For Employers in a Position to Do More for Employees. Whether a furloughed employee is entitled to notice under the WARN Act depends on the timing of the furlough among other criteria. Are employers required to comply with the Worker Adjustment and Retraining Notification (“WARN”) Act for temporary furloughs or closures related to COVID-19? 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? When determining whether such an amendment is appropriate, an employer must also consider Affordable Care Act compliance issues (for example, the ACA’s definition of “full-time employee”). Layoffs and WARN Act Implications. 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. 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. Can employers keep employees on their group health plan during a furlough? 100 or more full-time employees, or 2. If you are not already a client of Morrison & Foerster, do not include any confidential information in this message. 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. The WARN Act requires covered employers to provide at least 60 days’ advance notice of a mass layoff or plant closing. Nonetheless, “best practices would suggest that notice be given if an employer is uncertain whether a furlough will exceed six months,” she said. The Worker Adjustment and Retraining Notification (WARN) Act obligates covered employers to provide advance notice of an “employment loss” to “affected employees.”. 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. Keep up with the latest legal and industry insights, news, and events from MoFo. However, employers should still give furloughed employees as much notice as possible. As we all know, the situation is developing rapidly, seemingly by the minute. For example, furloughs expected to last less than six months do not trigger the WARN Act. Maine. "So a furlough may trigger the WARN Act's advance-notice requirements and those imposed by state WARN Acts if the furlough is conducted for a … What should employers do if they have to extend a layoff that was originally expected to last fewer than six months? The terms layoff, furlough, reductions in force, reorganization, and terminations are often used interchangeably although they are not necessarily the same thing. The WARN Act obliges employers to notify employees if a plant shutdown or mass layoff will result in employment loss. Furloughs What’s a Furlough? A furlough can cause an employee to become ineligible for benefits if the employee fails to work the required number of hours. 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. 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This alert addresses common federal WARN Act questions prompted by the COVID-19 pandemic. MoFo’s Coronavirus (COVID-19) Resource Center. 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. You have not solved the recaptcha challenge yet or session expired, try again. 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). The notice should include a brief statement describing the basis for a shortened notice period, including a description of the circumstances making the exception applicable. What payments does an employer owe to employees if a layoff (mass or otherwise) or a plant closing occurs? It is not acceptable to provide a rolling or routine periodic notice, whether or not a mass layoff or plant closing is coming. Knowing the differences will help you adjust and be prepared during these economic uncertainties. [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). 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. The “unforeseeable business circumstances” exception arguably applies but neither the DOL nor any courts have definitively said so. 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. If the extension is 60 days or more, then this additional notice should be treated as a new notice. A mass layoff is defined as one involving more than 50 employees at a location. 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. 250 workers from a single employment site. These federal guidelines often differ from state guidelines, and differentiating between the two could have implications to your business operations. If employers terminate the employment of employees through a plant closing, temporary layoff, or otherwise during this public health emergency, employers should remember their usual protocols for terminating employees. The WARN Act provides employees with a 60 calendar-day advance notice of layoffs, in companies that have 100 or more employees. If the furlough is expected to last longer than six months, then WARN will likely apply. EisnerAmper has deployed a Coronavirus - COVID-19 tax insights resource page. In April 2020, Employee Z, who is covered under the Plan, is furloughed, works fewer than 120 hours, and therefore loses coverage under the Plan. Law §§ 860 to 861-I; 12 NYCRR § 921-1.0 to 921-9.1. What are the exceptions to the 60-day advance notice requirement? The furlough extends until the end of June. The WARN Act requires advance notice when a mass layoff or plant closing results in employment loss for a requisite number of people. 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. The federal WARN Act only requires notice when a furlough is more than six months. This will give you the must updated information relating to tax changes. 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. The employer must pay the employee’s final pay within the deadlines set by state law. 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 … 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. Failure to give the 60-day notice entitles the employees to damages for wages and benefits they would have earned during the notice period.[2]. It depends on the terms of the underlying plan documents. 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. A few states have addressed covered employers’ obligations to notify employees of layoff or closure (temporary or not) during this crisis. A mass layoff is defined as one involving more than 50 employees at a location. A California appellate court has ruled that California’s WARN Act, which requires 60 days advance notice of “mass layoffs,” applies to temporary layoffs and furloughs. However, employers may elect to subsidize all or a portion of COBRA premiums on behalf of any terminated employees. N.Y. While employers with self-insured plans likely have flexibility to amend any hours-worked requirements, insured plans will need approval from their third-party insurer. 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. 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. The federal Worker Adjustment and Retraining Notification Act (WARN Act) was enacted in 1988. The typical notice period, as defined in the Act, is 60 calendar days. What is the WARN Act? Under this ruling, therefore, California employers are exposed to WARN Act liability for layoffs involving 50 or more employees regardless of the duration. Morrison & Foerster Associate Erin Hamilton Jansen assisted in the preparation of this client alert. 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 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. [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. App. The 33% rule does not apply where 500 or more employees will suffer an employment loss. State laws differ on timing, as well as whether unused accrued vacation or paid time off (PTO) must be cashed out upon termination. Yes, if the group health plan is subject to COBRA (federal or state “mini-COBRA” such as Cal-COBRA), all covered employees (and their covered dependents) who experience both a reduction of hours and a loss of group health plan coverage due to the furlough are entitled to elect COBRA. Before we dive into the substance of this discussion, we provide our definitions so we and our readers are on the same page. For example, California Governor Gavin Newsom suspended advance notice requirements under the state’s “mini-WARN” law in his March 17, 2020 Executive Order N-31-20. 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. The Worker Adjustment and Retraining Notification Act (“WARN”) (29 U.S.C. Specifically, if employers furlough employees with the expectation of returning the employees to work in under six months, there are circumstances under which WARN Act notices may be avoided. 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. 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. Exempt (salaried) employees generally must be paid on a salary basis to maintain their exempt status. Whether an employer's furlough decision triggers the WARN Act depends on the timing of the furlough. Cal-WARN applies to all facilities that employ 75 or more persons. For example, eligibility under group health plans often depends on the number of weekly or monthly hours worked by an employee. 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. 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. State mini-WARN laws vary in their definitions of an employment loss such that notice for short term layoffs may trigger notice obligations in the state despite the six-month minimum under federal law. WARN Act Recommendations. Permanent or Long-term Reductions – If an employer is permanently reducing its workforce or implementing layoffs or furloughs that are anticipated to last longer than 6 months, it must comply with the WARN Act’s notice requirements if there are a sufficient number of employment losses to constitute a “plant closing” or “mass layoff.” A few other states raise additional issues. In some cases, however, an employer may amend the terms of their group health plan to permit coverage to continue during a furlough. The Worker Adjustment and Retraining Notification (WARN) Act obligates covered employers to provide advance notice of an “employment loss” to “affected employees.” The Basics Which employers are covered by the WARN Act? § 2101 et seq.) Not all employment loss requires 60 days' notice, Singer noted. 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. There is no standard legal definition of these terms. Like the federal WARN Act, Illinois’ statute exempts closings or layoffs that result in a loss of employment for fewer than six months. See below for a comparison of regulations across states: Any business enterprise with 100 or more employees, excluding part time; or 100 or more employees, including part time, who work a combined total of at least 4,000 regular hours per week, Private sector employers that employ more than 50 employees. The employer also must give notice as soon as it realizes the layoffs will extend beyond six months. For example, furloughs expected to last less than six months do not trigger the WARN Act. Absent a complete waiver of employee premiums, there may be no payroll from which to deduct the employee premiums. Employee Z starts work again in July 2020 and works sufficient hours to have his coverage under the Plan reinstated. Not all employment loss requires 60 days’ notice, Singer noted. Do states have their own advance notice requirements? 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. 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. 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. 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? Federal WARN Act. 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 WARN Act is not triggered for employers who furlough employees for less than six months. Note that the most recent draft legislation dealing with the COVID-19 pandemic does not provide for government-funded COBRA subsidies. Private sector employers in New York State that employ more than 50 employees must issue a WARN Notice 90 days before closing a plant. 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. 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. Short furloughs will not trigger notice under the federal WARN Act. If you have any questions, we'd like to hear from you. 100 or more employees, including part-time employees, who work at least a combined 4,000 hours per week. Can employers create a hardship fund for employees? Since furloughs do not result in an employment termination, this pro rata exception does not apply to temporarily furloughed employees. 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. 6. An employment termination, other than a discharge for cause, voluntary departure, or retirement; A reduction of more than 50% in hours of work of individual employees during each month of any six-month period. As an employer you may already be aware that the federal government has regulations that govern situations involving mass layoffs and plant shutdowns. If an employer decides to proceed under one of these exceptions, the employer is still required to provide as much notice as is practicable. EisnerAmper discusses a summary of CARES Act and how self-employed individuals, independent contractors or sole proprietors must submit necessary documentation. 5th 1105 (2017), holding that furloughs exceeding a de minimis amount of time would trigger an employer’s obligations to comply with Cal-WARN. New York, on the other hand, continues to require that businesses covered by the state’s “mini-WARN” law provide 90 days’ advance notice. 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. All rights reserved. Whether an employer's furlough decision triggers the WARN Act depends on the timing of the furlough. In conclusion, as an employer, it is imperative that you understand these implications. 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. *Effective July 19, 2020, New Jersey will require severance pay in mass layoff situations. 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. EisnerAmper provides some federal and state resources that are providing coronavirus-related assistance. 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. ©1996-2020 Morrison & Foerster LLP. 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. 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