A Warning About WARN: Did You Know That Certain Employers Can’t Just Lay Off Employees? If you are Buying a Business— You Must Take Note of this Too!

In what seems to be a resurgence of mergers and acquisitions (business purchase and sale), companies (sellers and buyers) need to be mindful whether they are subject to federal laws when structuring their sale as an asset sale or a stock (ownership interest) sale and in planning any organizational reorg plans for post-closing.

Here’s the rub:  Certain employers cannot lay off employees without giving advance notice or paying them for a period of time.

In 1989, the government enacted WARN – the Worker Adjustment and Retraining Notification Act.

WARN protects workers by requiring employers to provide sixty days advance notice of certain layoffs.

In general, employers are subject to WARN if they have a 100 or more employees, not counting employees who have worked less than six months in the last twelve months and not counting employees who work an average of less than twenty hours a week.

In general, such an employer must give sixty days advance notice if an employee site will be shut down and the shutdown will result in employment loss for fifty or more employees during any thirty-day period.  This is commonly known as a “plant closing”, although it does not merely apply to manufacturing sites.

Alternatively, such an employer must give notice if there is to be a “mass layoff” which will result in an employment loss at the employment site during any thirty-day period for 500 or more employees, or a lay off 50 to 499 employees if they make up at least 33% of the employer’s active workforce.

WARN also applies in the case of a sale of a business.  However, there is an additional twist.  Not only is the seller responsible for providing notice of the “plant closing” or “mass layoff”, but if the buyer of the business would anticipate a “plant closing” or “mass layoff”, such buyer must also give the sixty-day notice.  As an alternative to giving sixty days notice, if a company is subject to WARN, the employer can pay the laid-off employees for those sixty days.

WARN is complicated and should be evaluated in the context of every individual business.

[This article is not to be construed as legal advice and does not create an attorney-client relationship.]