce the days or hours of their non-exempt employees without incurring liability.  Under the Fair Labor Standards Act (FLSA), employers are not required to pay non-exempt employees for hours they do not work.  Exempt employees, on the other hand, are typically salaried employees, and they generally are entitled to a full weeks’ salary provided they worked any hours in that week.  As such, there may be different notice requirements that apply to the reduction of hours or wages paid to exempt employees.  Failing to provide the appropriate notice could result in a violation of the FLSA and the loss of an employee’s exempt status – which could entitle that employee to overtime compensation for past hours worked.

In many states, this analysis is further complicated by state WARN Acts (often called, Mini-WARN Acts).  West Virginia, however, does not have its own Mini-WARN Act.  While this fact eases the analysis of issues a bit, there are new COVID-19-related regulatory changes seemingly every day.  As such, it is advisable to seek the assistance of an experienced attorney if your company is considering actions contemplated by the WARN Act.  Bowles Rice LLP has experienced attorneys that are available to help you through these questions, as well as all other COVID-19-related issues.