Employers Failing to Comply with the WARN Act May be Liable for Back Pay

Employers who fail to provide their employees with timely notice of expected employee downsizing or closing of operations may be liable for back pay and employment benefits even after shutting down operations. Under the Federal Worker Adjustment and Restraining Notification Act (“WARN Act”), employers are required to provide employees with 60 days’ notice that it may shut down or lay off a significant number of workers. The state of New York has its own version of this federal law, the New York State WARN Act, which requires 90 days’ notice. These mandatory notice periods are intended to provide employees with an opportunity to begin seeking another job, or make adjustments he or she may deem appropriate to compensate for an expected loss of their job.

The NY WARN Act provides a broader protective scope than the federal WARN Act because it includes workers whose employers have more than 50 full time employees, while the federal law only applies to employers with more than 100 full time employees. The New York law also defines the status of shutting down operations as the termination of at least 25 employees, as opposed to the 50-employee minimum under federal law, at a single site of employment. Also, under the New York WARN Act, multiple offices of an employer may be considered as a “single site of employment” if they are located in “reasonable geographic proximity.” Other factors that are taken under consideration to determine whether different subsidiaries or affiliates are a “single employer” include common ownership, common directors or officers, consistency of personnel policies coming from a single source, de facto control and the dependency of operations.

Each law allows for recovery of $700,000; however, a recent decision by the Southern District of New York (S.D.N.Y) established that employees are not able to collect maximum damages under both laws for claims arising out of a single incident. Courts are required to reduce any liability imposed by state law with liability already imposed by federal law; this way, employers would not have to face double liability. In 1199 SEIU United Healthcare Workers East v. South Bronx Mental Health Council, Inc., the court reduced the amount of damages available to the employers to $500,000, denying them the ability to recover under both statutes because the employer’s violation of both statues arose from a single act.

In 1199 SEIU, the S.D.N.Y. also established that employees who did not receive sufficient notice under the federal and state WARN Acts were entitled to recover back pay and benefits for the days they would have worked during the notice period. The Court found SEUI, a nonprofit community health organization, liable because it only provided notice to its employees ten to twelve days before closing four clinics it operated. Both the federal and New York law entitle employees to recover back pay and benefits for the days they would have actually worked during the days of insufficient notice falling within the 60-day mandatory notice period. For example, an employee working only 20 hours out of the 10 days of insufficient notice would only be entitled to those hours. As a result, SEIU was found liable although it stated that it was closing its clinics due to an unforeseeable crisis.

The WARN laws are designed to help employees mitigate for expected job losses, and to protect employees from any disadvantage they may suffer as a result of not having information about their employer’s business plans.

If you believe your employer gave you insufficient notice that it would be shutting down operations or downsizing personnel, please contact The Harman Firm, LLP.