Just a few weeks ago, employers nationwide were struggling to fill positions during a time of record-low unemployment. But seemingly in the blink of an eye, the economic news has turned to temporary shutdowns, mass layoffs, and talk of a recession that could put some employers out of business permanently.
As the novel coronavirus and the disease it causes, COVID-19, have spread with lightning speed, employers are now grappling with questions about what they need to consider as they shed employees at least for the short term. A key consideration: federal and state WARN acts.
Federal WARN Act
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. The law includes certain exceptions, including when layoffs are a result of unforeseeable circumstances.
Michele L. (Warnock) Brott, an attorney with the Davis Brown Law Firm in Des Moines, Iowa, says legal professionals believe COVID-19 qualifies as an unforeseen business circumstance and therefore will relieve the obligations for a WARN Act notice and waiting period. But, she adds, there is no case law on the subject given the novelty of the issue.
Gary Fealk, an attorney with Bodman PLC in Troy, Michigan, says the WARN Act’s obligations are not relaxed, “but arguably the unforeseeable business circumstances and/or natural disaster exceptions may apply.” He also reminds employers that qualifying WARN At events still require notice as soon as practicable.
Lisa Koblin, an attorney with Saul Ewing Arnstein &Lehr LLP in Philadelphia, Pennsylvania, says employers have a lot of planning to do regardless of how the pandemic affects WARN Act provisions. She says any employer that becomes aware it will need to lay off a significant number of employees for longer than six months needs to be thinking about WARN Act obligations.
Two factors to consider: How long will the layoff be necessary, and what communications need to be made to employees?
Koblin advises employers to let employees know at the outset, if possible, if a layoff is permanent or temporary. Many employers, particularly restaurants and other hospitality businesses, as well as retail outlets, remain hopeful they will be able to call people back—at least in phases—once the stay-at-home orders and other restrictions put in place because of the virus have been lifted.
But since the situation is fluid, employers may send an initial notice of a temporary layoff and then later need to send a second notice if the layoff extends more than 6 months, Koblin says. With so much unknown and rapidly changing, it’s a challenge, but employers need to balance their short- and long-term planning as much as possible to avoid penalties for failing to comply.
State WARN laws
A number of states have their own “mini-WARN” acts that have their own requirements for notifying employees of mass layoffs, and at least some states have suspended those stipulations in light of the pandemic.
For example, California Governor Gavin Newsom signed an executive order on March 17 putting in place temporary modifications for helping employers during the crisis.
The temporary relaxation of the requirements in California’s law are particularly important since it doesn’t contain the exceptions for unforeseeable circumstances included in the federal WARN Act and in many other state laws.
Even if an employer isn’t covered by a WARN act, employers have planning to do and decisions to make. For example, Koblin says employers need to think about whether to furlough or lay off employees.
When employees are furloughed, they are still employed. They may be working limited hours or not working at all for a limited time, but they are still on the employer’s payroll. Often furloughed employees are still covered under benefit plans, and they can use any paid time off they may have.
But with a layoff—either permanent or temporary—employees are officially separated from the employer. They have no access to benefits. They’re issued their COBRA continuation of benefits notice and may file for unemployment.
In some circumstances, even furloughed employees can apply for unemployment. Koblin says some states are starting to allow furloughed employees to collect partial unemployment benefits because of the impact of the coronavirus.
Also, some states are waiving the waiting period for laid-off employees to start collecting unemployment benefits. Plus, states are starting to temporarily relax requirements under their unemployment compensation laws so that people out of work because of the virus don’t have to document that they are looking for work.
Tammy Binford writes and edits news alerts and newsletter articles on labor and employment law topics for BLR web and print publications.