HOME Preparing for Reductions-In-Force by Understanding the WARN Act by William D. Deveney and Elliott M. Friedman The current state of the economy has affected employers nationwide by causing a widespread recent increase in mass reductions-in-force. In February 2009 alone, 2,769 mass reductions-in-force occurred, which affected 295,000 workers (seasonally adjusted), according to statistics released by the Labor Department. As employers prepare for a reduction-in-force, they must consider the ramifications to minimize their potential for legal liability under the WARN Act. In general, the WARN Act requires that covered employers give 60 days advance notice of a “plant closing” or “mass layoff” to affected employees, bargaining representatives, and local government officials. The WARN Act only covers employers with over 100 employees, generally measured on the date notice is required. “Affected employees” are those who may reasonably be expected to experience an employment loss as the result of a plant closing or mass layoff, so employers must be mindful of bumping rights and other factors that may lead to eventual terminations when deciding to whom notice must be provided. Failure to provide proper notice to affected employees will result in liability for the employer. The WARN Act Regulations require that notice be given to employees “who may reasonably be expected to experience an employment loss.” The Act also mandates that conditional notices be given to employees (e.g., the plant will close at the end of this year if our government contract is not renewed by December 31) when the conditional “event is definite and the consequences of its occurrence or nonoccurrence will necessarily, in the normal course of business, lead to a covered plant closing or mass layoff” in 60 days or less. If an employer fails to provide the notice required by the WARN Act, the employer is liable to each affected employee after the reduction for both wages and benefits under all ERISA-covered employee benefit plans. When the requirements of the WARN Act are triggered in connection with a reduction-in-force, employers must properly select the affected employees. First, the employer must establish objective, business-related reasons for reducing the workforce. For any reason provided, it should be grounded in readily determinable facts and well documented in the event motives are called into question. Typical reasons include economic necessity, loss or downturn of business, reorganization, consolidation of functions or installation of technological advances that reduce manual labor requirements. Once the employer determines the job category involved in the reduction-in-force, it must then determine an objective means of selecting specific individuals for layoff (i.e., seniority, job performance, etc.). An objective means must be used so that an employer can avoid discrimination claims under equal employment opportunity laws. To properly prepare for a reduction-in-force, employers must conduct an assessment of the WARN Act and related state laws. [PRINTER FRIENDLY VERSION]