The Worker Adjustment and Retraining Notification Act (WARN) imposes certain requirements on employers who conduct mass layoffs of employees. For many employers, the challenge is how to time the layoffs and whether groups can be aggregated to impose the WARN notice requirements.
Under the WARN Act, an employer of 100 or more employees is generally required to provide at least 60 days’ written notice to affected employees before a mass layoff may occur. To determine the employee count, an employer does not have to count employees who have worked for less than six months in the last 12 months, or employees who work an average of fewer than 20 hours a week. Worksites may be aggregated together under certain circumstances, such as when there is sharing of employees, common HR/Labor Relations functions and overlapping management between worksites. In addition, the WARN Act has an aggregation provision, which allows for separate layoffs within a 90-day period to be counted together in determining whether there has been a mass layoff.
In a recent case, a group of 194 employees working at Vanderbilt University were terminated by the University on July 1, 2013. A second group of employees was notified on September 17, 2013 that their jobs would be eliminated 60 days later, on November 16, 2013.
On the same day that the second group received their WARN letters, the employees were told by their managers that they should gather their personal belongings and return all Vanderbilt property, including identification badges, laptop computers, and cell phones. They were then taken to meet with someone to discuss career transition counseling, after which they were told to leave the campus immediately. However they were paid their salaries and maintained their benefits until the November 16th date, after which they became eligible to apply for unemployment.
The first group of employees—who had not received WARN letters because of their smaller number—then sued the University alleging that the two actions in such close proximity should have been aggregated for WARN act purposes, and Vanderbilt thus violated the law by not providing WARN notices to their group. The crux of their argument was that the WARN notices given to the second group constituted the termination of those employees, since they were sent home on the same day they got their notice. If they were right, the total number of employees terminated within 90 days of the plaintiffs’ termination would reach the 500-employee threshold to constitute a “mass layoff” under the WARN Act.
The trial court upheld the plaintiffs, ruling that under these circumstances the WARN notice provisions were triggered. Vanderbilt appealed.
The 6th Circuit Court of Appeals (which includes Michigan), overturned the trial court. It ruled that a WARN notice to employees does not equate to a termination. It is the actual date of the termination from the employer that is the counted date. The court noted that although the second group of employees did not have to come to work, they were paid their salaries and benefits and they had to wait to apply for unemployment. Under these circumstances this group was not officially terminated until more than 90 days after the first group.
The WARN Act is triggered when there is a mass layoff or employment loss. A mass layoff is a reduction in force, not due to a plant closing, that causes an employment loss of at least 33% of active employees and at least 50 employees (excluding part-time workers) for at least 30 days. Where 500 or more employees (excluding part-timers) are affected, the 33% requirement does not apply.
An employment loss is defined as a termination other than a discharge for cause, voluntary departure or retirement; a layoff exceeding six months; or a reduction in work hours of more than 50% during each month in any six-month period. It does not include employees who refuse a transfer to a different employment site within a reasonable distance. It also does not include employees who accept a transfer outside a reasonable distance within the later of 30 days after it is offered or 30 days after the plant closing or mass layoff resulting from the relocation or consolidation of part or all of the business. For these exceptions to apply, there can be no more than a six-month break in employment.
In this case, the court found that a triggering event may have occurred but the timing was such that employment numbers did not meet the legislative requirements under the law. In other words, the second group of Vanderbilt employees suffered an employment loss more than 90 days after the plaintiffs (i.e., the first group). Thus, the first group could not be counted under the WARN aggregation provision.
This case is important for employers, as it gives guidance as to how the WARN notice works and what can be legally done under the statute. One caveat: If the court felt that Vanderbilt had used subterfuge to evade the WARN notice requirements, it likely would have ruled differently.
Source: Morton v. Vanderbilt Univ., No. 15-5417 (6th Circuit Court of Appeals, 1/5/16)