On March 16, the state of Alabama issued a “shelter in place” order to mitigate the spread of the unrelenting novel coronavirus. Although this drastic move was needed to deal with the negative effects of a global pandemic quickly making its way to the state, the local economy has come to a halt, affecting numerous industries and leaving many companies with no other option than to consider cutting employees’ hours, furloughing others for weeks at a time, and, in some situations, ending their employment through layoffs or reductions in force.
Many other states and localities have implemented similar measures to curtail the spread of the virus. And are now trying to figure out how to open for business.
As one might expect, there are likely to be unsuspecting employers who run afoul of many federal and state laws that could affect a large segment of their work populations and lead to class-and collective-actions. The following is a discussion of the issues that are most likely to result in costly class and collective action litigation matters, and some possible solutions.
Reductions in force
Many employers have been forced to make the difficult decision to lay off employees through reductions in force. Before conducting a reduction in force, employers should consider whether mass layoffs will affect their eligibility for new federal benefits under the Coronavirus Aid, Relief and Economic Security Act, also known as the CARES Act. Employers with 500 or fewer employees may be eligible for the Paycheck Protection Program loans to cover payroll and other business expenses so long as they maintain specified levels of full-time equivalent-employees.
Despite the CARES Act, employers may find that a reduction in force is the only viable option. In such cases, employers should take steps to consider whether compliance with federal and state notice requirements is required under their circumstances.
WARN Act and state “Mini-WARN” acts
The federal Worker Adjustment and Retraining Notification Act requires covered employers to provide 60 days’ notice of plant closings or mass layoffs. Many states have their own “mini-WARN” acts that require notice in similar situations. Notice must be provided to affected employees, union representatives, and various state and local entities. The financial penalties associated with WARN Act violations are significant. Employers who fail to provide required notice face strict fines and must pay affected employees back pay and benefits up to a maximum of 60 workdays.
The federal WARN Act allows for reduced notice where a plant closing, or mass layoff was caused by unforeseen business circumstances. In the past, this exception has been applied narrowly to “sudden, dramatic and unexpected” circumstances outside of an employer’s control, such as a natural disaster. Although courts are likely to extend this exception to the COVID-19 pandemic, employers still must provide as much advance notice as possible and comply with the Act’s other requirements.
Employers considering a reduction in force should consult with counsel because some states have temporarily amended their mini-WARN acts or provided pandemic-related guidance for employers. In California, Gov. Gavin Newsom (D) issued an executive order temporarily suspending the 60-day notice period for mass layoffs, relocations, or terminations directly caused by COVID-19-related business circumstances that were not reasonably foreseeable.
Common Sense Counsel: What Should Employers Do? See 25 plus Helpful Links at: https://www.constangy.com/coronavirus
Not all reductions in force will trigger notice under the federal WARN Act or state law. Consult with counsel on how to structure mass layoffs and plant closings to avoid notice requirements where possible.
Document the specific ways in which the COVID-19 pandemic has affected your business. In the event of litigation, employers would have to prove that the reduction in force was directly caused by the pandemic to take advantage of notice exceptions.
The U.S. Department of Labor and states are likely to continue to provide additional guidance as the pandemic progresses. Seek the advice of counsel before conducting a reduction in force to stay on top of notice requirements as the law rapidly changes.