A layoff is a termination of employment at the will of the employer. It may be temporary or permanent and can occur for several reasons including downsizing, changes in market conditions, or new technology.

The federal Worker Adjustment and Retraining Notification Act (WARN Act) imposes restrictions on the way layoffs are handled (29 U.S.C. Sec. 2101 et seq.; 29 U.S.C. Sec. 639.1 et seq.).

WARN is designed to give employees advance notice of layoff to allow them to find other employment and/or seek retraining in a new occupation. This notice also gives state dislocated-worker units adequate preparation time to better assist affected workers.

Employers must comply with the WARN Act if they have 100 or more full-time employees or 100 or more employees, including part-time employees, who regularly work a total of 4,000 hours per week, exclusive of overtime.

Part-time employees. The Act defines “part-time employees” as those who work an average of fewer than 20 hours per week or who have been employed for fewer than 6 of the 12 months preceding the date on which notice is required (29 U.S.C. Sec. 2101).

Temporary employees. Temporary employees are individuals hired with the understanding that their jobs will end when a specific project ends.

Workers on temporary layoff who have a reasonable expectation of recall are counted as employees.

An employee has a reasonable expectation of recall when he or she understands, through notification or industry practice, that his or her employment has been temporarily interrupted and that he or she will be recalled to the same or a similar job (20 CFR Sec. 639.3).

Public employers. Regular federal, state, and local government entities that provide public services are not covered by the Act (20 CFR Sec. 639.3).

Employees covered. Employees entitled to notice under the WARN Act include hourly and salaried workers, as well as managerial and supervisory employees.

Multiple employment sites. An employer may have several sites of employment under common ownership or control, yet there is only one "employer" for purposes of the Act.

Independent contractors and subsidiaries. Independent contractors and subsidiaries that are wholly or partially owned by a parent company may be considered separate employers or part of the parent or contracting company depending upon their degree of independence.

Some of the factors to be considered in making this determination are (1) common ownership, (2) common directors and/or officers, (3) de facto exercise of control, (4) unity of personnel policies emanating from a common source, and (5) the dependency of operations (20 CFR Sec. 639.3).

WARN responsibility upon sale of the business. In the event of a sale of part or all of an employer's business, the seller is responsible for providing notice of any plant closing or mass layoff that takes place up to and including the effective date of the sale, and the buyer is responsible for providing notice of any plant closing or mass layoff that takes place after the effective date of the sale (29 U.S.C. Sec. 2101).

Employers should note that the requirements of the WARN Act may be interpreted strictly by the courts. Therefore, employers should work closely with an employment law attorney when planning and negotiating a business transaction that may involve layoffs.

Effect of state laws and collective bargaining agreements. The WARN Act does not replace state laws or collective bargaining agreements that may require additional notice.

Several states have enacted "mini-WARN" laws providing employees with greater protections than the federal WARN Act. Employers should check to see if their states of operation have any additional advance notice requirements.

The law requires covered employers to give affected employees 60 days' notice of a “mass layoff” or a “plant closing” that is expected to last 6 months or longer.

Employers must also notify local government officials and the appropriate state dislocated worker unit(s).

Additional notice is needed if the planned layoff date is extended.

An employer may not order a plant closing or mass layoff until the end of the 60-day notice period and after the employer has served written notice of such an order.

When all employees are not terminated on the same date, the date of the first individual termination within the statutory 30-day or 90-day period triggers the 60-day notice requirement.

A worker's last day of employment is considered the date of that worker's layoff.

The first and each subsequent group of affected employees is entitled to a full 60 days' notice.

The point in time at which the number of employees is to be measured for purposes of determining coverage under the Act is the date on which the first notice is required to be given (20 CFR Sec. 639.5).

Definitions. The WARN Act defines the preceding terms as follows:

Employment loss does not occur if the closing or layoff is the result of the relocation or consolidation of part or all of the employer's business and, before the closing or layoff:

(29 U.S.C. Sec. 2101).

Separate and distinct actions. Employment losses for two or more groups at a single site within a 90-day period, each of which involves fewer than the minimum number of employees to qualify as a plant closing or mass layoff but, in the aggregate, do exceed the minimum number of employees, will be considered a mass layoff or plant closing unless the employer can demonstrate that there were two separate and distinct actions and there was no attempt to evade the WARN Act requirements (29 U.S.C. Sec. 2102).

What is a single site of employment? According to federal regulations, a "single site of employment" is either a single location or separate facilities that are in geographic proximity, used for the same purpose, and that share staff and equipment (20 CFR Sec. 639.3).

Determination of these factors is fact specific. For example, in one case, an employer was found not to be subject to WARN because the employers’ multiple construction sites were not geographically near (to headquarters or each other), employees were not assigned to the headquarters, work was not assigned at headquarters, and employees did not report to headquarters.

Yet, had any of the factors been different, the sites would have been considered a single site of employment, and WARN would have applied. (Bader v. Northern Line Layers Inc., 503 F.3d 813 (9th Cir. 2007)).

Employers should carefully consider any obligations that may apply to their specific circumstances under a strict interpretation of the law.

Determining whether a departure was "voluntary." Federal courts have interpreted “voluntary departure” to include employees’ entering into severance agreements following layoff announcements; however, failure to report to work after announcement of layoff, without reasons other than the shutdown, may not be enough to constitute voluntary departure. (Ellis v. DHL Express, 633 F.3d 522 (7th Cir. 2011)); (Collins v. Gee West Seattle, 631 F.3d 1001 (9th Cir. 2011)).

Thus, employees who stop coming to work when a plant closing is imminent may still need to be counted for purposes of determining if the WARN Act applies.

Under these circumstances, employers should consult with an experienced employment law attorney in their jurisdiction for advice on their obligations under the WARN Act or similar state law.

Extension of layoff period. When a layoff that was initially announced to be a layoff of 6 months or less lasts more than 6 months, it is treated as an employment loss unless:

Employers must provide different types of information to employees depending upon whether or not they are unionized.

Employers must always notify the state.

Notice may be sent by any method designed to ensure receipt at least 60 days before separation, e.g., first-class mail, personal delivery, or insertion of a notice into pay envelopes (20 CFR Sec. 639.6 to 639.8).

Union employees. If employees are unionized, only the chief elected union representative must be given notice. The notice must contain:

Unionized employers should seek additional legal advice because the WARN Act and the National Labor Relations Act may have different notice and bargaining requirements.

The Supreme Court has ruled that unions may sue on behalf of their members for WARN Act violations (United Food and Commercial Workers Union Local 751 v. Brown Group, Inc., 517 U.S. 544 (1996)).

Nonunion employees. Employees who may reasonably be expected to experience an employment loss and who are not represented by a union must be notified individually in writing.

While part-time employees are not counted in determining if a plant closing or mass layoff had occurred, these workers must still receive notice if they will experience an employment loss.

The notice must include:

State notification. Employers must also notify the state dislocated worker unit and the chief elected official of the local government unit within which the closing or layoff will occur.

The notice must include:

The WARN Act's notice requirements do not apply if:

Additionally, there are three other important exceptions to the 60 days' notice requirement that are explained in the U.S. Department of Labor's regulations interpreting the WARN Act (20 CFR 639.9).

Employers claiming these exemptions are required to give as much notice as they can, along with a brief statement of why the notification period has been reduced. The employer has the burden of proving that the conditions for an exception have been met.

These exceptions are:

Faltering company exception. The faltering company exception, which is narrowly construed, applies only to plant closings and not mass layoffs.

In order for it to apply, the employer must have been actively seeking capital or business, at the time notice would have been required, that was realistically obtainable and, if obtained, would have allowed the employer to avoid or postpone the shutdown.

In addition, the employer must have reasonably and in good faith believed that giving the required notice would have prevented the employer from obtaining the financing or business.

This means that the employer must be able to objectively show that it believed that a potential customer or source of financing would have been unwilling to provide business or financing to the new business if the public knew that there might be a closing.

Practice tip: One way to satisfy the faltering company exception is by showing that the finance or business source would not choose to do business with a troubled company or with a company whose workforce would be looking for other jobs.

This exception will be viewed in a companywide context, so a company with access to financing or with cash reserves may not use it based solely on the financial condition of the plant that is being closed.

Unforeseen business circumstances exception. This exception applies to plant closings and mass layoffs caused by business circumstances that were not reasonably foreseeable at the time that the 60-day notice would have been required.

An important indicator that a circumstance is not reasonably foreseeable is that it is caused by some sudden, dramatic, and unexpected action or condition outside the employer's control.

Examples include a principal client's sudden termination of a major contract, a strike at a major supplier, or an unexpected and dramatic economic downturn.

The test for determining when circumstances are reasonably foreseeable focuses on an employer's business judgment.

The employer must exercise the same commercially reasonable business judgment that a similarly situated employer would in predicting the demands of its particular market. The employer, however, does not have to accurately predict general economic conditions.

Government actions. A government-ordered closing of an employment site that occurs without prior notice may also fall under the unforeseen business circumstances exception.

Natural disaster exception. This exemption applies to plant closings and mass layoffs due to any form of a natural disaster. Examples include floods, earthquakes, droughts, storms, tidal waves or tsunamis, and similar events.

The employer must be able to demonstrate that its plant closing or mass layoff was, in fact, due to the natural disaster.

While a disaster may preclude full notice, as much notice as possible must be given.

Plant closings or layoffs that are the indirect result of a natural disaster are not covered by this exception, but may fall under the unforeseen business circumstances exception.

Any employer that violates the Act's notice requirements may be liable to each affected employee who suffers an employment loss.

An aggrieved employee may claim back pay for each day of the violation period in an amount equal to his or her average regular rate for the previous 3 years or final regular rate. The employer may also be held liable for lost benefits and be subject to civil fines for each day it is in violation of the Act.

Damages paid to any aggrieved employee will be reduced by any wages paid by the employer to the employee during the violation period, any voluntary and unconditional payment by the employer to the employee that is not required by some legal obligation, and any payment by the employer to a third party or trustee on behalf of the employee during the violation period (29 U.S.C. Sec. 2104).

Computation of damages. The damages an employer may have to pay if it violates the WARN Act have been the subject of several court cases.

The majority of federal circuit courts of appeal have ruled that employers are liable for each "work" day within the violation period.

However, the 3rd Circuit has held that employers are liable for each "calendar" day during the violation period.

At least one court has held that back pay includes tips and holiday pay that employees would have earned had they been working (Local Joint Executive Board of Culinary/Bartender Trust Fund v. Las Vegas Sands, Inc., 244 F.3d 1152 (9th Cir. 2001)). In the same case, the court held that WARN Act damages may not be reduced by severance pay or accrued vacation pay that the employer was otherwise obligated to pay.

Waivers. Employers often ask their employees to sign releases waiving their rights under the WARN Act in return for additional consideration.

The Department of Labor (DOL) has stated that employees cannot be required to waive their right to the WARN Act notice. However, employees may agree to waive their rights to make claims against the employer.

In some cases, employers can avoid layoffs by instituting other cost-cutting measures so that the financial burden of an economic downturn is shared among employees.

Employees benefit despite the hardship of reduced hours and/or pay, because they are able to keep their jobs. Employers also benefit by maintaining a well-trained workforce ready to resume maximum production or service levels when the economy improves.

Additionally, when employers try to avoid layoffs, they often gain the goodwill and loyalty of their employees.

Examples of alternatives to layoffs include:

Work sharing. Work sharing allows employees to share the work that remains after some jobs are lost due to adverse economic conditions.

Under a work-sharing arrangement, employees may work a reduced week or work every other week. Their hourly pay remains the same but reflects the reduced hours.

In some states, the unemployment compensation laws allow employees to collect partial unemployment benefits during a work-sharing period.

Reduced pay. A reduction in pay works best if it is shared by all employees, including management.

It may be acceptable to employees if their unemployment benefits during a period of layoff would be less than the reduced pay.

Furloughs. Employers can require employees to take unpaid time off—either a few days or a full week or more.

In the absence of a state law to the contrary, employers may allow or require furloughed employees to use vacation or PTO time.

Sometimes, employers will temporarily shut down a facility, thereby saving not only wages but energy and other administrative costs as well.

Caution: Exempt workers. If improperly applied, layoff alternatives such as work sharing, reduced pay, furloughs, and shutdowns may jeopardize employees' exempt status.

Exempt employees are not subject to minimum wage and overtime laws. Under federal law, most exempt employees must be paid on a salary basis, which means they must be paid the same salary if they work any part of a workweek, regardless of the quantity or quality of their work.

Instituting a furlough or temporary shutdown without jeopardizing an employee's exempt status can be particularly challenging for employers. However, if an employer sets up a weeklong furlough or shutdown and does not pay exempt employees, there is no risk of losing the employees’ exempt status.

This is because the wage and hour regulations provide that exempt employees need not be paid for any workweek in which they perform no work.

On the other hand, if an employee sets up a partial-week furlough and deducts the pay of exempt employees for the furlough days, those employees are at risk of losing their exempt status and may be entitled to overtime.

Also, it is critical that employees perform no work at all during a furlough or shutdown, including checking work e-mails, making business phone calls, etc.

Remember, nonexempt employees must be paid for hours worked and, as noted above, exempt employees must be paid their full salary for any week in which they perform any work.

To ensure that no work is performed during a furlough or shutdown, many employers require employees to turn in their personal digital assistants, laptops, and other employer-owned communication devices before they leave.

More information on exempt workers is available on the Exempt Personnel topical analysis.

Reduced benefits. Sometimes, employers can cut costs by reducing employee benefits. For example, employers may eliminate or reduce their contribution to employees' 401(k) plans.

Employers' options in this area may be limited if there is a union contract or other employment contract in place.

Employers must also make sure that they comply with the requirements of ERISA.

More information on ERISA is available on the ERISA topical analysis.

Early retirement. Employers can reduce their workforce by offering attractive incentives to employees who are about to reach retirement age.

The advantage of retirement incentives is that they allow employers to cut costs without requiring employees to leave their jobs involuntarily.

However, the employer may lose some employees it would prefer to keep.

Employers need to be aware of other considerations when laying off employees, whether or not the requirements of the WARN Act apply.

Employers should always avoid unlawful discrimination when considering layoffs. Each layoff decision should be made according to objective, business-related criteria and be well-documented.

Avoiding bias in layoff selection. Once an employer has determined that a layoff is necessary, it should identify the supervisors who will facilitate the layoff. These supervisors should be directed to select employees for layoff on the basis of nondiscriminatory criteria such as job performance, employee skills, or seniority.

Additionally, the selection should be made with any policies or employment contracts in mind.

Note that the EEOC has stated that if productivity is a layoff criterion, employees with disabilities cannot be penalized if their productivity has been negatively affected as a result of an accommodation.

Once employees have been selected for layoff, a statistical analysis should be done to determine if the layoff would have a disparate impact on employees within a protected group (race, gender, national origin, workers over the age of 40, etc.).

If so, the selections should be reexamined.

Remember, the employer may be required to show that a business necessity justifies the criteria that have a disparate impact on a protected group.

An employer may lay off an employee who is out of work on short-term disability, even in cases when the leave is qualified under the Family and Medical Leave Act (FMLA).

The test is whether the employee would have been selected for layoff if he or she was not out of work on disability. Therefore, the employer should make sure the reasons for selecting this employee are job-related and well documented.

If an employee on leave is the only employee selected for layoff in a unit or at a facility and there are others in similar jobs not being laid off, the employer is vulnerable to a claim that this employee was selected because he or she was exercising rights under the FMLA, workers' compensation, or other leave law.

Employers instituting layoffs must be particularly careful if they employ foreign workers. Depending on the type of visa, employers may need to notify the Department of Labor or the U.S. Citizenship and Immigration Service of layoffs, reduced hours, or reduced pay.

There are several different types of visas for foreign workers, each with its own rules and regulations.

Therefore, employers with foreign workers should consult with experienced counsel when considering a layoff that will include foreign workers.

The Consolidated Omnibus Budget Reconciliation Act (COBRA) requires employers with 20 or more employees to offer continued group health insurance after terminations for any of a number of reasons, including some layoffs.

State continuation laws may provide additional rights.

Additional guidance is available on the COBRA topical analysis.

As a matter of goodwill, some companies provide outplacement services to laid-off employees.

Outplacement counseling is designed to help terminated employees prepare themselves for a new job or a new career, to lend assistance in providing outside resources, to receive training, and to help employees cope with the stress of leaving the company.

Outplacement services include assistance in rewriting resumes, job placements, career counseling, conducting employee skill surveys, and providing pre-layoff employment service registration.

Larger organizations may hire outplacement services to assist employees, whereas smaller organizations may hire a single counselor or use existing resources to assist employees.

Employers should consider providing outplacement services if employees have been working at the same company for a long period of time and may not have the tools necessary to successfully find another job.

Severance benefits are payments made to employees upon termination of employment caused by events that are beyond their control, such as workforce reductions, plant closings, company takeovers, and mergers.

Severance benefits are not required by federal law and are only required by a handful of states.

However, many companies do offer severance pay. The payments themselves may be paid in a lump sum or over a period of time.

These benefits are usually calculated by the employee's length of service with the company (e.g., 1 week of severance pay given for every year employed with the company).

Additional guidance is available on the Severance Pay topical analysis.

Most states have laws regarding when final paychecks must be given to terminated employees.

Some states specify when laid-off employees must be paid.

Employers need to make sure that they are aware of these laws when conducting a layoff.

Additional guidance is available on the Paychecks topical analysis.

Regulations issued under the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) specifically address an employer's obligations in the event of a layoff or reduction in force.

The regulations provide:

Additional guidance on USERRA is available on the Military Service (USERRA) topical analysis.

Shortly after a layoff is completed, management should inform remaining employees why the layoffs were necessary.

An employer's honesty will be appreciated by employees; if further layoffs are possible, say so. Additionally, employers should acknowledge the extra effort that may be required of the remaining employees.

Layoff survivors may be experiencing a range of sometimes conflicting emotions such as relief, guilt, insecurity, distrust of management, anxiety, and a lack of motivation.

It is important for employers to make sure that layoff survivors know that they are valued employees and to help them stay engaged and productive. Managers should be available to discuss the concerns of layoff survivors.

In some situations, it may be appropriate to refer layoff survivors to the organization's employee assistance program.

A collective bargaining agreement may mandate the order of rehiring after a layoff. Otherwise, employers usually rehire employees in reverse order of layoff.

Problems may arise if employers rehire out of order, if employees choose to remain on layoff status rather than accept a lower-paying job, or if employees are kept on recall status for too long a period of time. Employers may want to limit the eligibility period for rehiring.

Staying in touch with laid-off employees and establishing clear procedures for recall and reporting back to work will help the rehiring process run more smoothly.

Effective July 1, 2015, the Workforce Innovation and Opportunity Act (WIOA)superseded the Workforce Investment Act of 1998 (WIA).

Like its predecessor, the WIOA is a federal workforce development law that provides for state and federal employment, education, job-training, and support services.

The law is designed to help jobseekers access employment, education, training, and support services and to match employers with the skilled workers they need.

The WIOA is intended to develop strong regional economies. In line with this goal, state and local governments have primary responsibility for implementing all programs.

State governors must designate local workforce investment areas and oversee local workforce investment boards with the following goals in mind:

Additional information.Additional information on WIOA implementation, including links to guidance, technical assistance events, and tools, are available on the Employment and Training Administration's WIOA Resource Page at www.doleta.gov/WIOA .

American Job Center "One Stop" Approach. The cornerstone of the WIA was the "One Stop" service delivery system, which was designed to make information about and access to a wide array of job training, education, and employment services available for workers and employers at a single neighborhood location.

The WIOA supports and further streamlines this one-stop career service approach.

Through these one-stop American Job Centers, employers have a single point of contact to provide information about current and future skills their workers need to possess and to list job openings.

More information on American Job Centers is available at http://www.careeronestop.org

In addition, a directory of state American Job Center "One Stop" websites is available at http://www.doleta.gov/usworkforce/onestop/onestopmap.cfm.

The Department of Labor has set up a website to answer both employer and employee questions about the WIOA and the WARN Acts.

The website can be found at http://www.doleta.gov.

Additional information about each state's WIOA programs, including youth services, funding, accountability, Job Corps, Veteran's Programs, etc., can be obtained by contacting a state's dislocated worker unit.