Benefits and Compensation

Can’t We Use the ‘Faltering Company’ Exception for Layoffs?

Well, we’re faltering, you may think, so we don’t have to worry about WARN, but it’s not as simple as that.

Exceptions to the WARN Act Notice Requirements

The WARN Act’s notice requirements do not apply if the conditions of one of the following exceptions are met:

  • Temporary facility
  • Completion of a particular project when the employees involved were hired with the understanding that employment was limited to the duration of the facility or the project
  • Strike or lockout
  • Faltering company
  • Unforeseen business circumstances
  • Natural disaster exception

The latter three exceptions pose the most difficulties for employers. Here are some tips for when they actually apply:

Faltering Company Exception

The faltering company exception applies only to plant closings and not mass layoffs. The exception is narrowly construed. In order for it to apply, the employer must have been actively seeking capital or business at the time notice would have been required, that was realistically obtainable and, if obtained, would have allowed the employer to avoid or postpone the shutdown.

In addition, the employer must have reasonably and in good faith believed that giving the required notice would have prevented the employer from obtaining the financing or business. This means that the employer must be able to objectively show that it believed that a potential customer or source of financing would have been unwilling to provide business or financing to the new business if the public knew that there might be a closing.

For example, a company might show that the finance or business source would not choose to do business with a troubled company or with a company whose workforce would be looking for other jobs.

Note: This exception will be viewed in a companywide context, so a company with access to financing or with cash reserves may not use it based solely on the financial condition of the plant that is being closed.

Unforeseen Business Circumstances Exception

This exception applies to plant closings and mass layoffs caused by business circumstances that were not reasonably foreseeable at the time that the 60-day notice would have been required.

An important indicator that a circumstance is not reasonably foreseeable is that it is caused by some sudden, dramatic, and unexpected action or condition outside the employer’s control. Examples include a principal client’s sudden termination of a major contract, a strike at a major supplier, or an unexpected and dramatic economic downturn.


Pay Cuts as a Viable Alternative to Layoffs: Determining What Works Best for Your Organization will give you what you need to make a good decision. Practical, field-tested approaches. Guaranteed. Get info here.


The test for determining when circumstances are reasonably foreseeable focuses on an employer’s business judgment. The employer must exercise the same commercially reasonable business judgment that a similarly situated employer would in predicting the demands of its particular market.

The employer, however, does not have to accurately predict general economic conditions. The determination of whether the exception applies is made on a case-by-case basis.

Natural Disaster Exception

This exemption applies to plant closings and mass layoffs due to any form of a natural disaster. Examples include floods, earthquakes, droughts, storms, tidal waves or tsunamis, and similar events.

The employer must be able to demonstrate that its plant closing or mass layoff was in fact due to the natural disaster. While a disaster may preclude full notice, as much notice as possible must be given. Plant closings or layoffs that are the indirect result of a natural disaster are not covered by this exception, but may fall under the unforeseen business circumstances exception.

WARN, layoffs, furloughs, pay cuts, they’re a bit of a quagmire. Fortunately, there’s a timely BLR webinar that will keep you out of the swamp: Pay Cuts as a Viable Alternative to Layoffs: Determining What Works Best for Your Organization.

By most accounts, the economy is on an upswing, although the recovery process is slow and employees aren’t that optimistic. About 50 percent of U.S. workers believe benefits will be cut in 2012, 24 percent think a pay cut may be coming soon, and 41 percent believe that layoffs are on the horizon.

Despite these grim projections, two-thirds of employees see a future at their organizations and would be willing to lose their bonuses or work for less just to keep their jobs.

Assuming that’s true, there’s a good chance that your top performers could stick around even if you need to cut their compensation in the short term—which could be a viable option for organizations facing layoffs.

But are pay cuts right for you? By participating in this interactive webinar, you’ll learn an effective strategy for determining if pay cuts will work for your organization, the risks and rewards of this approach to boosting your bottom line, and the best practices for communicating your changes without disrupting your workforce.

You’ll also learn:

  • Data to collect before determining if a pay cut is the best option for your organization
  • Tips for determining how big a cut you should make
  • Whether your cut should be limited to executive-level employees, made across the board, or on a tiered basis
  • The pros and cons of voluntary pay cuts
  • The types of incentives you should consider offering when a pay cut is necessary
  • Whether a salary freeze is a viable alternative to pay cuts—or just a temporary fix
  • When and how to communicate pay cuts to your workforce
  • How to tell if layoffs are a better solution for your organization than pay cuts
  • Why employee buy-in is absolutely essential if you’re planning on cutting pay and how to go about getting it

In just 90 minutes, you’ll learn the ins and outs of pay cuts and whether or not they’re a viable strategy for your organization. Register now for this timely event for both supervisors and HR professionals.


Considering a pay cut? Layoff?  Don’t act until after you attend the March 14 BLR/HR Hero webinar, Pay Cuts as a Viable Alternative to Layoffs: Determining What Works Best for Your Organization. Click here to find out more.


Approved for Recertification Credit

This program has been approved for 1.5 recertification credit hours toward PHR and SPHR recertification through the Human Resource Certification Institute (HRCI).

Register now for this event risk-free.

Pay Cuts as a Viable Alternative to Layoffs: Determining What Works Best for Your Organization
Wednesday, March 14, 2012
10:30 a.m. to 12:00 p.m. (PST)
11:30 a.m. to 1:00 p.m. (MST)
12:30 to 2:00 p.m. (CST)
1:30 to 3:00 p.m. (EST)

Join us on March 14—you’ll get the practical ins and outs of Pay Cuts as a Viable Alternative to Layoffs: Determining What Works Best for Your Organization AND you’ll get all of your particular questions answered by our experts.

Find out more

Train Your Entire Staff

As with all BLR/HRhero webinars:

  • One fee trains all the staff you can fit around a conference phone
  • You can get your (and their) specific phoned-in or emailed questions answered in Q&A sessions that follow each segment of the presentation
  • Your satisfaction is assured or you get a full refund

What if you can’t attend on that date? Pre-order the conference CD. For more information on the conference and the experts presenting it, to register, or to pre-order the CD, click here. We’ll be happy to make the arrangements. 

Why You Can Sign Up to Attend This Event with Confidence

As with all BLR/HRhero products, you’re completely protected. If, for any reason, you are unsatisfied with this webinar, simply let us know, and we will return your entire registration fee.

Webinar: Pay Cuts as a Viable Alternative to Layoffs:
Determining What Works Best for Your Organization
Sign up, find out more, or order the CD.