Understanding the WARN Act: Importance of Advance Notice in Layoffs

Week One Project Anastasia Marquez MGT3045- Human Resource Management James Ziegler March 22, 2024

The Worker Adjustment and Retraining Notification Act protects workers, their families, and communities by mandating that employers give a 60-day notice before plant closings and mass layoffs. This advance notice gives workers and their families time to prepare for potential job loss, find new employment opportunities, and even pursue skill training to stay competitive in the job market. Additionally, WARN ensures that State dislocated worker units are informed so that assistance can be provided promptly. These rules set out fundamental definitions and guidelines for providing notification and carrying out the requirements of WARN. The Department aims to set forth precise principles and general guidelines that can be utilized in particular situations. Nevertheless, the Department acknowledges that Federal regulations cannot cover all the various industry and company- specific scenarios where advance notice will be provided. Providing employees with a 60-day advance notice of a plant closing or mass layoff is not only a legal requirement but also a good business practice that benefits all parties involved. This practice ensures compliance with the law and helps maintain a positive relationship between employers and employees. Giving employees sufficient notice of a plant closing or mass layoff is a legal obligation under the Worker Adjustment and Retraining Notification (WARN) Act in many countries, including the United States. This legislation aims to protect workers by requiring employers to provide advance notice of significant workforce reductions. “Enforcement of WARN will be through the courts, as provided in section 5 of the statute. Employees, their representatives, and units of local government may initiate civil actions against employers believed to be in violation of § 3 of the Act. “ (20 CFR Part 639 -- Worker Adjustment and Retraining Notification) By

adhering to this law, businesses avoid potential legal consequences such as civil actions and penalties. Providing advance notice is a responsible and ethical business practice that demonstrates respect for employees and their livelihoods. Employees who are informed in advance have the opportunity to prepare for the upcoming changes, both financially and emotionally. They can explore alternative job opportunities, seek retraining or education, or make necessary financial adjustments. This advance notice allows employees to have a smoother transition and reduces the negative impact on their lives. Giving employees ample notice fosters trust and transparency within the organization. It shows that the employer values open communication and respects the contributions of its workforce. This can help maintain a positive employer-employee relationship, even during challenging times. “It is civically desirable, and it would appear to be good business practice for an employer to provide advance notice to its workers or unions, local government and the State when terminating a significant number of employees.” (20 CFR Part 639 -- Worker Adjustment and Retraining Notification) Employees who feel respected and informed are more likely to remain loyal to the company and may even become brand ambassadors, positively influencing the company's reputation. The plant can argue that they were actively seeking capital or business to keep the plant operational but were unable to secure the necessary funding or contracts to continue operations. “ An employer must have been actively seeking capital or business at the time that 60-day notice would have been required. That is, the employer must have been seeking financing or refinancing through the arrangement of loans, the issuance of stocks, bonds, or other methods of internally generated financing; or the employer must have been seeking additional money, credit,

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or business through any other commercially reasonable method. The employer must be able to identify specific actions taken to obtain capital or business.” (20 CFR Part 639 -- Worker Adjustment and Retraining Notification) Therefore, they decided to close the plant without providing a 60-day notice to employees. This decision was made to prevent further financial losses and to protect the interests of the company and its stakeholders. It is important to note that the WARN Act provides certain exceptions to the requirement of providing a 60-day notice, and the "faltering company" exception is one of them. “The employer must be able to objectively demonstrate that it reasonably thought that a potential customer or source of financing would have been unwilling to provide the new business or capital if notice were given, that is, if the employees, customers, or the public were aware that the facility, operating unit, or site might have to close. This condition may be satisfied if the employer can show that the financing or business source would not choose to do business with a troubled company or with a company whose workforce would be looking for other jobs.” (20 CFR Part 639 -- Worker Adjustment and Retraining Notification)By meeting the criteria for this exception, the plant can argue that they were not in violation of the Act by closing the plant without giving a 60-day notice. It is crucial for employers to understand their obligations under the WARN Act and to carefully consider the circumstances surrounding plant closures to ensure compliance with the law. In this case, the plant may have a valid argument for why it did not violate the Act by closing the plant without providing a 60-day notice to employees. One way the managers and HR can handle this situation is by informing the employees about the company's struggles over the past five years and the recent loss of a major account with a sporting clothes company. The intense contract renegotiations that have been ongoing for the

past six months should have been communicated to the employees from the beginning, including the worst-case scenario of potential layoffs. Strategic planning is crucial for setting up an organization for success, aligning leaders with a common goal, and guiding management decisions. Many companies go through strategic planning processes before the start of a new year but often fail to see real value due to common pitfalls. Conducting a SWOT analysis to identify strengths, weaknesses, opportunities, and threats can help leaders develop offensive and defensive strategies to leverage opportunities and mitigate potential risks. Traditional EAPs, peer-driven or coworker-driven EAPs provide education, training, support, and referrals through peers and coworkers. This kind of program necessitates thorough education and training for employees. Instead of managers who are receiving their pay for another 60 days while handling the plant closure, the hourly workers facing layoff in two days should also receive 60 days of pay. It will be difficult for them to secure a new job in just two days, and they will need financial support to sustain themselves during the job search. External EAPs are usually priced on a fixed-fee basis. With this pricing model, an employer pays a set rate per employee per month, multiplied by the total number of employees throughout each contract year. This business can showcase ethical treatment of its employees when shutting down by following work practices that are lawful, and just, and guarantee proper treatment of their staff, ensuring working conditions that do not pose any physical or mental harm. Adhering to the minimum employment standards is crucial for being recognized as an ethical employer. Some believe that ethical treatment entails companies going above and beyond the legal requirements. This could involve paying a fair wage or investing in the training and growth of their employees.

The UN document, which is grounded on the United Nations Guiding Principles on Business and Human Rights, offers advice on how companies can uphold human rights.

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References 20 CFR Part 639 -- Worker Adjustment and Retraining Notification . https://www.ecfr.gov/current/title-20/chapter-V/part-639 Provide support . (2023, October 3). SAMHSA. https://www.samhsa.gov/workplace/employer- resources/provide-support Code of Business Conduct and Ethics . https://www.sec.gov/Archives/edgar/data/1094007/000119312504044901/ dex14.htm

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