Tuesday, August 7, 2012

DOL to Employers: Ignore the Law . . . This Time

Ah, the Worker Adjustment and Retraining Notification (WARN) Act.  Big Labor loves it.  Most employers don’t.  Many folks don’t even know what it is.  (It’s the law that requires businesses to give employees (or their unions) notice at least 60 days ahead of a plant closure or large-scale layoff.)

Whatever one’s opinion of WARN, there’s no denying that recent “guidance” from the U. S. Department of Labor on the subject raises more questions than it answers.  Here’s the scenario:

Unless Congress reaches agreement on a 10-year budget plan, automatic budget cuts are scheduled to take effect on January 2, 2013.  Most of those cuts would affect the defense and aerospace industries, which just happen to have large concentrations of contractors in Virginia, Ohio, and Florida (i.e., so-called “swing states” in the upcoming November election).  If these contractors were to follow the 60-day notice requirements of WARN, as many as 2.1 million job loss notices would have to be sent out to employees by November 2, just four days before the election.  It doesn’t take a rocket scientist – sorry, couldn’t resist – to figure out that so many pink slips hitting mailboxes on the eve of the election could well have a significant effect on the outcome.

As if on cue, Assistant Labor Secretary Jane Oates last week issued a five-page guidance letter (here) suggesting that it would be “inappropriate” for federal contractors to comply with WARN’s requirements.  Citing the lack of certainty about the budget cuts, Oates opined that the statute simply does not apply to federal contractors who may be affected.  She also noted that Congress might pass a new budget measure before January, in which case notice would not be needed at all.

For many employers, however, the guidance memo is hardly comforting.  The most obvious reason is that the Department of Labor has no jurisdiction to decide the applicability of the WARN Act to this or any other situation.  That is up to the courts to decide, and the decision is almost always made in hindsight.  That is, an employer may not know it should have given notice at a particular time until after it is too late to go back and do it right.  (That is why most choose to proactively give the notice whenever it looks as if it might be required.)  Also, following DOL’s “guidance” would not be a defense in the event of a lawsuit against a company that failed to give the requisite 60-day notice.  Guidance is not law; it’s just someone’s opinion, and a court is not obligated to give it any deference.

What, then, should employers affected by the looming budget cuts do?  While there is no one-size-fits-all answer, perhaps the best thing to do is assess the potential risk involved in not complying with WARN’s requirements.  Failure to give adequate WARN notice can result in up to 60 days of back pay for each affected employee plus fines to the company for each day of non-compliance.  If that level of risk is tolerable, the company may choose to ignore WARN’s requirements, as urged by DOL.  If not, the business may want to go ahead and give the notices if it believes that a plant closing or mass layoff is reasonably foreseeable.  (And doesn't the fact that possible budget cuts have prompted the DOL to enter the fray in the first place suggest at least some degree of reasonable foreseeability?)

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