WARN Act Recommendations. However, if the furlough is intended to be lengthy, the employer may want to provide the employees’ final pay in accordance with state law governing final pay to preclude any potential claim that the furlough was actually a termination, and final wages were not timely paid. Lab. Allen Wilen is a Partner and serves as the National Director of the Financial Advisory Services Group assisting the firm’s clients through the litigation and restructuring process. The federal WARN notice obligation is not triggered if employees will be laid off for fewer than six months, since those employees have not suffered an “employment loss.” The key issue with the COVID-19 pandemic is that employers do not know how long the pandemic will last. To the extent feasible, take any other steps the employer regularly takes in processing an employee termination. Employers should check with their state Department of Labor or equivalent state agency for more information on state obligations, as they may be stricter than federal obligations and may have different notice triggers. Prior to implementing any furlough, layoff or reduction in force, care should be taken to ensure that compliance with all federal, state and local laws is observed, including but not limited to antidiscrimination laws, the federal WARN Act, any state WARN Acts, federal COBRA and any state healthcare continuation coverage requirements and laws relating to payment of wages and accrued … Before we dive into the substance of this discussion, we provide our definitions so we and our readers are on the same page. Under the federal WARN Act, a full-time employee is an employee who works more than 20 hours per week and has been employed for at least 6 out of the last 12 months (some states have different definitions; for example, California doesn’t have the 20 hours-per-week requirement). Illinois’s WARN Act applies to employers with 75 employees, as well as mass layoffs of 25 or more employees where that number constitutes at least 75% of the employer’s workforce. A furlough may also implicate other employment laws such as the Fair Labor Standards Act, which, amongst other things, provides for the circumstances where employees may be exempt from overtime pay. A statement about whether the planned action is expected to be permanent or temporary and, if the entire plant is to be closed, a statement to that effect. 100 or more full-time employees, or 2. A few states have addressed covered employers’ obligations to notify employees of layoff or closure (temporary or not) during this crisis. If furloughed employees are allowed to continue participation in the group health plan during the furlough period, then no COBRA election is required because there is no loss of coverage for furloughed employees. Do states have their own advance notice requirements? Or if the lay-off that affects either: 33 percent of the workforce (at least 25 workers), or 250 workers from a single employment site, Any business that has been open for three years and employs 100 or more full-time employees, Any business with 100 or more employees. Employers may also want to voluntarily pay out or permit employees to use any accrued vacation or PTO during the furlough. Regular federal, state, and local government entities which provide public services are not covered. A mass layoff is defined as one involving more than 50 employees at a location. A few other states raise additional issues. Nonexempt (hourly) employees generally need only be paid for hours worked unless company policy, individual agreements, or collective bargaining agreements provide otherwise. 100 or more employees, including part-time employees, who work at least a combined 4,000 hours per week. What should employers do if they have to extend a layoff that was originally expected to last fewer than six months? If you have any questions, we'd like to hear from you. As employers develop return-to-work strategies, they may be unable to recall or re-hire all workers who have been furloughed or laid off. We provide here an update to our prior alerts regarding Leaves, Furloughs and the WARN Act and the Implications of California’s Coronavirus Stay at Home Order for Employers to provide more nuts and bolts information for employers navigating these waters. It is important to understand the subtleties of the WARN Act regulations in the state in which your business operates. Keep up with the latest legal and industry insights, news, and events from MoFo. If an employer extends a layoff that was originally expected to last fewer than six months (and therefore was not subject to the law’s notification requirements), the employer must show that the extension was caused by business circumstances that were not foreseeable at the time of the initial layoff. The Department of Labor (DOL) recently issued guidelines on the federal Worker Adjustment and Retraining Notification (WARN) Act as a result of pandemic-related employee furloughs and layoffs. If an employer is covered by WARN and the layoff or closure is one that would qualify for the notices required under WARN, then yes, the employer would need to comply with WARN, regardless of the reason for the layoff or closure. Not all employment loss requires 60 days’ notice, Singer noted. If employees are furloughed but not terminated, employers need not provide them with their final pay when the furlough goes into effect. [2] https://uscode.house.gov/view.xhtml?path=/prelim@title29/chapter23&edition=prelim, [3] https://labor.ny.gov/workforcenypartners/warn/warnportal.shtm, [4] https://www.nj.gov/labor/lwdhome/warn/njwarn.html, [5] https://www.dli.pa.gov/Individuals/Workforce-Development/warn/Pages/default.aspx. A furlough is a suspension from work without pay for a fixed, typically short, period of time. Another upside to furloughs over layoffs: Job actions deemed mass layoffs are regulated by the federal Worker Adjustment and Retraining Notification (WARN) Act and various state “mini-WARN” laws. To the extent feasible, follow usual protocols for disabling network access of terminated employees. The WARN Act obliges employers to notify employees if a plant shutdown or mass layoff will result in employment loss. EisnerAmper provides some federal and state resources that are providing coronavirus-related assistance. Private, for-profit employers and private, non-profit employers are covered, as are public and quasi-public entities which operate in a commercial context and are separately organized from the regular government. Federal WARN Act. When communicating with employees, be sure to comply with legal requirements, such as those under the WARN Act or state termination pay guidelines, or for those surrounding unemployment claims. the Implications of California’s Coronavirus Stay at Home Order for Employers, https://www.labor.ny.gov/workforcenypartners/warn/warnportal.shtm, https://www.illinoisworknet.com/LayoffRecovery/Pages/WARNLayoff.aspx. Additional notice is also required when the date for a planned plant closing or mass layoff is extended beyond the date announced in the original notice—regardless of how long the layoff will last. An exempt employee who is furloughed must be paid his or her full salary for the workweek in which the furlough begins if the employee works any part of the workweek. For example, there is a provision in the case of a “disaster” to not abide by the rule under federal law; however, in many states there is no similar provision. Like the federal WARN Act, Illinois’ statute exempts closings or layoffs that result in a loss of employment for fewer than six months. Does the WARN Act Still Apply if a Company Furloughs Employees? In addition, many states have adopted their own WARN Act regulations and, as an employer, it is your duty to abide by both federal and state guidelines. The WARN Act requires advance notice when a mass layoff or plant closing results in employment loss for a requisite number of people. [1] The New York State Department of Labor notes that “the WARN Act already recognizes that businesses cannot predict sudden and unexpected circumstances beyond an employer’s control, such as government-mandated closures, the loss of your workforce due to school closings, or other specific circumstances due to the [C]oronavirus pandemic,” and urges employers to provide notice as soon as possible. Note that the most recent draft legislation dealing with the COVID-19 pandemic does not provide for government-funded COBRA subsidies. Not all employment loss requires 60 days' notice, Singer noted. For Employers in a Position to Do More for Employees. A mass layoff is defined as one involving more than 50 employees at a location. If the furlough is expected to last longer than six months, then WARN will likely apply. These federal guidelines often differ from state guidelines, and differentiating between the two could have implications to your business operations. The notice may include additional information useful to the employees, such as information on available dislocated worker assistance, and, if the planned action is expected to be temporary, the estimated duration. Contributed by John Hayes and Carlos Arévalo, April 1, 2020 gavel on white backgruound The federal Worker Adjustment and Retraining Notification (WARN) Act and the patchwork state-law equivalents are often overlooked when employers are considering their options regarding potential layoffs or furloughs – either permanent or temporary. WARN Act Responsibilities Furloughs were appealing options for many employers early in the pandemic since furloughed employees can be recalled quickly. 6. The terms layoff, furlough, reductions in force, reorganization, and terminations are often used interchangeably although they are not necessarily the same thing. California Cal-WARN Act. All rights reserved. Under the federal WARN Act, a furlough lasting longer than six months is treated as an “employment loss” from the date the layoff started, according to information from … Company X must offer Employee Z a COBRA election as a result of the April reduction of hours even if it is presumed that Employee Z will only elect and continue COBRA coverage for three months. The United States Department of Labor (DOL) has yet to issue any guidelines relating to what businesses should do to stay compliant with the WARN Act during this period of uncertainty. In some cases, however, an employer may amend the terms of their group health plan to permit coverage to continue during a furlough. The employer cannot complete the planned layoff until the 60 days have expired. Private sector employers in New York State that employ more than 50 employees must issue a WARN Notice 90 days before closing a plant. The federal Worker Adjustment and Retraining Notification Act (WARN Act) was enacted in 1988. The employer also must give notice as soon as it realizes the layoffs will extend beyond six months. Furloughs What’s a Furlough? The federal WARN Act imposes a notice obligation on covered employers (those with 100 or more full-time employees) who implement a “plant closing” or “mass layoff” in certain situations, even when they are forced to do so for economic reasons. Morrison & Foerster Associate Erin Hamilton Jansen assisted in the preparation of this client alert. A “mass layoff” is a reduction in force that: A “plant closing” is a permanent or temporary shutdown, resulting in an employment loss for at least 50 employees during a 30-day period, of either (i) a single site of employment; or (ii) facilities or operating units within a single site of employment. § 2101 et seq.) As we all know, the situation is developing rapidly, seemingly by the minute. As an employer you may already be aware that the federal government has regulations that govern situations involving mass layoffs and plant shutdowns. Are employers required to comply with the Worker Adjustment and Retraining Notification (“WARN”) Act for temporary furloughs or closures related to COVID-19? [7] This exemption applies only if the workers were hired with the understanding that their employment was limited to the duration of the facility, project or undertaking. For example, under the terms of a group health plan, employees of Company X must work at least 30 hours per week in a given month. An employer cannot label an ongoing project "temporary" in order to evade its obligations under WARN. Layoffs and WARN Act Implications. The Worker Adjustment and Retraining Notification Act (“WARN”) (29 U.S.C. Which employers are covered by the WARN Act? In some states, such as California, final pay is due on the day of termination for any involuntary termination. New York, on the other hand, continues to require that businesses covered by the state’s “mini-WARN” law provide 90 days’ advance notice. If an employer’s plans change and a temporary furlough extends beyond six months or becomes a permanent layoff, then the WARN Act’s notice obligations can be triggered. Employees who are terminated or laid off for more than six months; Employees who have their hours reduced 50% or more as a result of the plant closing or mass layoff; Employees who may reasonably be expected to experience an employment loss as a result of proposed plant closing or mass layoff; Employees who are on temporary layoff but have a reasonable expectation of recall (such as those on workers’ compensation or medical, maternity, or other leave); Results in an employment loss at the single site of employment during any 30-day period for: At least 50 to 499 employees if they represent at least thirty-three percent (33%) of the total active workforce (excluding any part-time employees); 500 or more employees (excluding any part-time employees). However, the Internal Revenue Code provides an exception for certain amounts in the case of a federal “qualified disaster,” which President Trump declared on March 13, 2020. The furlough extends until the end of June. What are the exceptions to the 60-day advance notice requirement? The WARN Act provides employees with a 60 calendar-day advance notice of layoffs, in companies that have 100 or more employees. [6] See individual state guidelines for full details. However, employers should still give furloughed employees as much notice as possible. [8] Notice need not be provided to strikers or to workers who are part of the bargaining unit(s) which are involved in the labor negotiations that led to a lockout when the strike or lockout is equivalent to a plant closing or mass layoff. [3] https://www.illinoisworknet.com/LayoffRecovery/Pages/WARNLayoff.aspx, retrieved March 19, 2020. If the extension is 60 days or more, then this additional notice should be treated as a new notice. Where feasible, follow up with terminated employees on the return of company property and their obligations to maintain the confidentiality of confidential, proprietary and trade secret information. Also, please note that our attorneys do not seek to practice law in any jurisdiction in which they are not properly authorized to do so. Typically, these payments will be limited to expenses that an employee incurs directly as a result of the COVID-19 pandemic and exclude any expense that is reimbursable by insurance or amounts that substitute for lost wages. What are the obligations of an employer in the case of a mass layoff or plant closing? William Pederson is a Director in EisnerAmper's Financial Advisory Services Group with over 30 years in the areas of bankruptcy, commercial litigation, business valuation, accounting and auditing, and forensic accounting services. Most states with “mini-WARN” laws have not yet spoken on any modifications to advance notice requirements due to the impact of COVID-19. In conclusion, as an employer, it is imperative that you understand these implications. v. NASSCO Holdings Inc. , 17 Cal. [2] https://www.labor.ny.gov/workforcenypartners/warn/warnportal.shtm, retrieved March 19, 2020. WARN Act notices to go out to AA employees this week In a brief report published today, Reuters says notices warning of potential furloughs will be sent to employees “later this week.” In conjunction, American Airlines is actively encouraging employees to consider early retirement packages already on the table. Maine. These orders have forced many employers to lay off or furlough large portions of their workforces or completely shut down their businesses on extremely short notice. Generally speaking, individual states have adopted mini WARN-Act regulations that are more favorable to the affected employees than federal regulations. N.Y. Non-striking employees who experience an employment loss as a direct or indirect result of a strike and workers who are not part of the bargaining unit(s) which are involved in the labor negotiations that led to a lockout are still entitled to notice. ©2020 EisnerAmper LLP. The federal Worker Adjustment and Retraining Notification (WARN) Act requires employers with 100 or more employees to provide at least 60 calendar days’ advance written notice of a plant closing and mass layoff affecting 50 or more employees at a single site of employment. Any notice should be precise enough to include the following (and meet the regular notice requirements under WARN): Be Mindful of Regular Termination Protocols. If you are not already a client of Morrison & Foerster, do not include any confidential information in this message. is a federal statute that requires employers with more than 100 employees [1] to give a 60-day notice of any plant closing or mass layoff. In the case of a federal “qualified disaster,” employers may make nontaxable “qualified disaster relief payments” to help employees with certain reasonable and necessary expenses. For example, furloughs expected to last less than six months do not trigger the WARN Act. There are at least twenty states and at least one municipality that have “mini-WARN” or similar laws requiring advance notice of certain layoffs, plant closings or related actions. Generally, the WARN Act requires covered employers give affected employees 60 days notice of a layoff. Unsolicited e-mails and information sent to Morrison & Foerster will not be considered confidential, may be disclosed to others pursuant to our Privacy Policy, may not receive a response, and do not create an attorney-client relationship with Morrison & Foerster. Note that WARN Act provides that a “routine periodic” “rolling” notice given without regard to whether a layoff is truly impending does not comply with the Act. The WARN Act applies to private for-profit, private non-profit, or quasi-public entity (separately organized from regular government) employers who have: 1. Yes, employers generally may waive or reduce employee premiums on behalf of furloughed employees who continue coverage under the employer’s group health plan subject to the Internal Revenue Code’s cafeteria plan rules, which prohibit certain mid-year changes to elections under a cafeteria plan but include exceptions for significant cost changes. Whether an employer's furlough decision triggers the WARN Act depends on the timing of the furlough. Whether an employer's furlough decision triggers the WARN Act depends on the timing of the furlough. Does not include employees who have worked less than 6 months in the last 12 months and not counting employees who work an average of less than 20 hours a week. • Check federal or state WARN laws –furloughs lasting less than 6 months generally won’t trigger WARN obligations –check state law - particularly an issue in California • Use of vacation and sick time –Families First Coronavirus Response Act includes paid sick time and leave for … Employers should take extra caution when implementing an employee furlough policy to avoid activating the WARN Act. The Worker Adjustment and Retraining Notification Act (“WARN”) (29 U.S.C. [1] This definition has additional qualifiers, (a) 100 or more full-time employees or (b) 100 or more employees, including part-time employees who, in the aggregate, work at least 4,000 hours per week (fewer total employees, such as only 50 employees in New York, may cause the application of certain mini-WARN statutes). Given that it is now foreseeable that the layoff or furlough extension is necessary that would result in an employment loss exceeding six months, an employer’s failure to provide WARN notice to its affected employees (and other required recipients) could expose the employer to liability under the WARN Act. The WARN Act is not triggered for employers who furlough employees for less than six months. Can employers elect to subsidize the employee premium throughout the furlough period? Must employers who were forced to close abruptly pay employees for time they were scheduled to work or through the end of the pay period? 100 or more employees, including part-time employees, who work at least a combine… The last week brought a wave of unprecedented government orders for non-essential businesses to close and people to stay at home. Should you have any questions, reach out to your professional advisor and counsel in navigating these regulations, especially during these turbulent times. If an insurer were to investigate and determine that claims were made by an ineligible employee, the claims could be denied, the policy revoked and/or the insurer could pursue fraud claims. Please keep checking our blog, the Employment Law Commentary for employment-related developments and our Coronavirus (COVID-19) Resource Center for continued advice on the numerous issues that we are following. An employer does not need to give notice when permanently replacing a person who is an "economic striker" as defined under the National Labor Relations Act. If you and your business require further guidance on structuring or reviewing reductions in force, including layoffs and reduction in hours in these uncertain times, please reach out to one of the key contacts listed. So far, the DOL regulations describe the “natural disaster” exception as applying to a flood, earthquake, drought, storm, tidal wave, “or similar effects of nature.” Again, arguments can be made that the COVID-19 pandemic is a natural disaster, but there is no definitive authority. Do mass layoffs or plant closings due to the COVID-19 pandemic fall within any exceptions under the WARN Act or state “mini-WARN” laws? The WARN Act applies to private for-profit, private non-profit, or quasi-public entity (separately organized from regular government) employers who have: A “full-time employee” is an employee who works 20 or more hours per week and worked for at least six of the twelve months preceding the date on which the notice is required. In California, any mass layoff – which includes a furlough of any duration – affecting 50 or more employees at a covered establishment in a 30-day period triggers a 60-day notice requirement. (Note that this provision can bring furloughs within the definition of “employment loss,” even though the employees’ employment may not be terminated.). Prior to approving any hardship withdrawal requests, the terms of any underlying plan should be carefully reviewed to determine whether the plan allows for relief in this particular situation. Can employers create a hardship fund for employees? By William Pederson, Andrew Still and Allen Wilen. In general, employers are covered by WARN if they have 100 or more employees, not counting employees who have worked less than 6 months in the last 12 months and not counting employees who work an average of less than 20 hours a week. The Worker Adjustment and Retraining Notification (WARN) Act obligates covered employers to provide advance notice of an “employment loss” to “affected employees.”. EisnerAmper discusses a summary of CARES Act and how self-employed individuals, independent contractors or sole proprietors must submit necessary documentation. In this case, employers may continue to require furloughed employees to pay the employee premium by billing the employees directly or recouping the premiums once the furlough period ends. There is no standard legal definition of these terms. Covered employers are required to provide written notice to affected employees, the union representative in the case of a unionized workforce, the state dislocated worker unit, and the local chief elected official, at least 60 days in advance of mass layoffs and plant closings. State laws differ on timing, as well as whether unused accrued vacation or paid time off (PTO) must be cashed out upon termination. The impact of the novel coronavirus (COVID-19) has already seen sweeping changes in our business communities, and will inevitably continue to impact businesses. Theoretically, that means that if someone was on furlough through July 19, 2020, the new statute could apply to that leave and retroactively impose NJ WARN liability under the amended statute. If the insurer or administrator cannot accommodate such an amendment, employers should avoid the temptation to do a “favor” for employees by allowing them to remain on the group plan after losing eligibility under the plan. Exempt (salaried) employees generally must be paid on a salary basis to maintain their exempt status. Since furloughs do not result in an employment termination, this pro rata exception does not apply to temporarily furloughed employees. Andrew Still is a Manager in the Financial Advisory Services Group where he specializes in complex litigation services, forensic accounting investigations, operational analysis and data analytics for cases involving bankruptcy. However, many furloughs may trigger a notice requirement under CalWARN because short term layoffs have been interpreted to count as a layoff for the purposes of determining if there is a “mass layoff” under CalWARN. is a federal statute that requires employers with more than 100 employees[1] to give a 60-day notice of any plant closing or mass layoff. If an employer decides to proceed under one of these exceptions, the employer is still required to provide as much notice as is practicable. Under this ruling, therefore, California employers are exposed to WARN Act liability for layoffs involving 50 or more employees regardless of the duration. Notice should be treated as a New notice employees must issue a WARN notice 90 days before closing plant... To evade its obligations under the federal government has regulations that govern situations involving mass layoffs and plant shutdowns covered! As we all know, the situation is warn act furlough rapidly, seemingly the. 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