7 things to know about layoff filings a.k.a. WARN notices
December 13, 2022 5:00 AM
Laws requiring advance notice of mass terminations have drawn scrutiny as the mortgage industry continues to undertake sweeping layoffs.
Companiesshedding payroll to address declining revenues have made abrupt announcements, upsetting employees by giving them little time to react . Other firms that planned to make the cuts in the coming weeks or months filed Worker Adjustment and Retraining Notifications with state labor offices.
The disclosures comply with state and federal WARN Acts, laws meant to provide advance notice of layoffs for workers. The requirements trigger assistance through a State Rapid Response Dislocated Worker Unit, which coordinates with employers to provide information to impacted workers about employment and retraining services. While most states follow the federal guidelines, others such as California, New Jersey and New York also have tougher requirements such as extended notice periods or varying worker thresholds that trigger a filing.
While some of the biggest cuts in the industry this year have been revealed via WARNs, many rounds have been executed quietly. Two lenders who filed for Chapter 11 protection this year were sued for failing to file WARNs ahead of their shutdowns, and the employees of one of those companies are likely to receive some compensation.
The U.S. The Department of Labor provides handbooks for employers and workers detailing the nuances of the Act, including exemptions and exceptions. National Mortgage News broke down some of the basics of the federal law that mortgage professionals and companies need to know. For the full legal requirements, firms and workers shouldrefer to the federal act and individual state laws.
Companies
The disclosures comply with state and federal WARN Acts, laws meant to provide advance notice of layoffs for workers. The requirements trigger assistance through a State Rapid Response Dislocated Worker Unit, which coordinates with employers to provide information to impacted workers about employment and retraining services. While most states follow the federal guidelines, others such as California, New Jersey and New York also have tougher requirements such as extended notice periods or varying worker thresholds that trigger a filing.
While some of the biggest cuts in the industry this year have been revealed via WARNs, many rounds have been executed quietly. Two lenders who filed for Chapter 11 protection this year were sued for failing to file WARNs ahead of their shutdowns, and the employees of one of those companies are likely to receive some compensation.
The U.S. The Department of Labor provides handbooks for employers and workers detailing the nuances of the Act, including exemptions and exceptions. National Mortgage News broke down some of the basics of the federal law that mortgage professionals and companies need to know. For the full legal requirements, firms and workers should
What kind of layoff event triggers a WARN?
Employers are required to provide written notice to employees at least 60 calendar days in advance of a covered plant closing or mass layoff. Plant closings are defined as an employer shutting down a facility within a single site of employment. A plant closing also occurs when an employer shuts down an operating unit with fewer than 50 workers, but is laying off other workers to make the total number exceed 50.
A mass layoff is defined as an employer laying off at least 500 employees in a 30-day period, or between 50 to 499 full-time workers at a single site of employment, and that number is 33% of the number of full-time workers. A single site of employment is described as the location from which employees' work is assigned.
WARNs can't be delivered in preprinted notices in paychecks, pay envelops or verbal notices. If an employer undertakes a series of small cuts, it is required to give advance notice if the numbers add up to the WARN threshold.
A mass layoff is defined as an employer laying off at least 500 employees in a 30-day period, or between 50 to 499 full-time workers at a single site of employment, and that number is 33% of the number of full-time workers. A single site of employment is described as the location from which employees' work is assigned.
WARNs can't be delivered in preprinted notices in paychecks, pay envelops or verbal notices. If an employer undertakes a series of small cuts, it is required to give advance notice if the numbers add up to the WARN threshold.
Which employees are counted for WARNs?
Staff who are laid off for more than 6 months or who have their hours reduced by 50% or more in any 6-month period are included in WARN counts. Many personnel aren't counted for WARN purposes, including workers locked out in a labor dispute; consultants and contract employees and federal, state and local government employees.
Part-time employees working an average of fewer than 20 hours per week aren't included by employers when calculating the total number of impacted employees, but are still entitled to receive the notice. Staff who retire or are fired for cause aren't included either, nor are workers who transfer to another site of employment within a "reasonable commuting distance," according to the act.
Part-time employees working an average of fewer than 20 hours per week aren't included by employers when calculating the total number of impacted employees, but are still entitled to receive the notice. Staff who retire or are fired for cause aren't included either, nor are workers who transfer to another site of employment within a "reasonable commuting distance," according to the act.
When are WARNs not required?
Employers aren't required to file the disclosure if they can prove the terminations were the result of separate and distinct actions that aren't an attempt to evade a WARN, according to the handbooks. Businesses don't have to file a WARN if they shut down a temporary facility or complete a project in which employees were hired with the clear understanding of the temporary nature of the task.
WARNs aren't required if employees will be laid off for fewer than six months, or if work hours aren't reduced 50% in each month of any 6-month period. Companies can also shut down a facility because of a strike or lockout
Businesses can shut down a facility because of a strike or lockout, and the closing isn't an attempt to evade a WARN filing. WARNs are not required if the layoff is for six months or less, or if work hours aren't reduced 50% in each month of any 6-month period.
WARNs aren't required if employees will be laid off for fewer than six months, or if work hours aren't reduced 50% in each month of any 6-month period. Companies can also shut down a facility because of a strike or lockout
Businesses can shut down a facility because of a strike or lockout, and the closing isn't an attempt to evade a WARN filing. WARNs are not required if the layoff is for six months or less, or if work hours aren't reduced 50% in each month of any 6-month period.
Are there exemptions for companies that file with less than 60 days notice?
The act provides three exceptions to the 60-day notice period, some of which mortgage companies have already cited this year. A company can be exempt from the 60-day window if a layoff or plant closing is prompted by a natural disaster.
A business can cite a "faltering company" scenario, in which before a plant closing, the firm is actively seeking capital to avoid or postpone a shutdown and the organization believes a WARN would preclude its ability to secure the capital. First Guaranty Mortgage Corp. in a WARN cited anunsuccessful effort to obtain funding before its June bankruptcy.
Businesses can also cite unforeseen business circumstances in which the layoff or plant closing could have not reasonably been foreseen at the time the 60-day notice would have been required. The handbook cites "sudden, dramatic and unexpected" conditions outside the employer's control. Colorado-based lender American Financing Corp. ina WARN in mid-November cited "unexpected and dramatically decreased" sales volume in late October and changing projections in early November as reasons for cutting 194 workers.
A business can cite a "faltering company" scenario, in which before a plant closing, the firm is actively seeking capital to avoid or postpone a shutdown and the organization believes a WARN would preclude its ability to secure the capital. First Guaranty Mortgage Corp. in a WARN cited an
Businesses can also cite unforeseen business circumstances in which the layoff or plant closing could have not reasonably been foreseen at the time the 60-day notice would have been required. The handbook cites "sudden, dramatic and unexpected" conditions outside the employer's control. Colorado-based lender American Financing Corp. in
What are the penalties for companies who don’t file WARNs in a timely manner?
Businesses who violate the act are liable to each impacted worker for an amount equal to back pay and benefits for the period of the violation up to 60 days, according to the handbooks. Companies can reduce their liability by any wages it paid over the period and by any voluntary and unconditional payments not required by legal obligation.
Firms in violation of WARN can be subject to a civil penalty up to $500 for each day of the violation. The penalty can be avoided if the company satisfies its liability to impacted employees within three weeks after closing.
Vacation pay can be considered wages or fringe benefits in some situations, according to the handbooks; if an employee earned their vacation pay, the company must pay it. If a worker gets another job within the 60-day period, it's counted as a voluntary termination that makes that worker ineligible to collect any damages.
Firms in violation of WARN can be subject to a civil penalty up to $500 for each day of the violation. The penalty can be avoided if the company satisfies its liability to impacted employees within three weeks after closing.
Vacation pay can be considered wages or fringe benefits in some situations, according to the handbooks; if an employee earned their vacation pay, the company must pay it. If a worker gets another job within the 60-day period, it's counted as a voluntary termination that makes that worker ineligible to collect any damages.
What happens in a sale or bankruptcy?
Sellers are responsible for any WARN before the sale becomes effective, while the buyer is liable for any mass layoff or plant notification afterward. In a hostile takeover situation, if the seller refuses to give notice, the buyer is responsible. Employers who reject offers of employment with a buyer are considered "constructive discharges" and counted as voluntary departures per the federal handbook.
A bankruptcy doesn't completely absolve a company from responsibility for filing a WARN. The act still applies if a business knows a plant closing or mass termination is coming but tries to use the bankruptcy to avoid providing notice. A WARN is still required when a company continues to operate in bankruptcy, or "debtor in possession." A bankruptcy filing can also impact how soon damages are actually paid to affected employees in a WARN lawsuit.
A bankruptcy doesn't completely absolve a company from responsibility for filing a WARN. The act still applies if a business knows a plant closing or mass termination is coming but tries to use the bankruptcy to avoid providing notice. A WARN is still required when a company continues to operate in bankruptcy, or "debtor in possession." A bankruptcy filing can also impact how soon damages are actually paid to affected employees in a WARN lawsuit.
If an employer violates the WARN Act, what recourse do they have?
Employees can't waive their rights to receive a WARN, but a business can ask workers to sign a document to waive their rights to make a claim against them. A worker can also waive their WARN claim if they receive additional pay or benefits for signing such waiver.
WARN enforcement is handled through the U.S. District Courts, although a federal court can't enjoin the layoff, according to the handbooks. The DOL also doesn't have authority in enforcement actions. Minor or inadvertent errors do not constitute violations of the act, according to the handbooks.
Lawsuits over WARN violations remain pending against lenders FGMC and East Meadow, New York-based Sprout, which also declared bankruptcy this summer. FGMC's court-approved bankruptcy plan allocates up to $2.5 million for impacted workers, although litigation remains in its early stages, a spokesperson for the firm said.
Sprout, which immediately fired 400 employees in July when it shut down, is facing a class action lawsuit in which over 74 former employees have joined the plaintiffs. The suit alleges Sprout should have foreseen the necessity of a WARN as early as 90 days before its layoff because of executives' knowledge of industry conditions; the lender hasdenied the accusations in court.
WARN enforcement is handled through the U.S. District Courts, although a federal court can't enjoin the layoff, according to the handbooks. The DOL also doesn't have authority in enforcement actions. Minor or inadvertent errors do not constitute violations of the act, according to the handbooks.
Lawsuits over WARN violations remain pending against lenders FGMC and East Meadow, New York-based Sprout, which also declared bankruptcy this summer. FGMC's court-approved bankruptcy plan allocates up to $2.5 million for impacted workers, although litigation remains in its early stages, a spokesperson for the firm said.
Sprout, which immediately fired 400 employees in July when it shut down, is facing a class action lawsuit in which over 74 former employees have joined the plaintiffs. The suit alleges Sprout should have foreseen the necessity of a WARN as early as 90 days before its layoff because of executives' knowledge of industry conditions; the lender has
