Client Alerts
August 11, 2020

When Furloughs Become Permanent Layoffs: An Employer’s Ongoing Obligations Under the WARN Act in the Time of COVID-19

Stites & Harbison Client Alert, August 11, 2020

At the beginning of the COVID-19 pandemic, many employers implemented what they hoped would be temporary furloughs. However, as the pandemic has progressed, employers may now realize that the furloughs will last longer than expected or become permanent layoffs. Such employers must be vigilant about their ongoing duty to reassess their obligations to provide notice to employees under the WARN Act, or risk being held liable for damages.

The WARN Act, 29 U.S.C. §§ 2101-2109, requires employers with 100 or more full-time employees to provide a 60-day advanced written notice to employees prior to an “employment loss” due to a “plant closing” or “mass layoff.” With respect to “mass layoffs,” notice is required if, during any 30-day period, (1) 500 or more full-time employees will suffer an “employment loss” at a single location, or (2) 50-499 full-time employees suffer an “employment loss” at a single location and those employees constitute at least 33% of the active workforce. Further, multiple “employment losses” that occur within any 90-day period are aggregated for purposes of defining a “mass layoff,” unless the employer can show that the employment losses were the result of “separate and distinct” causes.

Importantly, a furlough announced at its outset to last less than six months does not constitute an “employment loss” under the WARN Act, and so a 60-day notice is not required for such furloughs. In addition, with respect to permanent layoffs, a 60-day notice is not required if the employment loss was caused by “unforeseeable business circumstances” that were not “reasonably foreseeable” 60 days prior to the layoffs; instead, in such circumstances, notice is required only as far in advance as is practical, and the notice must explain why the full 60-day notice period is not being given.

At the beginning of the pandemic, many employers were not required to provide a 60-day written notice under the WARN Act, as the need for layoffs was the result of unforeseeable business circumstances (the sudden shutdown of the economy per state and local orders) and/or the employer communicated that implemented furloughs were expected to end within six months once the pandemic subsided.

But now, as the pandemic has progressed, it is becoming clearer that the pandemic will not end any time soon and that the economic impacts of the pandemic will last longer than six months, at least for many businesses. Accordingly, employers considering extending furloughs or making furloughs permanent must be cautious to regularly reassess their WARN Act obligations. If the employer’s original notice communicated that the furloughs were expected to last less than six months, the employer has an obligation under the WARN Act to provide notice as soon as it becomes reasonably foreseeable that the furloughs will last longer than six months or become permanent.

For employers who implemented temporary furloughs in March or April, the end of the six-month period is quickly approaching in September and October, respectively. Further, employers should not simply wait until 60 days prior to the end of the six-month period to determine whether WARN notices should be delivered to furloughed employees. If discovery reveals that the employer unreasonably delayed in providing notice after it knew that the furloughs would last longer than six months or become permanent, the employer could be liable for damages under the WARN Act, even though the furloughed employees were not receiving pay at the time the notices became due.

In addition, employers should be aware than some states have “mini-WARN Acts” that impose additional requirements. Experienced employment attorneys at Stites & Harbison, PLLC can help employers ensure that they are complying with their obligations under the WARN Act and applicable state law.

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