Does the WARN Act Apply to Michigan Employers Affected by the COVID-19 Emergency?
Because of the severe coronavirus restrictions implemented by Governor Whitmer’s “Stay Home, Stay Safe” executive order, many Michigan businesses are being forced to significantly reduce their workforce or close altogether for at least some period of time. And they wonder if they must give employees advanced notice to comply with the Worker Adjustment and Retraining Notification (WARN) Act?
Generally, the WARN Act requires covered employers — those with 100 or more full-time employees — to provide 60 days’ advanced notice before terminating or laying off employees in connection with a “plant closing” or “mass layoff.” These obligations can be triggered by a layoff that includes as few as 50 employees. Importantly, if an employer does not believe that the reduction will exceed six months, the employer does not have to provide notice under the WARN Act. If, however, this six-month period is extended, then employees would need to be given notice as soon as practicable.
Are There Any Exceptions to the WARN Act?
Yes, there are three limited exceptions to the 60 days’ notice requirement, which may apply to the circumstances brought on by the COVID-19. But due to the fact-specific analysis that each requires, these exceptions are often litigated.
Faltering Company Exemption. This exemption typically covers situations where one company has sought new capital or financing to stay open and where giving notice would ruin the opportunity to obtain the new capital or financing, and applies only to plant closings. This exemption is most likely the least applicable exemption to the impact caused by COVID-19 for numerous reasons, especially because it does not apply to mass layoffs.
Natural Disaster Exemption. This exemption applies where a closing or layoff directly results from a natural disaster, such as a flood, earthquake, tornado, or hurricane. It is unclear if this exemption will apply to the COVID-19 situation. The definition of natural disaster includes effects of nature but does not include pandemic. It is possible, especially with guidance from the U.S. Department of Labor, that this exemption does or will apply to these situations at some point. Importantly, unlike hurricanes, tornadoes, storms, etc., COVID-19 is not causing physical damage to a facility.
Unforeseeable Business Circumstances Exemption. This exception applies to both closings and layoffs caused by business circumstances that were not reasonably foreseeable when notice would otherwise have been required. This indicates a sudden and dramatic unknown set of events that drastically impacts business. Of the three exemptions, this exemption is most likely to apply to the COVID-19 situation. The definition does not address pandemics specifically, but there is a strong argument in light of the unprecedented COVID-19 crisis, making certain prior interpretive authority potentially less applicable and creating issues of first impression.
Be aware, an employer relying on one of these exemptions must still provide “as much notice as is practicable, and at that time shall give a brief statement of the basis for reducing the notification period.” Therefore, once an employer is in a position to evaluate the immediate impact of the coronavirus outbreak upon its workforce, it must then provide specific notice to all “affected employees” as soon as practicable. This notice must also contain a statement explaining the failure to provide the 60 days’ notice, which would obviously be tied to the unforeseeable nature of COVID-19.
If you are an employer and believe that one the three exemptions applies to your business, proceed with caution and contact us to help you navigate the legal complexities. You should evaluate your current situation against the WARN Act to determine if a qualifying event has occurred or is likely to occur in your organization. If so, provide as much notice to affected employees as possible under the circumstances.
We can help your organization arrive at a safe but practical solution to address reductions-in-force impacted by the outbreak, either directly or indirectly. As with most employment and human resources issues, clear and consistent communications with employees explaining workplace issues as they develop is critical to avoid potential litigation.
We are working remotely during the crisis and can conference with you by telephone or video.