Question

My company is planning to lay off about 50 employees in the next few weeks. We currently have about 200 employees. We don’t think there is going to be more than one layoff, but it depends on the economy. Are there are legal requirement we need to be aware of? Are there any resources we can access to help our employees?

Answer

We are sorry to hear that your company is going to lay off some employees. There are some important laws you need to know to ensure compliance regarding the layoff process. The state has some resources that can help your company and your employees as they face this challenging transition.

WARN

The key federal law in cases like this is the Worker Adjustment Retraining and Notification Act (WARN), a law passed in 1988.

The WARN Act protects workers by requiring most employers of 100 or more people to provide written notification 60 calendar days in advance of a plant closing or a mass layoff. The employees entitled to notice include managers and supervisors, as well as hourly and salaried workers. WARN requires that notice also be given to employees’ representatives (if there are any), the local chief elected official, and the state’s dislocated worker unit. The state dislocated worker unit is the Rapid Response team, discussed below.

The principal behind the 60-day advance notice is to afford workers and their families some transition time to adjust to the prospective loss of employment, to seek and obtain other jobs, and, if necessary, to enter skill training or retraining that will allow them to compete successfully in the job market. If the employer fails to provide the necessary notice, the law provides for a $500 per day penalty payable to the local government.

The U.S. Department of Labor (DOL) administers WARN at the federal level. Although the DOL has no enforcement role in seeking damages for workers who did not receive adequate notice or received no notice at all, employees may bring a private right of action in court seeking unpaid wages for the time they did not receive notice, up to 60 days.

Here are the key elements of the WARN Act:

A “plant closing” is 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.

A “mass layoff” occurs when there is a reduction in force that is not the result of a plant closing and that results in an employment loss at a single site of employment during any 30-day period for either:

• at least 33 percent of the employees, excluding part-time workers, and at least 50 employees or
• at least 500 employees, excluding part-time employees.

Mass layoff

Based on the information supplied in your question it appears that neither the plant closing or mass layoff definition applies. Fifty employees do not represent is one-third of the workforce unless more layoffs occur within a 90-day period. An employer is required to give advance notice if it has a series of small terminations or layoffs, none of which individually would be covered under WARN but which add up to numbers that would require WARN notice.

However, an employer is not required to give notice if it can show that the individual events occurred because of separate and distinct actions and causes and are not an attempt to evade WARN.

The WARN law contains the following example of how an employer should handle multiple but related layoffs by looking ahead and back 90 days to determine whether separate but related events would trigger coverage.

• DAY 1 Company has 180 employees
• DAY 2 Company terminates 30 employees (150 is now the number for WARN computations)
• DAY 31 Company terminates 29 employees (now 121 remaining employees)
• DAY 60 Company terminates 6 employees (115 remaining employees)
• DAY 90 Company terminates 5 employees (110 remain)

Assuming no notice was given, the company is liable to all 70 employees who were terminated because the mass layoff threshold has been reached through separate actions that did not occur for separate and distinct causes within this 90-day period. All employees terminated within the 90 days have suffered a mass layoff and are entitled to 60 days’ notice before the date of termination.

Exceptions

There are three exceptions to the full 60-day notice requirement. Even when an exception applies, however, notice must be provided as soon as is practicable, and the employer must provide a statement of the reason for reducing the notice requirement in addition to fulfilling other notice information requirements. The exceptions are:

• Faltering company: When, before a plant closing, a company is seeking capital or business and reasonably in good faith believes that advance notice would preclude its ability to obtain such capital or business, and this new capital or business would allow the employer to avoid or postpone a shutdown for a reasonable period;
• Unforeseeable business circumstances: When the closing or mass layoff is caused by business circumstances that were not reasonably foreseeable at the time that 60-day notice would have been required (i.e., a business circumstance that is caused by some sudden, dramatic, and unexpected action or conditions outside the employer’s control, like the unexpected cancellation of a major order); or
• Natural disaster: When a plant closing or mass layoff is the direct result of a natural disaster such as a flood, earthquake, drought, storm, tidal wave, or similar effects of nature. In this case, notice may be given after the event.

Massachusetts

Massachusetts has a voluntary plant-closure law that asks employers that received some form of state or quasi-state agency financial assistance to voluntary inform employees 90 days in advance of any closing. In general, however, the state responds to plant closings not with punitive measures but with assistance for the soon-to-be-dislocated workers through the rapid response program.

Post layoff announcement

The Rapid Response program helps all employers and employees, not just employers covered by WARN, when the company is downsizing or closing. The Rapid Response Team provides early intervention re-employment services at no cost to Massachusetts companies and their employees affected by layoffs and closings.

The Rapid Response team will come to an employer’s facility to meet with and help employees understand the services it offers. Among the services the Rapid Response team provides are:

• Confidentiality concerning your business needs;
• Information about alternatives that may mitigate the layoff, or possible future layoffs;
• Pre-layoff services designed to help workers shorten their transition time;
• Information on One-Stop Career Centers and Unemployment Insurance;
• Assistance in maintaining worker morale and productivity during the transition, and
• Assistance in preparing affected workers to find new employment.

Unemployment Insurance

Massachusetts law requires employers to provide all separating employees with a pamphlet that describes how to apply for Unemployment Insurance (UI) benefits.

The pamphlet addresses many questions employees may have about filing for UI including:

• How long does it take to process a new claim?
• When should an employee apply for UI benefits? and
• How to apply for UI benefits.

The legally required DUA brochure must be given to every separated employee no later than 30 days from the date of separation. The brochure is available in multiple languages.

COBRA

The Consolidated Omnibus Reconciliation Act (COBRA) gives qualified employees and others the right to elect to continue their employer-based health insurance for up to 18 months. The eligible party may in certain cases elect up to 36 months of coverage. The employer may charge the former employee up to 102% of the cost of the coverage.

If the company has completely gone out of business, there is no health plan available for the employee to use COBRA. In that case, the employee would have to look to coverage alternatives such as a spouse’s or parent’s plan or the Massachusetts Health Connector.

However, if other parts of the company continue to exist and offer health insurance, the employee may be eligible for coverage under that plan.

Final Wages

Under the Massachusetts wage-and-hour law, an employer must pay final wages to all employees for all time worked, as well as any accrued but unused vacation time. Failure to do so entitles the former employee to file a complaint for non-payment of wages and ultimately seek treble damages.

Final thoughts

A plant closing often involves a wide range of personnel and employee morale issues that are going to be unique to the company and the circumstances surrounding the closure.

AIM members with questions about this or any other human-resource matter may contact the AIM Employer Hotline at 800-470-6277.