Member Article

As the COVID-19 outbreak spreads and officials recommend or impose increasingly restrictive steps to mitigate the impact to public health, more companies are assessing what impact the outbreak is likely to have on their business and are considering whether that impact may necessitate furloughing workers. Following is a summary of some of the core compliance issues employers should consider as they develop contingency plans that may include furloughs.

WARN Act

Employers that are covered by the Worker Adjustment and Retraining Notification Act (WARN Act) and need to close a facility or lay off a substantial number of employees as a result of the coronavirus outbreak may be required to give workers advance notice.

Employers with 100 or more full-time employees are covered by the WARN Act. Under the WARN Act, covered employers must generally give at least 60 days of prior notice to employees who will suffer an “employment loss” as a result of aplant closing(50 or more employment losses at a single site of employment from ceasing operations at the site) ormass layoff(50 or more employment losses at a single site of employment that constitutes at least 33 percent of the active workforce at the site).

Although the WARN Act has provisions that address terminations due to natural disasters, those provisions do not appear to cover epidemics such as the current COVID-19 outbreak.

There are, however, some notable exceptions to the WARN Act’s notice requirements that may apply. First, if employees are laid off for less than six months, they do not suffer an “employment loss” and notice may not be required. Relying on the anticipated length of a layoff in determining the applicability of the WARN Act, however, is problematic. The ultimate length of layoffs is likely hard to predict on the front end, and the applicability of the WARN Act depends onactualemployment losses, not the employer’s good faith estimation when the layoff is first implemented.

Second, even in cases where its notice requirements would otherwise apply, the WARN Act provides an exception when layoffs occur due to “unforeseeable business circumstances.” This provision may apply to the present COVID-19 outbreak, but because of the fact-specific analysis required for this exception, it is often litigated and far from certain to apply in a particular situation. For example, if the state government has ordered a shutdown of your business in response to the outbreak, you will likely have a strong argument that an unforeseeable business circumstance led to the closure. If on the other hand, you are having to shut down because of reduced consumer demand or supply chain difficulties, the analysis becomes less certain. Moreover, under the unforeseeable business circumstances exception, an employer 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.” In other words, once you are in a position to evaluate the impact of the outbreak upon your workforce and determine that a closure is necessary, you must then provide specific notice to “affected employees.” You must also provide a statement explaining the failure to provide the notice earlier, which in this case would be the unforeseeable nature of the COVID-19 outbreak and its effects.

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