The economic downturn that, in late 2008, dealt a sharp blow to many New York employers has led many of those employers to consider reductions in force. Indeed, the New York City unemployment rate lurched from 6.3% in November 2008 to 7.4% in December 2008, hitting the highest level in nearly five years. In addition, the U.S. Department of Labor reported earlier this month that the national unemployment rate reached a 16-year high of 7.2% in December 2008. With jobs scarce, and an otherwise poor economic environment, laid off employees also appear to be more willing to hold employers’ feet to the fire – through litigation, if necessary – when it comes to complying with termination-related legal obligations.
Many employers are already well aware of their obligations under the federal Worker Adjustment and Retraining Notification Act 29 U.S.C. § 2101 et seq. (the “Federal WARN Act”). For employers with a New York presence, however, the recently enacted New York State Worker Adjustment and Retraining Notification Act (the “New York Mini-WARN Act”) – which becomes effective February 1, 2009 – provides additional legal obligations for employers who implement a covered plant closing or mass layoff. While similar to the Federal WARN Act in many respects, the New York Mini-WARN Act: (i) expands the class of employers who are covered; (ii) expands the types of events that trigger notice requirements; and (iii) expands the amount of notice that must be given to employees who experience a loss of employment due to a covered mass layoff or plant closing.
This Client Alert summarizes the most material provisions of the New York Mini-WARN Act and contrasts the state statute’s requirements with those of the Federal WARN Act.
Which Employers Are Covered?
The Federal WARN Act applies to employers with 100 or more full-time employees. By contrast, the New York Mini-WARN Act applies to employers with 50 or more full-time employees.
What Triggers WARN Act Notice Requirements and How Much Notice Is Required?
Under the Federal WARN Act, covered employers are required to provide employees with 60 days’ advance written notice of a “mass layoff” or “plant closing.” For purposes of the Federal WARN Act, “mass layoff” means an employment loss, at a single site of employment, during any 30-day period of either (i) at least 500 full-time employees; or (ii) at least 50 full-time employees comprising at least 33% of the full-time workforce.
By contrast, under the New York Mini-WARN Act, covered employers must give affected employees 90 days’ advance written notice of a “mass layoff,” “plant closing” or “relocation.” For purposes of the New York Mini-WARN Act, “mass layoff” means an employment loss, at a single site of employment, during any 30-day period of either (i) at least 250 full-time employees; or (ii) at least 25 full-time employees comprising at least 33% of the full-time workforce. The term “relocation” (a concept that does not exist in the Federal WARN Act) is defined as the removal of all of the industrial or commercial operations of an employer to a location at least 50 miles away.
Who Is Entitled to Notice?
The Federal WARN Act requires notice to be provided to: (i) each representative (e.g., union) of the affected employees or, if there is no representative, directly to each affected employee; (ii) the state, or state-designated rapid response entity (e.g., State Dislocated Worker Unit); and (iii) the chief elected official of the unit of the local government within which the closing or layoff is to occur.
The New York Mini-WARN Act requires notice to be provided to: (i) the affected employees and any representatives of the affected employees; (ii) the New York State Department of Labor; and (iii) the local workforce investment board for the locality in which the mass layoff, relocation or employment loss will occur.
Under both the Federal and New York WARN Acts, “affected employees” are defined as those “employees who may reasonably be expected to experience an employment loss as a consequence of a proposed plant closing or mass layoff by their employer.”
It is important to recognize that, unlike the Federal WARN Act, under the New York Mini-WARN Act, union-represented employees must be given individual notices. It is also important to recognize that the local workforce investment boards to which notice must be given under the New York Mini-WARN Act have no corollary under the Federal WARN Act. The identities of the appropriate workforce investment boards are currently available on the New York State Department of Labor’s website here. Finally, it is important to recognize that, although part-time employees are not counted in the calculations pertaining to notice-triggering events, part-time employees are not per se excluded from the class of workers to whom notice must be given.
What Are the Consequences of Failing to Provide Proper Notice?
Under the Federal WARN Act, an employer who orders a plant closing or mass layoff without providing the statutorily required notice is liable to each employee for backpay and benefits for each day of the violation. The Federal WARN Act provides, however, that an employer’s maximum liability is 60 days’ pay and benefits and further states that these remedies (together with a civil penalty discussed below) are the exclusive remedies for a violation of the Federal WARN Act.
Like the Federal WARN Act, the New York Mini-WARN Act provides for backpay and benefits for the period of the violation. Also like the Federal WARN Act, the New York Mini-WARN Act provides that backpay and other liability are capped at 60 days.
The liability provision of the New York Mini-WARN Act is, however, ambiguous in at least two respects. First, unlike the Federal WARN Act which states that the employer would be liable “for . . . benefits . . .” during the period of the violation, the New York Mini-WARN Act provides that the employer is liable for “[t]he value of the cost of any benefits …” during the period of the violation. One interpretation of that language is that under the New York Mini-WARN Act the employer must calculate the cost of the benefits and pay out that amount in cash. Presumably, the Federal WARN Act would permit this – although it does not require it. Under the Federal WARN Act, an employer could, if feasible and permitted under the employer’s relevant benefits plans, keep the affected employees covered by the plans for the remainder of the statutory notice period. Read literally, the New York Mini-WARN Act appears to remove that option.
A second ambiguity concerning the liability provision in the New York Mini-WARN Act is its interplay with its Federal WARN Act corollary with respect to the calculation of maximum damages. As stated above, both WARN Acts contain an expressed 60-day cap on backpay and other liability. It is unclear, however, whether a New York employer who fails to provide the requisite 90 days of notice would be liable for 60 days of backpay and benefits (i.e., the 60 days stated in the Federal and New York Mini-WARN Acts) or 90 days of backpay and benefits (i.e., the 60 days of Federal WARN Act liability plus an additional 30 days of liability under the New York Mini-WARN Act). Stated differently, it is unclear whether the liability under the Federal and New York Mini-WARN Acts run concurrently or if they can “stack.” The New York Mini-WARN Act does state that an employer’s liability is reduced by any liability paid by the employer under the Federal WARN Act, which would seem to imply that there is no stacking. Yet, such a reading would effectively render the 90-day notice provision of the New York Mini-WARN Act meaningless.
In addition to the above liabilities, both the Federal WARN and New York Mini-WARN Acts provide that employers who violate the notice requirement of the statute are liable for a civil penalty of $500 per violation per day. The civil penalties, however, do not apply if the employer pays each aggrieved employee the amount for which the employer is liable to that employee (i.e., the backpay and benefits) within three weeks from the date the employer orders the event which triggered the notice obligation.
The New York Mini-WARN Act expands the notice requirements which employers have become familiar with in the context of the Federal WARN Act. Accordingly, an employer who is contemplating a reduction in force that will affect its New York-based operations is well-advised to consider carefully what, if any, obligations it may have under the New York Mini-WARN Act and consult legal counsel as appropriate to ensure compliance with this new statute.
Jennifer Merrigan FayPartner
Steven R. FeldsteinOf Counsel
Robert M. HalePartnerChair, Employment
James W. NagleRetired Partner
Heidi Goldstein ShepherdProfessional StaffChief Talent Officer and Assistant General Counsel for Employment
Bradford J. SmithPartner