Are employees entitled to notice before a layoff?

A company official asked the following question: Our company has a major contract that will be coming to an end soon. Are we obligated to give any advance notice to our employees regarding possible layoffs? What are the consequences if notice is not given? This question raises a number of potential

A company official asked the following question: Our company has a major contract that will be coming to an end soon. Are we obligated to give any advance notice to our employees regarding possible layoffs? What are the consequences if notice is not given?

This question raises a number of potential legal issues. In general, the most noteworthy of these issues arise under the Worker Adjustment and Retraining Notification (WARN) Act (29 U.S.C. : 2101, et seq.) Some of those issues are discussed below. However, a complete answer to the question in a specific case would require an interpretation of several other items, including the company's general employment policies, the agreements with individual employees, any collective bargaining agreements and any applicable state laws.

Congress passed the WARN Act in 1988 to protect workers, their families and communities from the effects of large-scale, local job losses by requiring advance notice of those layoffs in some circumstances. WARN is applicable to employers of at least 100 full-time employees.

Under the act, a covered employer must give its workers or their union at least 60 days' notice before closing a plant or a "mass layoff." A mass layoff is a reduction in force that results in an employment loss at a single site during any 30-day period of either 500 or more employees, or 50 or more employees if that number represents at least 33 percent of all employees. [29 U.S.C. : 2101(a)(3).]

The statute includes an exception for unforeseen circumstances. Thus, "an employer may order a plant closing or mass layoff before the conclusion of the 60-day period if the closing or mass layoff is caused by business circumstances that were not reasonably foreseeable as of the time the notice would have to have been given." [29 U.S.C. : 2102(a)(1).] In such circumstances, the employer "shall give as much notice is as practicable and at that time shall give a brief statement of the basis for reducing the notification period."

The test for determining whether this exception applies involves a highly factual inquiry, which must be made on a case-by-case basis. According to regulations promulgated by the Labor Department: "An important indicator of a business circumstance that is not reasonably foreseeable is that the circumstance is caused by some sudden, dramatic and unexpected action or condition outside the employer's control." [20 C.F.R. : 639.9(b).] An example might be a customer's "sudden and unexpected termination of a major contract with the employer."

In Loehrer v. McDonnell Douglas Corp. [98 F.3d 1056 (8th Cir. 1996)], the Navy's cancellation of its A-12 aircraft program was found to be sudden and unexpected even though the program had been suffering numerous and serious problems for many months before the cancellation. The court noted that the case involved the "rather unique, politically charged area of defense contracts." Under the facts of the case, the court concluded that the contractor's reluctance to provide a WARN notice to its employees, even after issuance of a cure letter, was "in accord with what would be expected from a reasonable defense contractor."

(See also Halkias v. General Dynamics Corp., [137 F.3d 333 (5th Cir. 1998)], in which, notwithstanding problems, cancellation of the A-12 contract was no more than a possibility, for which notice was not required, as long as the secretaries of Defense and the Navy continued to express support for the program.)

By comparison, it is likely that a court would find that notice is required when a sufficiently large contract is nearing the end of the contractual period and all the available options have been exercised. It is less likely that notice would be required if an option period remained available.

If the required notice is not given, the affected employees may sue for back pay. Alternatively, the employees' union may bring the suit. [See United Food & Commercial Workers Union Local 751 v. Brown Group Inc., 517 U.S. 544 (1996), in which a union has standing to sue notwithstanding statutory silence on the issue.]

Congress did not specify the time period within which a suit has to be instituted. Accordingly, courts must look to state law for the most analogous statute of limitations. Generally, the statute of limitations on actions for breach of an employment agreement will be considered the most analogous statute. [See North Star Steel v. Thomas, 515 U.S. 29 (1995).]

There has been some disagreement among the courts on how to measure the back pay that may be owed. Most courts have measured damages by the number of working days within the portion of the 60-day notice period for which the violation was found. However, some courts have awarded damages for every calendar day. [See, generally, Breedlove v. Earthgrains Baking Cos., No. 97-2057 (8th Cir. April 9, 1998).]

The statute also grants the courts the discretion to reduce the damages for which the employer is liable if the employer can show that its failure to give the required notice "was in good faith" and that it "had reasonable grounds for believing" that it had complied with WARN. [29 U.S.C. : 2104(a)(4).] Both parts of this test must be satisfied before a reduction may be ordered. [See Kildea v. Electro-Wire Products Inc., No. 96-1891 (6th Cir. May 13, 1998), in which an employer's actions may be reasonably compliant with the statute but not in good faith.]

-- Peckinpaugh is a member of the government contracts section of the law firm of Winston & Strawn, Washington, D.C.

NEXT STORY: The Rage for Value

X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.