Lesser Known Exemptions to the WARN Act

By: Laura Mohammad
November 11th, 2011

The Worker Adjustment and Retraining Notification Act (WARN) calls for 60-day notice to workers in some cases of a plant closing or significant reduction. Time, length of employment and numbers of employees all factor into whether your business is affected by the act.

But there are also a few lesser known loopholes that can make your business exempt from the act’s regulations. In some circumstances, strikes, natural disasters and the “faltering business” category will allow your business to disregard the rules of the WARN Act. Here are a few circumstances that would make your business exempt.

• Strikes. When there is a strike or lockout, in some circumstances your layoffs don’t apply to the WARN Act. If there were labor negotiations, the layoff of employees who are part of a bargaining unit may be exempt from WARN. There are some exceptions, however. For example, notification of a layoff may be required for employees who are not striking.
  
  
• Compensation instead of notice. Some companies choose to pay compensation for the 60 days rather than give notice. For example, a car dealership may want to make as many sales as possible before it closes, and doesn’t want to give notice, says Steve Roppolo, managing partner at Fisher & Phillips LLP’s Houston office. It might be a technical violation, he says, but if you pay them, there is no reason for them to sue you.
  
  
• Faltering business exception. In certain cases, distressed businesses are exempt from the WARN Act. For example, if the business is trying to get financing to avoid closure, and announcing a closing would impact getting the financing, the business may be exempt.
  
  
• Unforeseeable business closings. In rare cases, a business may face immediate impact to its livelihood. For example, if you provided a part that proved to be faulty, say a medical device that has been shown to cause cancer, and it caused an immediate shutdown of your operations, then you may be exempt. But such a case is rare — typically, there is some kind of indicator that the business is going to suffer losses.
  
  
• Temporary projects. When a project or facility has a limited duration, as well as the worker’s relationship with that project, the business may be exempt from the WARN Act. But the employee has to be made aware that he is employed temporarily for the duration of the project, for example in construction. However, this does not apply to the company’s permanent employees.
  
  
• Trustees in bankruptcy. In the case of bankruptcy, in some circumstances, WARN does not apply. When a company goes out of business, the winding down of a business is often run by a trustee in bankruptcy, who is not obligated to follow WARN, according to the U.S. Department of Labor.
  
  
• Natural disaster. In the case of natural disaster, when businesses are suddenly shut down, businesses can be exempted from the WARN Act.

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