Businesses that need to reduce the number of their employees or close a plant or facility, or a recognized department or division at the plant or facility, or need to conduct a mass layoff, for restructuring, organizational relocation, efficiency, and/or change in their market demand should consider the following points to avoid and/or limit liability to their employees.
Federal law and the laws of some states establish the requirement that in the event of a closing of a plant or facility or a mass layoff, the employer must provide minimum notice to affected employees or pay in lieu of notice, and also provide notice to certain governmental agencies.
The Worker Adjustment and Retraining Notification Act (“WARN Act”), a federal law, requires that businesses give advance notice of closures and mass layoffs so employees are able to prepare themselves for the loss of their jobs and state governments are able to provide prompt assistance (unemployment insurance benefits) to laid off employees. The WARN Act applies to employers
· that have:
o 100 or more full time employees, or
o more than 100 full time and part time employees who collectively work 4,000 hour during a given week,
· that plan to
o terminate 500 or more employees or 50 or more employees if they comprise more than a third of the employees at that single site of employment or recognized department or division (affected employees).
If the plant closing or mass layoff is of a large enough size to be covered by the WARN Act, the employer is required
· to provide written notice to affected employees at least 60 calendar days before the termination of an affected employee, and
· also give notice to
o state and local government agencies and
o unions if applicable.
Failure to provide this notice and/or to provide it in a timely manner will result in the obligation to:
· pay each affected employee back pay and benefits for each day up to 60 days (“pay in lieu of notice”), and
· pay a civil penalty of up to $500 per day.
The notice must include the following statements:
· First, the notice must contain a statement as to
o whether the entire or part of the plant or facility will be closed, and
o whether the planned action is expected to be permanent or temporary.
· Second, the notice must specify the expected date when
o the plant closing or mass layoff will commence
o and/or the expected date when the individual employee will be terminated.
· Third, the notice must provide an indication whether or not senior employees can move a lower level job which may be at a lower salary or wage rate (called “bumping rights”) to avoid termination.
· Fourth, the notice must include the name and telephone number of a company official to contact for further information.
· The notice may also, but need not, include “additional information useful to the employees such as information on available dislocated worker assistance, and, if the planned action is expected to be temporary, the estimated duration, if known.”
Often, the plant closing or mass layoff will not occur on a single day, but the employer will terminate affected employees’ employment in phases to meet operational requirements. Consequently, the WARN Act requires that the determination of whether the notice/pay in lieu of notice applies to an affected employee be based on the total number of employees and the percentage of affected employees over a “rolling” calculation period.
If the affected employee is terminated or laid off with less than 60 days’ notice and will be provided with pay in lieu of notice, for the pay in lieu of notice period the employer must continue the employees benefits, including medical insurance, in the same manner as if the affected employee had been working.
State Plant Closing Laws
As of May 2025, fifteen (15) states have enacted laws that mirror the federal WARN Act—these are nicknamed the mini-WARN Acts. However, several of these mini-WARN Acts have provisions that are stricter or more encompassing than the federal WARN Act or establish different severance requirements for terminated or laid off employees regardless of the number of affected employees or the size of the employer. For example:
· California law mirrors the WARN Act for the most part except it applies to a business (i) that has hired 75 employees in the 12 months preceding the triggering events and (ii) that has laid off at least 50 employees. In addition to the business being liable, direct and indirect owners of the business are also liable for backpay and penalties if the business fails to provide complete and timely notice.
· New York law applies to a business (i) that has 50 full time employees or more than 50 full time and part time employees who in the aggregate work 2,000 hours per week including overtime hours and (ii) that terminates only 25 employees. In addition, New York requires a 90 day prior notice (30 days longer than the notice period required by the WARN Act).
· Illinois law applies to a business with 75 full time employees that terminates 25 employees.
· New Jersey law applies to a business (i) that has 100 or more employees (ii) that terminates at least 50 employees. In addition, a business has to give (i) 90 day prior written notice to the affected employees, (ii) one week of severance pay, and (iii) if a business fails to timely provide the required notice is liable for an additional 4 weeks of severance pay.
· Hawaii law applies to a business (i) that has hired 50 employees in the 12 months preceding the triggering events, and (ii) to pay a severance payment of up to four weeks of average weekly wages less than unemployment benefit compensation.
Practical Advice For Employers When Contemplating a Plant Closing or Mass Layoff
The employer’s consideration of which employees should be terminated should be done through an organized process that relies on thoughtful analysis of each employee’s skills and experience,. The decision making process should be based on documents such as employees’ evaluations and management’s written past observations, or on other objective factors such as seniority in the position. The decision on which employees will be terminated or laid off and when those decisions will be effectuated must not be based on factors such as race, sex, gender, age, disability or other prohibited factors, to avoid potential liability under federal, state or local non-discrimination laws.
If an employer decides to provide separation payments to affected employees in exchange for a release and waiver of legal claims, any pay in lieu of notice cannot be considered part of the separation payment package since the employer is legally obligated to pay these amounts. Consequently, separation agreements offered to affected employees must provide them with additional compensation, such as separation pay, to make the release and waiver legally effective.
The criteria to determine who is an affected employee, when notice must be given, the contents of the notice, and what payments or benefits should be given to terminated employees is complex. An employer contemplating terminations or layoffs should consult with legal counsel as soon as the decision to close a facility or to lay off a large number of employees is under consideration so that the employer can avoid costly and time-consuming legal challenges.