RULES and REGULATIONS DEPARTMENT OF LABOR Employment and
Training Administration 20 CFR Part 639 Worker Adjustment and Retraining
Notification Thursday, April 20, 1989 AGENCY: Employment and Training
Administration, Labor. ACTION: Final rule.
SUMMARY: The Employment and Training Administration of the Department of
Labor is publishing a final regulation carrying out the provisions of the
Worker Adjustment and Retraining Notification Act (WARN). WARN provides that,
with certain exceptions, employers of 100 or more workers must give at least 60
days' advance notice of a plant closing or mass layoff to affected workers or
their representatives, to the State dislocated worker unit, and to the
appropriate local government.
Effective Date: May 22, 1989 FOR FURTHER INFORMATION CONTACT: Mr.
Robert N. Colombo, Director, Office of Employment and Training Programs,
Employment and Training Administration, Department of Labor, Room N4469, 200
Constitution Avenue NW., Washington, DC 20210. Telephone: (202) 535-0577.
SUPPLEMENTARY INFORMATION:
Introduction The Worker Adjustment and Retraining Notification Act
(WARN, the statute, or the Act), Pub. L. 100-379, 102 Stat. 890, was enacted on
August 4, 1988. 29 U.S.C. 2101 et seq. Section 11 of the Act provides that WARN
goes into effect on February 4, 1989. WARN provides that, with certain
exceptions, employers of 100 or more workers must give at least 60 days'
advance notice of a plant closing or mass layoff to affected workers or their
representatives, to the State dislocated worker unit (see 29 U.S.C.
1661(b)(2)), and to the appropriate local government. 29 U.S.C. 2902 and 2903.
Section 8(a) of the Act requires that the Secretary of Labor "prescribe such
regulations as may be necessary to carry out this Act. Such regulations shall,
at a minimum, include interpretative regulations describing the method by which
employers may provide for appropriate service of notice as required by this
Act." 29 U.S.C. 2107(a). Under section 11 of the Act, the authority to issue
regulations for WARN became effective on August 4, 1988.
The Employment and Training Administration (ETA) of the Department of
Labor (DOL or Department), since the enactment of WARN, has published in the
Federal Register for comment various notices, a discussion paper, an interim
interpretative rule and a proposed rule on WARN. 53 FR 34844 (September 8,
1988); 53 FR 36056 (September 16, 1988); 53 FR 38026 (September 29, 1988); 53
FR 39403 (October 6, 1988); 53 FR 43731 (October 28, 1988); 53 FR 48884
(December 2, 1988); and 53 FR 49076 (December 5, 1988). After full
consideration of public comments received in response to the notices,
discussion paper, interim interpretative rule and proposed rule, ETA is
publishing this final rule.
Prior Actions On September 16, 1988, the Department published a
notice in the Federal Register inviting comments from interested parties
regarding: "(1) The extent to which the Department should issue interpretive
regulations; and (2) To the extent that regulations are needed, the specific
views of commenters on how particular sections of the law should be implemented
through regulations."
A total of 63 letters was received from employer associations,
companies, law firms, unions, employee associations, Members of Congress, State
officials, and a private citizen. Commenters strongly encouraged DOL to publish
regulations to explain how WARN would be implemented and to clarify WARN
provisions they found ambiguous. Commenters also requested that DOL address a
number of specific items and define particular terms.
On October 28, 1988, the Department published the WARN Discussion Paper
in the Federal Register and solicited comments. This paper reviewed sections 2,
3, 4, and 11 of the statute, discussing questions raised in comments on the
September 16, 1988 Notice and issues addressed in the legislative history.
DOL received 62 comment letters in response to the October 28
Discussion Paper from employer associations, employers, labor unions, law
firms, a State governmental agency, four members of Congress who were
legislative sponsors, and another member of Congress. Commenters generally
expressed agreement with the scope of the issues presented and many of the
tentative positions covered in the Discussion Paper. Commenters did raise
specific points of disagreement, posed additional questions, sought information
about the application of WARN in specific situations, and provided examples.
On December 2, 1988 and December 5, 1988, the Department published an
interim interpretative rule effective through April 1, 1989, and a proposed
rule, respectively, implementing the provisions of WARN and soliciting comments
(these documents will be referred to as the proposed rule or regulation). 53 FR
48884 and 53 FR 49076. The rules were identical. In their preambles, the
Department discussed issues under the Act and comments received in response to
the October 28, 1988 Discussion Paper. DOL received 82 letters of comment on
the interim interpretative and proposed rules from employer associations,
employers, labor unions, City governments, government interest groups,
professional associations, four members of Congress who were legislative
sponsors, a municipal utility and a Federal agency. The comments were fully
considered, along with the written comments on the September 16, 1988 Notice
and the October 28, 1988 Discussion Paper, in ETA's development of this final
rule. The comments are discussed at considerable length in order to make clear
the Department's interpretation of WARN through these final regulations and of
their application to some of the problems that may arise in implementing the
Act. At various points in this preamble the Department, in response to
comments, has provided advice to employers on methods by which WARN liability
may be avoided. This advice is for guidance only and should not be interpreted
to impose any new or additional standards or requirements on employers.
Analysis of Final Rule and Comments (1) General Issues
(a)
Organization of Regulations The Department has written and presented the
WARN regulations so they will be understandable, and offer guidance to readers
in the business and labor communities. Issues are discussed in their logical
sequence, in an effort to easily convey the intent of the Act and employers'
responsibilities.
(b) Scope and Purpose These regulations cover sections 2, 3, and 4
of the Worker Adjustment and Retraining Notification Act. Section 2 of the Act
provides necessary definitions and exclusions. Section 3 creates the notice
requirement, describes the service of notice, sets forth the legal bases for
providing reduced notice, provides for the extension of a layoff period, and
specifies the consideration of employment losses over a 90-day period in
determining whether some employers are covered by WARN requirements. Section 4
outlines two exemptions to coverage of plant closings and mass layoffs.
(c) General Comments A commenter suggested that the final
regulations should only deal with what WARN requires, not what the Department
encourages. In developing these final regulations, DOL has attempted to
faithfully follow the language and intent of WARN. The Department also has been
aware that some of the provisions of WARN may be ambiguous. In an effort to
assist the public in avoiding unintentional noncompliance, DOL has tried to
point out potential problems and in some cases has suggested methods of
compliance.
A commenter suggested that DOL should not regard the comments of four of
the Congressional sponsors, who commented both on the Discussion Paper and on
the proposed regulations, as legislative history and should disregard those
comments. The Department agrees that these comments do not have the force of
legislative history. On the other hand, there is no reason to disregard them.
They have been treated as any other comments.
A commenter suggested that the final regulations should contain specific
citations to the legislative history for clarity and to preclude litigation.
DOL agrees that citations may be useful and has provided them.
(2) Section 639.1 Purpose and Scope (a) Section 639.1(a) Purpose of
WARN This section gives a brief overview of the purpose of the Act. None of
the comments discussed this provision and it remains unchanged in the final
regulations.
(b) Section 639.1(b) Scope of These Regulations This section
discusses the Department's intent in developing these regulations. None of the
comments discussed this provision and it remains unchanged in the final
regulations.
(c) Section 639.1 Notice Encouraged Where Not Required This section
quotes the statutory provision reflecting the intent of Congress that notice be
provided even where not required by WARN. None of the comments discussed this
provision and it remains unchanged in the final regulations.
(d) Section 639.1(d) WARN Enforcement This provision discusses the
WARN enforcement scheme. Commenters suggested that the regulations should
include interpretations of several of the provisions of §5 of WARN, which
contains the enforcement provisions. Specifically, it was suggested that the
regulations should discuss the "buy-out" provisions of sections 5(a) (2) and
(3), which provide that an employer may reduce its monetary liability for
violations of WARN by the amounts of certain payments made to or on behalf of
the affected workers. One of the commenters also suggested that the regulations
should discuss the basis for calculating the amount of monetary liability and
should distinguish between violations of the Act from failure to give notice
and violations for giving notice in a "technically deficient fashion".
The Department believes that in the unique WARN enforcement scheme,
under which all enforcement will occur in the context of private civil
lawsuits, it is inappropriate for the Department to regulate with respect to
these issues. These matters have been left solely to the courts to decide.
The Department generally agrees with the comment that technical
violations of the notice requirements not intended to evade the purposes of
WARN ought to be treated differently than either the failure to give notice or
the giving of notice intended to evade the purposes of the Act. The final
regulations, in §639.7(a)(3), include language to make it clear that
inadvertent errors and factual errors which occur because of subsequent changes
in events are not intended to be violations of the regulations. Other kinds of
violations, i.e., the failure to provide information required in these
regulations, may constitute a violation of WARN.
The proposal referred to these rules as interpretative regulations. Upon
re-evaluation, this reference has been eliminated in the final regulation. The
final regulation reflects the Department's careful consideration of the issues
raised in this rulemaking and extensive analysis of the numerous comments it
has received.
(e) Section 639.1(e) Notice in Ambiguous Situations This section
discusses the desirability of giving notice in situations where questions may
arise about the applicability of WARN. While no comments were received which
directly discussed this provision, DOL has received numerous comments and
questions which illustrate the principle of this provision and demonstrate the
existence of a possible source of confusion for some employers. These comments
inquire about whether or not an employer planning a plant closing or mass
layoff is covered because of some events which may occur between the date that
notice is required to be given and the date of the event. An example of a
typical inquiry is: an employer is planning to close a unit which employs 55
people; the employer will subsequently offer early retirement incentives to
some of these employees, six of whom accept the early retirements before the
termination occurs; since only 49 workers will finally be terminated is there a
covered plant closing Technically, the correct answer may be that no covered
plant closing will have occurred (assuming, of course, that other actions
within the 30- or 90-day aggregation periods provided in WARN do not trigger
coverage). However, an employer has to make a decision on whether or not to
give notice based on what it knows 60 or more days before the plant closing or
mass layoff will occur. If, as in this example, at the time the decision to
give notice has to be made, the employer is not certain that its early
retirement incentives will be accepted or how many workers will accept early
retirement, the employer is best advised to give notice. If the employer
"gambles" that a sufficient number of employees will accept the offer and
"loses", the employer's cost will be 60 days' pay and benefits to at least 50
workers. If the employer gives notice, the cost will be the cost of preparing
and mailing 55 notices. Given the relative costs involved, the employer is best
advised to give notice unless it is certain, at the time it must decide to give
notice, that there is no possibility of coverage.
Because of this possible source of confusion, DOL has strengthened the
language of this recommendation.
(f) Section 639.1(f) Coordination With Job Placement and Retraining
Programs This provision discusses coordination with other DOL programs
aimed at providing assistance to dislocated workers. None of the comments
discussed this provision and it remains unchanged in the final regulations.
(g) Section 639.1(g) WARN Not to Supersede Other Laws and Contracts
This provision discusses the requirement of §6 of WARN that the
provisions of the Act "are in addition to, and not in lieu of, any other
contractual and statutory rights of the employees". In the preamble to the
proposed regulations, DOL solicited comments on: (1) Whether and to what extent
the final regulations might provide that collective bargaining agreements which
provide for terms different from the terms incorporated into the WARN
regulations may be used as legitimate alternative methods of Compliance with
WARN; and (2) whether such a provision should apply only to collective
bargaining agreements that are entered into after the effective date of WARN or
whether agreements that predate WARN also should be included. DOL received a
number of comments on this issue. Some commenters supported broad application
of collective bargaining agreements to define the terms of WARN. Other
commenters opposed any application of collective bargaining agreements to alter
or modify the provisions of WARN.
After considering comments received, the Department concludes that the
WARN requirements stand by themselves and cannot be set aside in favor of
collective bargaining agreements, regardless of whether such agreements were
entered into before or after the effective date of WARN. However, where
collective bargaining agreements include provisions which are consistent with
and not inferior to WARN requirements, application of those provisions to
further define or clarify WARN terms in a specific context would satisfy WARN.
For example, WARN requires that notice of a mass layoff be provided at least 60
days in advance to affected employees or their representatives, to the State
dislocated worker unit, and to a unit of local government. If a collective
bargaining agreement provides for an employer to issue written notice to the
union representing the affected workers 10 days prior to an anticipated layoff,
this provision will not satisfy the WARN requirements for 60-day advance notice
to the union representing the workers. But if the contract provides for an
employer to issue written notice to the union 75 days in advance of anticipated
layoffs, that provision will satisfy the WARN requirement for 60-day advance
notice.
The Department also recognizes that certain of the provisions of WARN
involves subjects which are typically covered in collective bargaining
agreements. For example, the definition of the term "operating unit" depends on
the organizational and functional structure of each plant, a matter often
covered under seniority or other provisions of collective bargaining
agreements. Similarly, WARN provides that a worker does not experience an
employment loss if the employer offers to transfer the worker to a job at a
different site within a reasonable commuting distance. The definition of the
term "reasonable commuting distance" is a flexible one intended to take local
conditions into consideration. If a collective bargaining agreement includes
provisions for transfers and stipulates what constitutes reasonable commuting
distance, that definition should control; it is the parties' agreement on the
meaning of the term in the local conditions. Also, the collective bargaining
agreements often will help in defining whether certain of the exceptions to the
general definition of "single site of employment" are applicable.
(3) Section 639.2 What Does WARN Require This section provides a
brief overview of the WARN notice scheme. None of the comments discussed this
provision and it remains unchanged in the final regulations.
(4) Section 639.3 Definitions (a) Section 639.3(a) Definition of
"Employer" This provision provides a definition of the term "employer". It
repeats the statutory definition of the size threshold for coverage under WARN
as an employer and specifies which workers are counted in making coverage
determinations; it makes it clear that private nonprofit organizations, as well
as for-profit entities, are covered; it discusses the status of independent
contractors and subsidiaries as separate employers; and it clarifies that an
employer is defined in terms of the overall corporate or business entity, not
in terms of any particular plant.
In the preamble to the proposed regulations, DOL requested comments on
whether agencies of State and local government which are independent and
perform business activities should be covered. Several commenters opposed
inclusion of these entities, arguing that the statutory definition of employer
as a "business enterprise" is inapplicable to government agencies, that the tax
payment test for notice to local governments is inapplicable to agencies of
local government and that any definition would sweep too broadly and include
school boards and similar entities. Other commenters supported inclusion as
consistent with the intent of WARN to broadly protect workers against
dislocation. Because of the use of the term "business enterprise", DOL
concludes that regular Federal, State, and local government public agencies and
services are outside the purview of WARN. For completeness, federally
recognized Indian tribal governments have also been added to the list of
governments not covered by WARN. The legislative history is not helpful on the
specific question of coverage of public and quasi-public business enterprises.
DOL agrees that the underlying intent of WARN is worker protection. Given the
nature and the language of the law, DOL concludes that the term "business
enterprise" used in the statute includes public and quasi-public entities which
engage in business (i.e., take part in a commercial or industrial enterprise;
supply a service or good on a mercantile basis, or provide independent
management of public assets, raising revenue and making desired investments).
Whether a particular public or quasi-public entity is covered will be
determined by the functional test described above and by an organizational
test, i.e., whether the entity is managed by a separately organized governing
body with independent authority to manage its personnel and assets. It should
be noted that DOL has not defined covered public enterprises in terms of the
traditional/non-traditional governmental functions distinction that was
rejected by the Supreme Court as unworkable in Garcia v. San Antonio
Metropolitan Transit Authority, 469 U.S. 528 (1984). The test that has been
adopted is intended to be a relatively precise one that will include such
entities as regional transportation authorities and independent municipal
utilities, but will exclude such organizations as school boards. Several
commenters pointed out that the phrase in §639.3(a)(1), defining
additional workers who are counted in determining whether an employer meets the
coverage threshold, "[w]orkers on temporary layoff who have a reasonable
expectation of recall" needs further definition. Particularly, commenters from
the construction industry pointed out that when construction crafts workers are
laid off at the end of a project, they expect to be reemployed within the
construction industry, but not necessarily with the same employer. DOL agrees
with the commenters that further definition of the phrase is appropriate and
has added a definition. A worker is considered to have a "reasonable
expectation of recall" if the worker "understands, either through notification
or industry practice, that his/her employment with the employer has been
temporarily interrupted and that he/she will be recalled to the same or a
similar job." This definition, derived from case law under the National Labor
Relations Act (NLRA), is intended to cover those situations in which, for a
variety of reasons, workers are laid off with the understanding that they will
be called back at a later date. The definition is intended to be applied in
accordance with the case law developed under the NLRA.
Another commenter suggested that the regulations should define the
status of workers who are on leave from their employers. DOL thinks that the
same rules apply to these workers as apply to workers in layoff status, that
is, whether workers on leave from an employer understand that their leave
status constitutes a temporary interruption of their job and that they have
rights upon the conclusion of their leave to return to the same or a
substantially similar job with the employer. Language has been added in
§639.3(a)(1) to include workers on leave within the category of workers
who may be counted for determining the coverage thresholds for the definition
of employer.
Several commenters raised questions about the definition of
"[i]ndependent contractors and subsidiaries" in §639.3(a)(2). Some of
these commenters suggested that the definition should be simplified to treat
subsidiaries as separate employers as long as they are "bona fide separate and
distinct companies and hold themselves out to the public as such"; or to define
as separate companies entities that have separate payroll functions. One
commenter requested special treatment for the garment industry because of the
peculiar relationship of jobbers and contractors within that industry. Another
commenter suggested that the regulation also should recognize the doctrine of
joint employer status, as that doctrine has been developed under the NLRA. A
commenter suggested that the National Mediation Board should be recognized as
the authority for determining whether companies covered by the Railway Labor
Act (RLA) are separate. Another commenter stated that the rule on subsidiaries
also should apply to operating divisions.
The intent of the regulatory provision relating to independent
contractors and subsidiaries is not to create a special definition of these
terms for WARN purposes; the definition is intended only to summarize existing
law that has developed under State Corporations laws and such statutes as the
NLRA, the Fair Labor Standards Act (FLSA) and the Employee Retirement Income
Security Act (ERISA). The Department does not believe that there is any reason
to attempt to create new law in this area especially for WARN purposes when
relevant concepts of State and federal law adequately cover the issue. Thus, no
change has been made in the definition. Similarly, the regulation is not
intended to foreclose any application of existing law or to identify the source
of legal authority for making determinations of whether related entities are
separate. To the extent that existing law recognizes the joint employer
doctrine or the special situation of the garment industry, nothing in the
regulation prevents application of that law. Nor does the regulation preclude
recognition of the National Mediation Board as an authoritative decision maker
for entities covered under the RLA. Neither does the regulation preclude
treatment of operating divisions as separate entities if such divisions could
be so defined under existing law.
A commenter suggested that the regulations be clarified to reflect that
if a business loses a contract, it is not responsible for employment losses
that occur if the successor contractor fails. DOL agrees with the comment, but
believes that the proposition state is axiomatic in the WARN scheme; an
employer is only responsible for giving notice to its employees for covered
employment losses that occur as a result of its actions. The Department does
not believe that any clarification of the regulations is needed.
A question has been raised whether temporary employees are to be counted
when determining whether an employer is covered under WARN. The Department
notes that there is no exception for temporary employees (or more accurately,
for employees working on temporary projects or in temporary facilities) in the
definition of employer in the law; the only category of workers not counted in
determining coverage is part-time employees, as defined in the statute. In
determining employer coverage, therefore, temporary employees are counted
unless they are part-time employees. Of course, while an employer may be
covered by virtue of employing a sufficient number of temporary but not
part-time workers, the employer may be exempt from any requirement to
give these employees notice if they are working in a temporary facility, or on
a temporary project or undertaking, as defined in §4(a) of the Act and
§639.5(c) of these regulations.
The Federal Home Loan Bank Board (FHLBB) specifically commented on the
application of WARN to its activities and those of the Federal Savings and Loan
Insurance Corporation (FSLIC) in the current savings and loan (S & L)
banking crisis. FHLBB argues that, because of its statutory mandate, it should
not be considered an employer when it or the FSLIC closes a bank. The
Department agrees that under the statutory scheme of the deposit insurance
laws, neither the Board nor the FSLIC, which are exercising strictly
governmental authority in ordering the closing, are to be considered as
employers.
Another commenter suggested that "fiduciaries" in bankruptcy
proceedings should be excluded from the definition of employer. Since adequate
protections for fiduciaries are available through the bankruptcy courts, the
Department does not think it appropriate to change the regulations to address
this situation. Further, DOL agrees that a fiduciary whose sole function in the
bankruptcy process is to liquidate a failed business for the benefit of
creditors does not succeed to the notice obligations of the former employer
because the fiduciary is not operating a "business enterprise" in the normal
commercial sense. In other situations, where the fiduciary may continue to
operate the business for the benefit of creditors, the fiduciary would succeed
to the WARN obligations of the employer precisely because the fiduciary
continues the business in operation.
(b) Section 639.3(b) Definition of "Plant Closing" This section
closely replicates the statutory definition of the term "plant closing" and
applies the definition to other WARN requirements. There were few comments on
the regulatory language itself, and they supported the approach taken.
A comment made in the preamble to the proposed regulation, suggesting
that a plant closing occurs only where the threshold number of workers are
terminated or laid off as a direct result of one or more plant closings, did,
however, draw considerable comment. A number of commenters supported this
interpretation. Several commenters opposed it, pointing to the structure of the
statutory language. DOL has revisited this issue and has decided to revise its
earlier position. Section 2(a) (2) of WARN defines plant closing as "the
permanent or temporary shutdown of * * * one or more facilities or operating
units * * * if the shutdown results in an employment loss during any 30-day
period for 50 or more employees * * *." This language, particularly the use of
the words "results in", contemplates that both employment losses of the
employees who work in the facility(s) or operating unit(s) and those who lose
their jobs as the direct result of the shutdown(s) are to be counted in
determining when a plant closing has occurred. Thus, for example, if the 45
worker computer data entry department at a plant is closed and, as a direct
result of that closing, (and within 30 days of the closing), 5 computer
programmers also are terminated, a covered plant closing has occurred.
Another commenter suggested that a series of closings or layoffs should
be considered a plant closing or mass layoff "only if each stems from the same
business decision, personnel action, or other distinct cause"; where no
distinct cause accounts for a threshold number of employment losses there is no
WARN coverage. DOL disagrees with this interpretation. WARN Section 2(a)(2) and
(3) say nothing about cause. Under the language of those provisions, one merely
counts up all the employment losses that occur in a 30-day period to determine
coverage.
(c) Section 639.3 Definition of "Mass Layoff" This section closely
follows the statutory language defining the term "mass layoff" and contrasts
plant closings and mass layoffs. In reviewing the language of the regulation,
DOL has determined that the insertion of the phrase "which can be triggered by
the termination of a smaller number of workers than a mass layoff" in the
description of a plant closing, is technically incorrect, and, therefore, that
phrase has been removed. Both mass layoffs and plant closings can be triggered
by the layoff or termination of 50 workers. In the case of a mass layoff of
less than 500 workers, however, coverage only will be triggered if the number
of workers terminated is equal to 33 percent of the total number of workers at
the single site of employment. Thus, the termination of 50 affected workers
does not automatically lead to coverage as it does in the case of a plant
closing.
One commenter noted that the legislative history of WARN makes it clear
that only employees who are actively working for the employer at the single
site of employment as of the time of the layoff are to be considered in
determining whether the one-third threshold is met. Remarks to this effect were
made by Sen. Metzenbaum, the Senate floor manager of the bill. (133 CONG. REC.
S9488 (daily ed. July 9, 1987) (remarks of Sen. Metzenbaum)). Since the
statutory language can be read to include only active employees and since no
contrary interpretation has been discovered, the regulation has been revised
accordingly. The Department believes that "actively working" employees refers
to those currently on the payroll and in pay status as of the time of the mass
layoff.
Another commenter suggested that the phrase "or the entire site" be
added at the end of the third sentence of the section. The Department agrees
that this change more closely conforms to the statutory language and has added
the phrase.
A commenter suggested that the regulations should make it clear that
part-time workers are not counted in determining mass layoff or plant closing
thresholds. While this is a correct statement, the regulations adequately
address the issue. For reasons already discussed, language has been added in
the final regulations to clarify that workers on temporary projects or in
temporary facilities who do not meet the definition of part-time workers are
counted for purposes of determining whether covered plant closing or mass
layoff coverage thresholds have been met.
(d) Section 639.3(d) Definition of "Representative" This section
quotes the definition of the term representative as it appears in section
2(a)(4) of WARN. The comments supported this use of the definition and no
change has been made in the final regulations.
(e) Section 639.3(e) Definition of "Affected employees" This section
quotes the statutory definition of the term "affected employees": "employees
who may reasonably be expected to experience an employment loss as a
consequence of a proposed plant closing or mass layoff"; and discusses specific
applications of the term to certain classes of employees, including "bumpees",
managerial and supervisory employees and employees of independent contractors.
It also indicates a rule for determining the number of affected employees for
purposes of determining coverage thresholds.
The purpose of WARN, to provide notice to workers so alternative
employment or necessary training can be obtained on a timely basis, applies to
white-collar and managerial employees as well as to employees in the skilled
trades and other blue-collar occupations. Therefore, the Department includes
managerial and supervisory workers as "affected employees".
This provision drew a number of comments. A substantial number of
commenters opposed any requirement of notice to "bumpees", that is, to workers
who lose their jobs as a result of the exercise by an employee whose position
has been eliminated (or by other more senior workers who have previously been
bumped) of seniority or bumping rights established by a seniority system. Most
of these commenters pointed out the complexity of many seniority systems and
the difficulty of accurately predicting 60 days in advance which workers will
actually lose their jobs. It was also pointed out that requiring notice to
bumpees could lead to overbroad notice, which Congress clearly condemned. These
commenters suggested that notice to incumbents in the positions to be
eliminated satisfies the Act (although one of these commenters also suggested
that it is extremely difficult to identify incumbents 60 days in advance). Some
commenters suggested alternative notice to bumpees; either general notice to
all potentially affected workers, some kind of different notice to bumpees, or
specific notice to bumpees as soon as they are identified.
One commenter supported notice to bumpees but opposed any requirement
that notice to bumpees be given only "to the extent that such workers can be
identified at the time notice is required to be given." The commenter argued
that section 3(b)(3) of WARN requires employers to give affected employees "as
much notice as practicable".
Most of the comments discuss collectively bargained seniority systems
under which the identification problems suggested in the comments will not
arise since employers are required only to notify the affected unions and to
provide them with information about the positions affected and the incumbents
in those positions, not about the ultimate "bumpees". More fundamentally, the
commenters' position on this issue, as it may apply to non-bargained seniority
systems, directly conflicts with the plain language of WARN. Section 2(a)(5) of
the Act defines "affected employees" (in non-union situations, the persons
entitled to WARN notice) as "employees who may reasonably be expected to
experience an employment loss". The plain meaning of this language is that
notice must be given to those workers who will actually lose their jobs, to the
extent they can reasonably be identified. Only if the workers who will lose
their jobs cannot be reasonably identified is notice to incumbents sufficient.
DOL recognizes that, in cases of non-bargained, employer-developed
seniority or bumping systems, there are real complexities which militate
against imposing an absolute requirement that notice be given to all
potentially affected employees. DOL is persuaded that there are factors,
including the difficulty of predicting a bumping path where employees have
several options among positions or lines of progression into which they can
bump, which make it difficult to predict who will finally be affected as a
result of a plant closing or mass layoff. Nonetheless, DOL is constrained by
the statutory language to provide for notice to bumpees. The final regulations
provide some flexibility by providing that notice need only be given to
individual workers who can reasonably be identified at the time notice is
required to be given. This section and §639.6(b) have been revised to
clarify these principles.
In addition, the Department recommends that notice be given to bumpees
who are not given the full 60 days' notice as soon as they are identified. Such
notice, while not required, would tend to show good faith compliance. The
Department does not agree that section 3(b)(3) of WARN provides authority for a
separate requirement that notice be given to bumpees as soon as they are
identified since that provision applies only to situations in which one of the
three bases for providing less than 60 days' notice is invoked.
To some extent, it is true that broad notice may be the prudent course
in cases where complex seniority systems exist, but the concerns raised by some
commenters on this score appear to be overstated. Notice is not required to be
given to intermediate bumpees in situations in which multiple bumps will occur.
If an employee who has available bumping or seniority rights refuses to
exercise those rights and quits or resigns instead, that employee has
voluntarily quit, has not suffered an employment loss and is not entitled to
notice. Therefore, an employer need only provide notice to two classes of
workers: to those workers who are likely to actually lose their jobs taking
into consideration the probability that bumping rights will be exercised, and
to incumbents in the positions to be eliminated, in cases where it is not
possible 60 days in advance of the covered event to identify the ultimate
bumpees. Although the complexities of identifying these ultimate bumpees may
still exist, the group of workers to whom notice must be given is considerably
smaller than some commenters appear to think.
A commenter suggested that the regulations should be clear that the
number by which to measure whether the plant closing or mass layoff threshold
has been met is the number of employment losses that actually occur, if that
number is less than the number of positions eliminated. While the Department
agrees that this statement is correct and has revised the language of this
section to reflect this interpretation, it is important to point out that, from
a practical point of view, the number on which an employer must focus, in
determining whether to give notice, is the number of potential employment
losses which can be determined 65 days [FN1] before the closing or layoff is to
occur, the time at which the decision to give notice must be made. As the same
commenter stressed repeatedly in other comments, it is often difficult to
predict 65 days in advance exactly how many employment losses will actually
occur. Thus, an employer faced with a decision about whether to give notice may
be well advised to base its decision on the number of positions to be
eliminated, which is a known fact at the relevant time.
FN1: The figure of 65 days is used as an approximation of the number of
days it will take to identify workers and to prepare and serve notices 60 days
in advance of a planned action.
Commenters raised the question whether notice extends to bumpees who may
be bumped at other employment sites (to the extent that they can be identified
when notice is required to be given). DOL interprets the definition of affected
employees to include such workers, who are, therefore, entitled to receive
notice. It should be noted, however, that workers who suffer an employment loss
at another single site of employment are not counted in determining whether
plant closing or mass layoff coverage thresholds are met. (DOL notes again the
caution that the employer must evaluate the facts as they appear when it must
make its decision to give notice.) Thus, if an employer closes an operating
unit which employs 55 workers and, because of crossplant bumping rights, 6
workers at another site lose their jobs, (and if these facts can be accurately
predicted 65 days in advance of the closing date) the plant closing threshold
has not been met at the first site. It is also possible that an employment
action that affects large numbers of workers may trigger a second covered
action at a separate site if enough workers lose their jobs through cross-plant
bumping.
A commenter suggested that "the regulations should specify that
consultant or contract employees employed by another employer or self-employed
are not counted toward the threshold for determining employer coverage." DOL
agrees with this proposition, as long as the separate employment relationship
is established under existing legal rules. It is specifically covered in
section 639.3(e).
(f) Section 639.3(f) Definition of "Employment Loss" This section
defines "employment loss" and exclusions from employment loss when certain
transfers occur. These definitions closely follow the language of the statute.
The proposed regulation provided that workers who retained "full employment
status" could be reassigned without suffering employment loss. The Department
notes that it interprets the statutory terms "termination" and "layoff" in
section 3(a)(6) to be distinguishable and to have their common sense meanings.
Thus, for the purposes of defining "employment loss", the term "termination"
means the permanent cessation of the employment relationship and the term
"layoff" means the temporary cessation of that relationship.
A number of commenters questioned the use of the term "full employment
status" in section 639.3(f)(2). They argued that this concept, if broadly
applied to mean that an employee can be reassigned only if he/she retains full
pay and benefits, is inconsistent with the statutory definition of employment
loss and with employers' rights to reassign workers.
The intent of the "full employment status" language was to deal with a
specific comment from a major employer which has a program for moving workers
who are to be terminated or laid off for a long time into job-finding or
retraining activities, all at full pay and benefits. The "full employment
status" language was an attempt to distinguish this kind of program, in which
an employee is not working at his old job but is retained on the payroll, and
does not experience an employment loss, from other kinds of severance pay or
supplemental unemployment benefits (SUB) programs which occur after the end of
the job and do not postpone the date of the employment loss. DOL recognizes
that the comments have merit and that the "full employment status" concept is
capable of overbroad application. The regulations have been revised to delete
the concept but to retain language encouraging the kinds of employer-sponsored
retraining programs for which the full employment status concept was developed.
It must be noted that the ability to reassign workers is not without
limits. An employer may not vary the terms of a worker's assignment so much as
to constructively discharge (as discussed in greater detail below) the
employee. Language to this effect has been added to the regulation.
The question also has been raised as to whether an employment loss
occurs if an employee retains full pay and benefits and other entitlements but
is not required to report to work. DOL notes that neither WARN nor the
regulations dictate the nature of work to be performed or whether work
must be performed during a period of employment after notice of an
impending plant closing or mass layoff has been given. However, WARN does not
replace or alter any other contractual or statutory rights and remedies of
employees, and other contracts or statutes may be applicable when employers
consider reassignments or assignment to non-work status after giving notice in
advance of plant closings or mass layoffs.
Several commenters requested further definition of what constitutes a
"voluntary departure, or retirement", which are excluded from the definition of
employment loss. One commenter suggested that "incentive programs" should be
specifically recognized as voluntary departures. Another commenter suggested
that employees who are offered transfers to another employment site and who
refuse those offers should be considered to have voluntarily quit. Other
commenters suggested that "voluntary layoffs", that is, layoffs provided for in
certain collective bargaining agreements under which more senior workers may
accept a layoff in return for certain SUB or other benefits should be excluded
from the definition of employment loss. Other commenters disagreed and
suggested that workers who retire or quit in the face of an impending
termination should not be treated as having voluntarily departed.
DOL agrees with the commenters that some clarification of the concept of
voluntary departures is appropriate. The concept is not a new one in the law;
there is a developed body of law under such statutes as the NLRA, Title VII of
the 1964 Civil Rights Act and the Age Discrimination in Employment Act. This
body of law recognizes the concept of constructive discharge, under which a
worker's resignation or retirement may be found not to be voluntary if the
employer has created a hostile or intolerable work environment or has applied
other forms of pressure or coercion which forced the employee to quit or
resign. Similarly, acceptance of incentive programs, particularly incentive
retirement programs, can be found to be involuntary where a worker was unduly
pressured to accept the program. The regulations have been revised to include
this concept. Since the law in this area is well developed, the regulations do
not attempt to specifically define the parameters of voluntariness, but merely
refer to the existing legal concepts.
In terms of the specific issues raised in the comments, the Department
agrees that incentive programs, including incentive retirement programs and
voluntary layoffs, that meet the definition of voluntariness outlined above,
are voluntary departures for purposes of WARN. DOL does not, however, agree
that a worker who, after the announcement of a plant closing or mass layoff,
decides to leave early has necessarily been constructively discharged or quit
"involuntarily". (In the situation posted, where the plant closing or mass
layoff has been announced, and, presumably, notice has been given, the worker
already has received the notice that WARN requires and whether his later
resignation or retirement is voluntary or not is no longer germane.)
The comment about workers who quit when offered a transfer involves
another provision of WARN (section 2(b)(2)) which defines exclusions from
employment loss. Under that section, which will be discussed in greater detail
below, the basic rule is that if, as a part of a relocation or consolidation of
all or part of an employer's business, a worker is offered a transfer within a
reasonable commuting distance, the worker is not considered to have suffered an
employment loss whether or not the worker declines the transfer. There is no
requirement for acceptance of the offer in this situation and, unless the offer
itself may be deemed to be a constructive discharge, the offer of the transfer
itself means that the worker is not deemed to suffer an employment loss. On the
other hand, if the transfer is beyond a reasonable commuting distance, WARN
requires that the employee accept the transfer and refusal to accept means that
the employee has suffered an employment loss. If the transfer is not covered
under these provisions, because not offered as a result of a relocation or
consolidation, a technical employment loss occurs. If an employer offers to
transfer a worker in this situation and if the worker accepts, the employer may
still wish to provide notice as additional protection from liability.
Several commenters suggested that the regulations incorporate a concept
of "net employment loss" to cover situations in which an employer lays off one
group of workers and simultaneously hires another group to work on a different
aspect of the same task or project. Other commenters suggested that the
definition of employment loss exclude government service contractors; since
when such employers lose their contracts, their employees ordinarily are hired
by the successor contractor. Similarly, a commenter suggested that where work
is contracted out and the contractor hires the former employer's old workers to
perform the contracted work, no notice should be required unless more than the
threshold number of employees are not rehired. These definitions cannot be
squared with the definition of employment loss or with the statutory structure,
which focuses on the effects of employment losses on groups of workers. WARN
requires notice to workers who lose their jobs with a particular employer,
whether or not other workers have gained other jobs and whether or not other
employers may hire those workers.
As noted above, § 639.3(f)(4) reiterates the statutory exclusion of
certain transfers from the definition of employment loss. Commenters suggested
that further definition of the terms "relocation" and "consolidation" are
needed. One commenter suggested that the definition should be consistent with
the definition under the NLRA; which it summarized as stating that the terms
should be given a broad meaning not dependent on labels, as long as the
transfer offer is bona fide and is to a related enterprise. While the
Department agrees that a broad definition of the terms is appropriate in light
of the intent of WARN to focus on actual losses of employment, the commenter's
proposal cannot be accepted since it would give no meaning to the words
"relocation or consolidation". The final regulations have been revised to
include a broad definition, suggested by another commenter, under which the
transfer of definable business, whether customer orders, product lines or
operations, to a different site will be considered a relocation or
consolidation.
Commenters questioned how to determine whether there has been a more
than 50% reduction in hours for purposes of the third branch of the definition
of employment loss. They asked whether overtime hours should be counted;
whether overtime should be calculated on the basis of an 8-hour day or a
40-hour week; and how to determine the base for employees with fluctuating
hours. The Department thinks that overtime hours or hours in addition to the
normal and customary hours of the worker should not be counted in determining
the base hours of work. In terms of the other questions, DOL will rely on the
definitions found in the FLSA, that overtime is calculated based on a 40-hour
week and that each week is treated separately. For an employee who works
fluctuating hours, the monthly base would be the sum of the non-overtime hours
worked in each week of the month.
A commenter questioned whether employees laid off for an indefinite
period (i.e., where the employer expects to recall them but does not know
whether their recall will occur before or after 6 months) are automatically to
be considered as experiencing an employment loss at the time of the layoff. In
this situation, the layoff is not automatically deemed an employment loss. If
the layoff lasted for more than 6 months, the workers would experience an
employment loss, would be counted toward the trigger level for the plant
closing or mass layoff of which their individual layoffs were a part, and would
have been entitled to notice if the layoff or closing met coverage thresholds.
Since an employment loss begins with the layoff and since notice is due 60 days
in advance, a prudent employer wishing to avoid potential liability would
provide notice to the workers at least 60 days prior to their layoff unless it
is certain that the layoff will not exceed 6 months.
A commenter asked how to define the date on which to measure the
6-month period to determine whether there has been a more than 50% reduction in
hours of work. The commenter suggests using a "snapshot" on the date notice
first should be given. While DOL agrees that the determination whether a
reduction in hours will take place must be made around the time notice must be
given, the use of the term "snapshot" is confusing since it implies looking at
events that have already occurred. Notice that is given based on what has
happened over the past 6 months may be too late.
The reduction in hours language of the definition of employment loss is
not explained in the legislative history. This language can be interpreted to
require either that notice be given 60 days before the beginning of the 6-month
period in which hours are to be reduced more than 50% or that notice be given
60 days before an employee will suffer 6 consecutive months of more than 50%
reduction in hours (that is, 60 days before the end of the 6-month period.)
There are practical reasons for favoring each interpretation. The former
interpretation better protects workers against a substantial loss of income.
The latter interpretation is more consistent with what is probably the more
common situation, in which substantial reductions in hours occur, where the
reductions are not planned 6 months in advance, but happen incrementally
because of changing conditions, for example, a reduction in cash flow that
extends for many months. Thus, DOL believes that a common sense rule should be
followed in determining when to give notice of a covered reduction in hours:
When it becomes evident that the reduction will extend beyond 6 months, WARN
notice should be given. This rule will, at least, establish the employer's good
faith effort to comply with WARN. (Of course, if the employer knows in advance
that a reduction in hours of more than 50% will occur for each of 6 months, the
rule requires that the employer give notice at least 60 days in advance of the
beginning of the period or as soon as the duration of the reduction becomes
clear.)
Another commenter suggested that the regulations should be clarified to
state whether a layoff, recall and layoff of a worker within a 30-day period
constitutes one or two employment losses. Since WARN defines employment loss as
a layoff exceeding 6 months in duration, a layoff and recall which occurred
within a 30-day period cannot be an employment loss. Thus, only the second
layoff may count, if it will be of sufficient duration.
(g) Section 639.3(g) Definition of "Unit of Local Government "Unit
of local government" is defined in the proposed regulations as in the Act. This
section also provides a rule, based on total taxes paid to each unit, for
determining which unit of local government to notify where a plant is located
within more than one unit of local government. A commenter pointed out that
some taxes are not paid directly to the local government but are paid as a
surcharge on a State tax and are collected by the State. The commenter
suggested that the employer may not be able to easily determine how much tax it
paid to a unit of local government. The Department agrees and has revised the
definition to include only taxes paid directly to the unit of local government.
(h) Section 639.3(h) Definition of "Part-Time Employee" The
definition of "part-time employee" in the proposed regulations follows the
statutory language. Some commenters were unsure whether regular full-time
employees with employment during less than 6 of the last 12 months would be
considered part-time or full-time employees. The statute defines such employees
as part-time.
Other commenters were unsure as to the status of employees who are
traditionally understood to be "seasonal" and short-term, yet are hired on a
recurring basis. According to the Act, if there employees worked for less than
6 of the past 12 months, they are part-time employees. Such employees would, in
many cases, also fall under the "temporary facility/limited employment"
exemption in section 4(a). Further, "seasonal" employees who work 6 months or
more may also fall under the "limited employment" exemption.
In response to commenters' requests for guidelines in determining the
period used in calculating whether a worker has worked "an average of fewer
than 20 hours per week," DOL has established that the shorter of the time the
worker has been employed or the most recent 90 days should be used.
(i) Section 639.3(i) Definition of "Single Site of Employment" This
section provides a definition of "single site of employment" which is drawn
from the April 1988 Conference Report on H.R. 3. (H.R. Rep. 100-576, 100th
Cong., 2nd Sess., 1046 (April 20, 1988)). As a general rule, a geographic
connection or proximity is required to define "single site of employment." Even
where several distinct operations are performed at a geographically connected
site, that building or complex will be counted as a single site of employment.
The regulations also recognize that, in some limited cases, geographically
separate sites may still be considered a single site of employment because of
an inextricable operational connection. DOL intends this exception to be a
narrow one to cover those cases where separate buildings are used for the same
purpose and share the same staff and equipment.
Several commenters expressed concerns that the definition of single site
of employment could be read either too broadly or too narrowly. Two commenters
were concerned that the discussion of geographically separate but operationally
connected sites in §639.3(i)(2) could be read broadly to cover separate
sites which occasionally share staff or which are supplied from a common
source. As noted above, this exception is intended to be read narrowly to cover
those rare situations in which two separate buildings share staff, equipment
and functions. DOL believes that the language of the exception conveys this
narrow reading.
A commenter urged that the definition be amended to treat geographically
contiguous facilities that are functionally separate as distinct sites. The
Department agrees that this is an appropriate distinction in those cases where
two plants are clearly separate, that is, where they produce distinct products,
have different workforces and have separate management at the plant level. This
reading does not appear to be inconsistent with Congress' concern, reflected in
the Conference Report, that geographically separate plants be considered
different single sites of employment. The language of the regulation has been
revised to reflect this exception. Again, this is intended to be a narrow
exception to the general rule that geographically related facilities are single
sites of employment and geographically separate facilities are separate
sites.
The comments just discussed also caused the Department to review the
language of the regulation and to add a new subparagraph to make it clear that
in office buildings or similar sites, where several different businesses rent
or own space, the single site of employment for each employer is the space
within the building that it rents or owns.
Several commenters focused on the "catchall clause" in
§639.3(i)(4). Some commenters suggested that the clause either be
clarified or deleted to prevent it becoming an escape clause. Two commenters
described their individual employment arrangements and suggested that the
clause should be interpreted to include them. These employers have cross-plant
bumping and worker transfer among a number of geographically separate
facilities over a large area, in one case a major metropolitan area, in another
a several hundred square mile area. Given the concern expressed in the
Conference Report on H.R. 3 that geographically separate facilities be treated
separately, neither of these situations is an appropriate exception to the rule
which Congress intended to apply, that individual plants should be treated
individually. (H.R. Rep, 100-576, 100th Cong., 2nd Sess., 1046 (April 20,
1988)). DOL continues to believe it prudent, however, to maintain some
flexibility in the definition of "single site of employment", to provide for
truly unusual organizational situations which DOL could not anticipate. The
clause in §693.3(i)(4) has been retained in the final regulations, with
the proviso that application of any alternative, situation-specific definition
is allowable only if its use is not intended to evade the purpose of WARN to
provide notice. Thus, a firm which has a factory or other site which would
otherwise qualify as a single site of employment and whose size would permit
treatment of some small layoffs as mass layoffs (i.e., a plant that employs
fewer than 1499 workers) cannot be combined with other sites within an area for
the purpose of eliminating WARN coverage of mass layoffs.
A commenter suggested that foreign sites of employment should not be
covered under WARN. DOL agrees that the general rule is that foreign sites are
not considered covered by a statute unless coverage is specified in the
language of the act, and have added an exclusion for foreign sites of
employment to the definition of single site of employment. The exclusion of
foreign sites does not exclude the U.S. workers at those foreign sites from
being counted to determine coverage as an employer, i.e., whether an employer
has 100 employees.
(j) Section 639.3(j) Definition of "Facility or Operating Unit" The
regulations adopt common sense definitions of the terms "facility" and
"operating unit" within a single site of employment. These terms are important
for determining whether a plant closing has occurred. DOL has defined these
terms in a manner which attempts to define physically and operationally
distinct entities for purposes of determining whether a plant closing, the
shutdown of a distinct entity, has occurred.
Several commenters were concerned that the definition of "operating
unit" was overly broad and suggested that it be made clear that the term refers
to only a "fundamental, distinct or structural organizational segment of the
enterprise". These commenters were critically of the use of the word "task"
within the definition, arguing that the term is capable of application to
activities that are neither fundamental nor distinct. Another commenter thought
the definition was too narrow and should be revised to include any distinct
operation, department or division of work at a worksite, defined in terms of
function or organization. While these two commenters are apparently seeking
different results in terms of how operating units would be defined in practice,
there appears to be little difference in the definitions they present and DOL
agrees with both commenters that only distinct structural or operational
entities within a single site of employment are intended to be included as
operating units. DOL agrees that the use of the word "task" might be construed
to include specific work assignments within a distinct unit that would not be
appropriately included as an operating unit. The final regulations do not use
the term "fundamental" in the definition simply because it might create more
ambiguities in applying the definition that it would avoid. The definition of
operating unit has, therefore, been revised to include these concepts. The
revised definition reads: "an organizationally or operationally distinct
product, operation or specific work function".
Two examples may help to clarify our view of the appropriate limits of
the definition. If an automobile manufacturing plant has an assembly line which
assembles cars, there may be groups of workers whose job is to put on the doors
or the bumpers. The operating unit should be the assembly line, not the groups
of workers who perform the task of door or bumper assembly. Similarly, a data
processing department may have within it data entry workers, computer
programmers, computer maintenance workers and clerical workers. If the
department is clearly a distinct entity in terms of the employer's
organizational structure, the data processing department is the appropriate
operating unit and the separate task groups are simply a part of that operating
unit. (These examples are merely illustrative and are not intended to create
rules applicable to all assembly lines or data processing departments. There
may well be cases in which workers performing different jobs as a part of a
larger operation may be sufficiently organizationally or operationally distinct
to be defined as a separate operating unit.)
The critical factor in determining what constitutes an operating unit
will be the organizational or operational structure of the single site of
employment. Sources of evidence which will assist in defining separate and
distinct units will be applicable collective bargaining agreements, the
employer's organizational structure and industry understandings of what
constitute distinct work functions. One commenter suggested that in the
trucking industry, lines of progression would constitute operating units, i.e.,
over-the-road drivers, mechanics and clericals would each be in separate
operating units. As the Department understands the comment, the use of lines of
progression may well be an appropriate basis for defining operating units in
the trucking industry. In other industries, however, seniority lines or lines
of progression may not be a useful basis for defining an operating unit.
Several different groups of workers in different lines of progression may be
organized into a recognized department, like the data processing department
discussed above, which would be an operating unit.
In the preamble to the proposed regulations the following example was
used to illustrate the operating unit definition: "a 24-hour store eliminating
its night shift would not carry out a closing of an operating unit, but the
elimination of all warehouse and stock workers on all three shifts would
constitute the closing of an operating unit if 50 or more workers were
affected". Several commenters disagreed with the example. Some suggested that
shifts could constitute operating units depending on the employer's
organizational structure and whether the elimination of the shift "results in
the closing of the facility during the time the workforce was previously
employed". It is possible that there may be situations in which shifts can be
operating units if the workers on the shift perform some separate and distinct
function from the workers on other shifts. If, for example, a shift performed
only maintenance functions which were not performed on other shifts, if the
workers on that shift were in a separate job classification and, possibly, if
the workers were recognized in the employer's organizational structure or in
applicable collective bargaining agreements as a separate department, the shift
could be an operating unit. The Department disagrees, however, that the mere
closing of a plant for hours when it was previously open constitutes the
closing of an operating unit. As long as the plant continues to operate and no
recognized department, operation or major work function has been terminated,
the fact of a reduction in hours of plant operation is not the closing of an
operating unit.
Other commenters disagreed that all warehouse and stock workers would
necessarily constitute an operating unit. They suggested that whether such
workers would be defined as an operating unit would depend on the employer's
organization. If the store were organized by product departments, the
departments would be the operating units and the stock workers would be
assigned to those units. DOL agrees that, in the situation posited, the product
departments are the operating units.
Another commenter suggested that the definition of operating unit should
exclude "common tasks" such as maintenance, secretarial or housekeeping.
Whether maintenance, clerical or housekeeping workers will be considered as an
operating unit will depend on how they are organized and how they operate. If
there is a separate maintenance or housekeeping department or a central
clerical pool, the workers in those units will be in separate operating units.
If the workers are assigned to other distinct departments, for example, if
different clerical workers work exclusively in several distinct departments,
the workers will be considered assigned to those departments.
Another commenter suggested that the definition of operating unit is too
broad and proposed that operating units should be defined only as including
production processes and should not include support staff. The Department
disagrees. The reason for the use of the term "operating unit" in WARN is to
apply the protections of the law to small units of workers in a larger plant
when their units are closed. It is not relevant to this purpose whether the
workers are production workers or support workers; their job loss and their
need for protection is as real in either case.
A commenter suggested that the definition of operating unit be clarified
to reflect that, in the construction industry, employees of a subcontractor on
the construction site where several different activities are taking place are
an operating unit. DOL agrees that this will often be the case if the workers
are performing a separate part of the work. However, this would not necessarily
always be the case. Consistent with the decision not to attempt to cover
industry-specific cases in the regulations, these final regulations have not
been revised to provide for this particular case.
Another commenter suggested that in the railroad industry certain
maintenance crews have no home base and should be treated as separate operating
units. While such workers may well be considered as a separate operating unit,
their status must be determined in terms of the single site of employment to
which they are assigned. These workers may not have an assigned home base, but
they must get their orders or assignments from somewhere, even if that place
changes from time to time. In order to cover this situation and the situation
of outstationed workers and traveling workers who report to but do not work out
of a particular office, that part of the regulation relating to mobile workers
has been revised to clarify that such workers should be treated as assigned to
their home base or to the single site from which their work is assigned or to
which they report. This part of the definition has been moved, for reasons of
organizational clarity, to be a part of the definition of "single site of
employment" in §639.3(i).
(k) Section 639.3(k) Definition of "State Dislocated Worker Unit"
The definition of the term "State dislocated worker unit" refers to the
statutory provisions under which such units are created. None of the comments
discussed this definition and it remains unchanged.
(l) Section 639.3(l) Definition of "State" The definition of State
refers to the 50 States, the District of Columbia, the Commonwealth of Puerto
Rico and the U.S. Virgin Islands. None of the comments discussed this
definition and it remains unchanged.
(5) Section 639.4 Who Must Give Notice The prefatory language in
§639.4 states the basic rule of WARN about giving notice to the
appropriate parties. None of the comments discussed this definition and it
remains unchanged.
(a) Section 639.4(a) Who Should Give Notice This section discusses
who, within the employer's organization, should give notice. None of the
comments discussed this definition and it remains unchanged.
(b) Section 639.4(b) Layoffs That Extend Beyond 6 Months This
section discusses an employer's responsibility in situations in which a covered
layoff, which originally was announced as being for 6 months or less in
duration, is extended beyond 6 months and, therefore, falls within the
definition of "employment loss" in section 2(a)(6) of WARN and triggers the
requirement of notice. One commenter proposed that any suggestion in the
regulations that employers indicate the length of layoffs be deleted since some
courts might interpret it as a requirement. Another commenter suggested that
there should be no requirement of written notice for layoffs of 6 months or
less. Another commenter objected to the inclusion of the phrase "consistent
with section 3(c) of WARN" and suggested that the requirements of that section
be spelled out.
In response to these comments and the Department's own review of the
statute and the regulations, language has been added to the final regulations
in an effort to provide better guidance to employers. The Department's view is
that an employer who announced at the outset that a layoff would be for 6
months or less, who did not provide advance notice under WARN and who plans to
extend the layoff beyond 6 months may violate the Act unless: (i) The extension
is due to business circumstances (including unforeseeable changes in price or
cost) not reasonably foreseeable at the time of the initial layoff; and (ii)
notice is given when it becomes reasonably foreseeable that the extension is
required. A layoff extending beyond 6 months for any other reason is treated as
an employment loss from the date of its commencement. Although the standard for
foreseeability under this provision may be seen as less exacting than it is
under the "unforeseeable business circumstances" exception of section
3(b)(2)(A) of WARN, due to the addition of the parenthetical phrase in section
3(c), there still may be situations in which an employer may be found in
violation of WARN when it gives notice that a layoff will extend beyond 6
months. For example, if an employer shuts down for 5 months to retool his plant
for a new product line and the retooling process takes longer than originally
anticipated, and the employer has experienced similar delays in previous
retoolings, the employer may be liable under WARN for having failed to give
notice 60 days before the shutdown was begun since the cause of the extension
arguably was foreseeable. An employer may, therefore, want to consider giving
notice at least 60 days prior to the layoff unless it is certain that the
layoff will not exceed 6 months.
The Department does not view the regulations as requiring any form of
notice of a layoff that will not extend for more than 6 months. The statutory
use of the term "announced" merely recognizes the reality that if an employer
closes down or lays off some workers for a short period of time and expects to
reopen or recall the workers, it will somehow communicate to the workers the
fact that the closing or layoff is temporary.
(c) Section 693.3 Sales of Businesses WARN creates an absolute
division of responsibility for giving notice between a buyer and a seller of a
business; the seller is liable to give notice of covered actions which occur up
to and including the date (time) of sale and the buyer is responsible
thereafter. Thus, at all times one of the parties to the transaction is
responsible for giving notice. The proposed regulations offered guidance to
employers anticipating a sale or purchase transaction to avoid confusion
regarding service of notice and liability under WARN, by suggesting that each
party's responsibility with respect to these items be covered in the contract
of sale.
There were a wide variety of comments on this provision. One commenter
suggested that the regulations make it clear that if the employees of a
business that has been sold are not rehired by the buyer, the responsibility
for giving notice is on the seller. The Department believes that such an
allocation of responsibility is precisely contrary to the statutory language
and intent. If a plant closing occurred as a result of the buyer's decision not
to rehire the seller's workers, and the closing occurred after the effective
time of the sale, the buyer is responsible for giving notice. This view is
consistent with the statutory provision that the employees of the seller become
the employees of the buyer immediately after the sale, with the intent of WARN
that notice be given to workers who will suffer dislocations and with the
reality of allocating responsibility for notice to the party to the transaction
that actually makes the decision to order the plant closing or mass layoff.
Other commenters agreed with the allocation of notice responsibility just
discussed; one suggested that the apportionment of liability turn solely on
when the plant closing or mass layoff occurs relative to the effective date of
the sale.
Some commenters suggested that the regulations be clarified to assign
responsibility to the seller through the date of sale and to the buyer on the
next day. Such an interpretation is a possible reading of the statutory
language; but DOL has rejected that reading because it would either make the
seller responsible for the acts of the buyer or it would create a period in
which no one is responsible for giving notice. The former alternative is
inconsistent with the legal position of the parties after the sale has become
effective. The latter alternative is inconsistent with the intent of the
statute.
A commenter suggested that the regulations make it clear that the seller
is not responsible for a layoff ordered by the buyer within 60 days of the
sale. For the reasons already discussed, DOL agrees that no such responsibility
attaches.
Several commenters suggested that no employment loss is experienced in a
sale situation if the seller's employees are hired by the buyer within 6 months
of the sale. Assuming there has been an announcement that a layoff of 6 months
or less has been ordered, this is a correct statement since the definition of
employment loss excludes layoffs of 6 months or less.
Several commenters discussed the provision of WARN that assigns the
seller's employees to the buyer after the sale. These commenters agreed that
this provision does not create any additional employment rights, other than
WARN notice rights and that, although a technical termination (i.e., the
termination of employment with the seller) may be deemed to have occurred in a
sale, that termination, by itself, is not a basis for WARN notice. One
commenter suggested that nothing in the WARN provision on sales requires that a
buyer actually hire the seller's employees. Another commenter suggested that it
should be made clear that employees in a sale situation have the same WARN
rights as do any other workers. The Department generally agrees with all these
statements and believes the final regulations reflect them; but notes that the
buyer is responsible for giving notice to workers if it does not hire them.
One commenter suggested that the regulation should focus on the closing
date and time of the sale, not on the effective date and time. The Department
does not view these terms as different and the final regulations continue to
use the term "effective date" because it is used in the Act.
One commenter suggested that the phrase "at all times, one of the
parties to the transaction is responsible for giving notice" be added to the
regulations. DOL agrees and has added the phrase in the final regulations.
The variety of comments suggests that the regulations needed to be
clarified, along the lines suggested in this discussion. This section has been
revised extensively. The examples in §639.4 (1)-(3) have been revised to
make it clear that these are merely suggestions about how the buyer and seller
may wish to handle notice responsibilities between themselves and do not change
the basic allocation of responsibility for notice. While specific mention of
the contract of sale has been deleted in the final regulations, since the
parties to a transaction may utilize other methods to allocate WARN
responsibility, DOL continues to suggest that prudent employers make provisions
for WARN notice, if applicable, in the contract of sale or elsewhere. The
federal regulations also make it clear that if the seller gives notice as the
buyer's agent, the responsibility for giving notice still remains with the
buyer.
The FHLBB also described the situation in which it takes over an
institution and keeps it operating while seeking to merge it with another bank
or to find new owners. In that case, the new owner stands in the position of a
buyer under WARN and is responsible for notice from the time the merger or
acquisition becomes effective.
One commenter suggested that DOL not promulgate regulations on sales.
DOL believes that such a course of action would be inconsistent with its
statutory role and with its efforts to assist employers and workers in fully
understanding their rights and obligations under a complex statute.
(6) Section 639.5 When Must Notice Be Given
(a) Section 639.5(a)
General Rule This section discusses the basic WARN rule that notice must be
given 60 days in advance of a planned plant closing or mass layoff. It also
discusses the 30- and 90-day aggregation periods found in sections 2(a) and
3(d) of WARN and suggests alternative rules for measuring the size of an
employer's workforce for determining whether coverage thresholds are met.
Notice with respect to an individual worker's employment loss must be
given 60 days in advance of that worker's separation from employment. In
response to requests for clarification as to what date is the separation date,
the Department has specified in §639.5(a)(1) of the regulations that a
worker's last day of employment is considered the date of that worker's layoff.
The word "calendar" also has been added in this section to clarify that 60-day
notice is not based on working days.
To aid employers in complying with the Act and issuing notice when it is
due, DOL suggests that the employers look ahead and behind, not only 30 days,
but 90 days (to determine whether coverage is triggered under section 3(d) of
the Act) in determining whether planned employment actions will trigger notice
requirements. By doing this, an employer can look at its planned employment
actions in the broader framework of the Act, and reduce potential liability for
failure to give notice when thresholds have been met. For example, if an
employer has 300 employees, 60 of whom experience an employment loss on March 5
and an additional 40 of whom suffer an employment loss on March 30, 60 days'
notice is required for both the March 5 and the March 30 employment losses,
since they occurred within a 30-day period and constitute a mass layoff. If a
third layoff affecting 60 employees occurs on April 20, these employees also
are entitled to notice since their employment losses fall within a second
30-day period which includes the March 30 layoffs.
Section 3(d) of WARN provides that if, within a 90-day period, separate
employment losses occur, each of which involves fewer than the number of
workers necessary to trigger coverage but which together add up to the minimum
numbers necessary to trigger coverage, WARN notice must be given unless the
employer can demonstrate that the individual actions arose from separate and
distinct causes. The Department recognizes that this provision may place
employers in jeopardy for failing to accurately predict their employment
actions. DOL is, however, constrained to interpret the provision according to
its terms. It is important to note that the 90-day aggregation provision
applies only to separate actions each of which is under the coverage threshold.
Thus, small plant closings or layoffs are not aggregated with covered plant
closings or mass layoffs. Also, as some commenters pointed out, it does appear
that, in some cases where an employer underestimates the size of a layoff, the
unforeseeable business circumstances exception for reduced notice may be
applicable. Use of this exception may reduce liability for the second group of
workers who are laid off, but it does not appear to provide much assistance as
to the failure to give notice to the first group.
A number of commenters asked for additional definition of the term
"separate and distinct actions and causes". One suggested that the definition
be that the layoffs arise from different events. Another commenter suggested
that, in the construction industry, the completion of one phase of a project
and the layoff of the crafts workers on that phase should be considered as
separate and distinct causes. The Department does not find either of these
suggestions helpful; the first is too ambiguous to be useful; the second, while
probably correct in the context of the construction and similar industries,
does not provide a general definition. (In any event, since most construction
workers will be engaged in work on temporary projects, the definition will be
irrelevant to most layoffs in that industry.) DOL has considered these
comments, but believes that the words of the statute are clear.
One commenter suggested that the regulations not include language that
an employer should look ahead 90 days to determine whether separate but related
events will trigger coverage. The commenter argues that this language is
gratuitous and might undermine an employer's defense that the layoffs arose
from separate and distinct causes. The Department believes that this language
is an appropriate caution to employers about the obligations which WARN places
upon them.
One commenter gave a specific example of a situation in which 90-day
aggregation might apply and asked questions about the application of that
provision. The commenter offered the following example:
Day 1-Company has 180 employees; Day 2-Company terminates 30
employees (now 150 employees); Day 31-Company terminates 29 employees (now
121 employees); Day 60-Company terminates 6 employees (now 115 employees);
Day 90-Company terminates 5 employees (now 110 employees).
The commenter asked, to whom is the company liable The commenter argued
that there is liability only to the first 30 workers because the other three
groups when aggregated do not constitute 1/3 of the number of employees on Day
31 and, therefore, the mass layoff threshold has not been met as to those
workers. The commenter also asked what if the first group were "fired" for
cause, poor productivity; is there a violation if there are no further
layoffs.
In answer to these questions: Assuming that no notice was given, the
company is liable to all 70 employees because the mass layoff threshold has
been reached through separate actions which did not occur for separate and
distinct causes within a 90-day period. All employees terminated within the
90-day period have suffered a mass layoff and all are entitled to 60 days'
notice before the date of their termination. For this purpose, the date on
which the company size is measured is Day 1. (Note that the aggregation periods
are rolling and the second layoff starts a second 90-day period where the
applicable workforce is 121 workers.) On the second question, if the workers
were fired for cause they have not suffered an employment loss as defined in
WARN section 2(a)(6)(A), which excludes discharges for cause. (The remaining 40
workers who suffered an employment loss are not numerous enough to trigger mass
layoff coverage.) It is, however, likely that a mass firing will be challenged
and if it is determined that the firing was not for cause, the notice
obligation will revive. The courts may well look at the question of whether the
mass firing was intended to evade the Act.
The regulation also provides for a "snapshot" test for determining the
number of employees in an employer's workforce or at a single site of
employment for purposes of determining coverage. The "snapshot" test is simply
to look at the employer's employment levels on the date notice is due to be
given. An alternative test also is suggested for those unusual situations in
which the results of the snapshot test are not representative. Under the
alternative test, an employer or employees may look to a date or to a time
period in which employment levels were more representative.
A number of commenters suggested that the alternative test be abandoned
because it might create too many ambiguities and because it might lead to
second guessing in many situations. DOL believes that there are situations in
which the workforce at a single point in time may be genuinely unrepresentative
and may lead to inappropriate coverage or lack of coverage, such as situations
where workers are temporarily transferred among plants. Because there is a need
to provide protection to both employers and workers in these cases, the final
regulations retain the alternative test. In so doing, the final regulations
have been revised to stress that the alternative test is intended to be used
only in unusual situations. It is not to be applied in cases where a workforce
has shrunk through ordinary attrition. Language has been added to the final
regulations to make it clear that the alternative test is only to be used in
unusual situations and is not to be invoked for the purpose of evading WARN.
Another commenter disagreed with both the snapshot and the alternative
tests. The commenter argued that the employer's workforce should be determined
before notice is due to be given. The commenter suggested a bright line test
for determining coverage: an employer should be covered if, at any time before
an employment loss, it had 100 or more workers. While, from a practical point
of view the employer probably must look at its workforce on the date on which
it must decide to give notice, the Department concludes that the use of the
date on which notice is to be given is a reasonable date to use and is more
easily applied than any alternative date. The commenter's suggested test poses
serious problems because it does not permit legitimate shrinkage of the
workforce due to attrition to be taken into account and since it does not apply
to measuring the workforce at a single site of employment for purposes of
determining whether mass layoff thresholds have been met.
Questions were raised with regard to whether temporary employees are to
be counted when determining whether the closing/layoff threshold is reached. As
stated earlier, there is no exception for counting temporary employees in the
law or the regulations. Part-time employees, as defined in WARN, are the only
workers that are not counted when making this threshold determination.
Temporary employees, unless they are part-time, should, therefore, be included
in the calculation.
Several commenters raised a related issue not covered in the
regulations. They suggested that an exception for government ordered closings
be included in the regulations. No language recognizing such an exception
appears in WARN and the Department is reluctant to create such an exception.
However, some government-ordered closings may constitute unforeseeable business
circumstances to which reduced notice applies. This approach is supported in
the legislative history. (133 CONG REC S9435 (daily ed. July 8, 1987) (remarks
of Sen. Kennedy)). Although this treatment will lead to after the fact notice
in some cases, it also will lead to the provision of some notice to workers
affected by the closing. These workers have a legitimate need for notice,
particularly for notice of whether the closing will be a permanent or temporary
closing.
Some commenters discussed several types of governmental actions which
they argued should be treated as government ordered closings. DOL agrees that
those closings which are the direct result of governmental action and which
occur without notice should be counted as government ordered closings to which
after the fact notice is applicable. Examples of such closings would be the
closing of a restaurant by a local health department or the closing of nuclear
power plant by the Nuclear Regulatory Commission. Other agencies do not take
such direct action. For example, the Occupational Safety and Health
Administration and the Environmental Protection Agency take enforcement actions
which might result in the closing of a plant by the employer either to remedy
the violation or because it cannot continue to operate. These agencies do not,
however, directly order the closing of the plant and they usually give some
notice of the violation and an opportunity to contest the findings. Such
closings, although they may result from a government action, are not government
ordered and are not subject to the same treatment. (Depending on the length of
the notice given, a claim that the closings qualify for reduced notice under
the unforeseeable business circumstances exception may be available.) A
commenter also suggested that terminations of government contracts should
qualify as government ordered closings. In most cases, there is some notice of
the government's intent to terminate a contract, even if the termination is for
cause and, for the reasons stated above, these contract terminations should not
be treated as government ordered closings.
The Department notes an important difference between the closings
discussed above and the absolute closing of a savings and loan institution by
the FHLBB. In the case discussed above, the employer remains in control of its
business. The employer can remedy the conditions that caused the closing and
reopen the business. In the cause of an absolute closing or shut-down of a S
& L, in contrast, the previous ownership is ousted from control of the
institution and the FSLIC assumes control of the enterprise. In this case,
there is no employer to give notice and the after the fact notice requirement
cannot be imposed, since the S & L employer has been removed.
(b) Section 639.5(b) Transfers This section discusses the
application of section 2(b)(2) of WARN which excludes certain transfers from
the definition of employment loss. It discusses what kind of transfer offer
meets the statutory requirement, the definition of "reasonable commuting
distance" and discusses the operation of the provision relating to transfers
beyond a reasonable commuting distance.
A number of commenters criticized the inclusion in the regulations of
the requirement that, in order to qualify as a transfer to which the exclusion
applies, a transfer must be to a job that is "substantially equivalent in terms
of pay and working conditions." That language was adopted because of the use of
the term "equivalent position" in the Senate Report on S. 538. (S. Rep. 100-62,
100th Cong., 1st Sess., 23, 69-70 (June 2, 1987).) The transfer provision in
the Senate Bill differed substantially from the present transfer provision in
WARN. The Provision in the Senate Bill was an exemption to coverage involving
the transfer of "substantially all" of the affected workers with no more than a
two-week break in employment. The WARN transfer provision focuses on the
individual worker and permits a break in employment of no more than 6 months.
The Department has found nothing in the legislative history to explain these
changes. The Department agrees that the language of the transfer provision is
not consistent with the definition of employment loss, to which the break in
employment provision appears related. The Department concludes that its earlier
reliance on the legislative history is not supported by the later changes in
the language of the transfer provision. The "substantial equivalence"
requirement has, therefore, been deleted from the final regulations. Consistent
with the earlier discussion of the law of constructive discharge, language has
been added to the final regulation to state that a job offer which constitutes
a constructive discharge constitutes an employment loss for purposes of WARN.
Several commenters criticized the adoption of the Internal Revenue
Service (IRS) definition of "reasonable commuting distance" as the definition
of the same term for WARN purposes. Some commenters suggested other factors
that should be added to the definition. These included industry practice, a
comparison of the employee's pre- and post-commuting times, transportation
costs in the area and the availability of alternate forms of transportation,
public transportation and car and vanpools. One commenter suggested that the
regulations should state that transfers within a metro-wide area are always
within a reasonable commuting distance. Other commenters suggested the adoption
of a standard, such as the 30 miles/45 minutes "rule of thumb" contained in the
Senate Committee Report on S. 538. (S. Rep. 100-62, 100th Cong., 1st Sess., 23
(June 2, 1987).) One commenter suggested that the regulation should permit the
employer to rely on a written acknowledgment from the worker that the commuting
distance is reasonable.
The Department borrowed the IRS definition because it appears to be
appropriately general to permit considerable flexibility in arriving at a
determination of what constitutes a reasonable commuting distance. In doing so,
the Department did not intend to adopt all the IRS interpretations that apply
to situations not directly relevant to WARN. The language of the final
regulation has, therefore, been revised to eliminate specific reference to the
IRS regulation. DOL believes that the IRS definition encompasses all of the
factors discussed by the commenters. The Department notes that the
determination of what is a reasonable commuting distance may be strongly
influenced by industry practice or the provisions of collective bargaining
agreements. While setting a "rule of thumb" has some appeal, DOL has decided
not to do so because any such role could be inappropriate in a large number of
situations and may cause more confusion than it eliminates. Similarly,
establishing a rule of thumb that transfers within a metropolitan area are
always within a reasonable commuting distance is inappropriate, although such
transfers will usually meet the definition. In the case of the specific
commenter, it appears that the company's collective bargaining agreements
recognize the metropolitan area as an area within which transfers are
permissible. In that case, any transfer within the metropolitan area would be
deemed to be within a reasonable commuting distance. While an employer may seek
to obtain written acknowledgments that a transfer is within a reasonable
commuting distance, adopting that practice as a rule poses three problems:
First, it may be seen to require employers to adopt certain employment
practices; second, it will not provide an employer any protection if workers
refuse to sign the acknowledgment; and third, the employer might not find out
that not enough workers will sign the acknowledgment until after the time to
give notice has passed, thus possibly becoming liable for failing to give
notice.
(c) Section 639.5 Temporary Projects or Facilities This section
discusses the exemption from notice in section 4(a)(1) of WARN. Under that
exemption, no notice is required to be given when a plant closing or mass
layoff occurs because of the closing of a temporary facility or the completion
of a temporary project or undertaking, and the affected workers were hired with
the understanding that their employment was limited to the duration of the
facility or project. Since such an understanding could arise in a variety of
ways, the proposed regulation specifies reference to employment contracts or
local or industry employment practices, but leaves the burden of proof to
employers. The regulation also discusses some examples of what do and do not
constitute temporary projects.
Some commenters, representing the construction industry, requested an
exemption for their industry. DOL does not believe that industry-specific
exemptions from WARN notice requirements are appropriate or justified. The
construction industry and similar industries, including the shipbuilding
industry and the roadbuilding industry, will receive appropriate treatment
under the temporary projects exemption. To the extent that their workforces
only work on a project-specific basis, the employers are exempted from having
to give notice under the Act and the regulations. To the extent that they
employ workers on a more permanent basis, an exemption would defeat the purpose
of WARN.
Several commenters opposed the imposition of a temporal limitation in
the definition of "project". They pointed out that certain projects, like dams,
take years to complete. The discussion of the duration of a job in §639.5
(4) was not intended to suggest a time limitation on temporary projects. It was
intended to respond to comments that suggested that certain long-term
contractual arrangements also should be considered temporary projects.
Nonetheless, that point can be made without reference to the duration of the
contract and the final regulation has been revised to eliminate the reference.
A commenter criticized the same provision, arguing that long-term government
contracts can be cancelled with less than 60 days' notice and that employers
should be absolved from giving notice in that situation. DOL disagrees with
this analysis. The temporary projects exemption applies to the nature of the
project, not to the length of the notice given when it is terminated. If an
employer receives less than 60 days' notice of cancellation, it may be able to
give less than 60 days' notice under the unforeseeable business circumstances
exception.
Another commenter pointed out that to qualify as a temporary project, a
project must be for a "defined and limited" period and must have been begun
with "an announced and ascertainable duration and a terminal point". DOL
generally agrees with this characterization of the statutory requirement. It
must be recognized, however, that the duration and terminal point of many
temporary projects may not be capable of being precisely defined at the
beginning of the project due to the vargaries of other conditions and other
factors. What is important is that it be clear at the outset that upon the
completion of some defined undertaking, the project will be complete.
Several commenters opposed the use of the word "clearly" when describing
the workers' understanding that a project is temporary. Another commenter
opposed the assignment to employers of the burden of proof of the existence of
the understanding that the project is temporary. The word "clearly" comes from
the description of the Congressional understanding of the way the exemption
would work in the Conference Report on H.R. 3. (H.R. Rep. No. 100-576, 100th
Cong., 2d Sess., 1051 (April 20, 1988)). Although it is true that the statute
does not mention the burden of proof as it does in other instances, it is
reasonable to assign the burden to the employer in this case because the
employer is seeking an exemption from the general rule of 60-day notice (or,
legally speaking, is asserting an affirmative defense) and because, in the
nature of the language of the exemption, it is the employer that must prove
that it communicated the nature of the project. The final regulation has been
revised to make it clear that the employer must show that it communicated to
its employees the temporary nature of the project or facility. The final
regulation also has been revised to make it clear that the test of clear
communication focuses on the understandings of the affected employees in
general, not on whether each individual employee understood the temporary
nature of the project or facility.
Another commenter supported the approach taken in the regulation,
arguing that if the worker understood that he/she would be transferred to
another project at the completion of the work, the exemption does not apply.
DOL agrees with this formulation. The last point is particularly important.
Commenters in the shipbuilding industry referred to their "core staff" when
describing their operations which the commenters claimed were temporary
projects. While the Department agrees that the projects described in the
comments qualify as temporary projects, if the term "core staff" refers to
workers who remain on the payroll and move from project to project, the
temporary project exemption would not apply to those workers because they would
not understand that they had been hired to work on a particular project.
Some of the comments suggested that the commenters interpreted the
regulation to require written notice that the job is a temporary project and
insisted that the regulations should recognize industry practice. DOL believes
that these commenters have misread the regulation, which specifically refers to
"the employment practices of an industry or a locality". Reference to
collective bargaining agreements as a source of evidence of the understanding
that the project or facility is temporary also has been added in the final
regulations.
One commenter suggested a form of written notice to workers which
employers might use to reflect the understanding that the work is on a
temporary project.
Workers on this project are being hired on a project-only basis. When
this contract is completed, your job will be terminated. At that time, you may
or may not be offered another job on a different project as needs dictate.
Such written notice is not always required by WARN since industry
practice may be sufficient to demonstrate that workers understand that their
jobs are on temporary projects. It may, however, be useful to some employers to
give written notice. To provide assistance to those employers who may wish to
give written notice that a job is on a temporary project, DOL has reviewed the
commenter's proposed language. While the last sentence might be considered
confusing, DOL understands that in the construction and similar industries
workers often work for the same employer on different projects. In light of
that fact, the notice as a whole appears to adequately convey the temporary
nature of the job.
Another commenter suggested that the words "or project" be added to
clarify the example in §639.5 (3). The Department agrees and has so
revised the final regulation.
A commenter suggested that the temporary projects exemption should
apply to depletable resources. This does not appear to be an appropriate
extension of the exemption since depletable resources may last for so long a
time that they cannot be said to have a termination date, even though
eventually the resource may run out.
A commenter asked that the regulations include transportation projects
in the regulation. Another commenter asked that it be made clear that the
examples in the regulation are not inclusive. DOL agrees with the second
commenter; the purpose of the example in the regulation (as with exemples in
other parts of these rules) is to be illustrative, not to include every
industry that might work on temporary projects. The Department also agrees that
roadbuilding projects may qualify as temporary.
A commenter asked that the regulation be clarified as to the
construction industry to acknowledge that the completion of a project may
result in a layoff from a job but not a separation from the industry. DOL
assumes that this is true for most industries that work on temporary projects,
but has decided not to revise the regulations to reflect this fact.
The FHLBB stated that when it closes down a savings and loan
institution, it sometimes rehires the employees of the closed institution to
work on closing down the bank. The FSLIC rehires the workers with the
understanding that their work will only last until the affairs of the S & L
are wound up, although the time that this task will take is not certain at the
time the workers are rehired. The FHLBB suggested that these employees should
be covered under the temporary projects exemption. DOL agrees, under the
circumstances stated, that these workers are covered under the temporary
projects exemption.
A commenter from the trucking industry suggested that the temporary
projects exemption should cover "casual" workers in that industry, that is,
workers who are hired on an "as needed" basis when freight volumes increase and
are laid off indefinitely subject to recall. The Department does not agree that
these workers, while their work may be temporary, are working on a temporary
project, which is a distinct undertaking not simply an increase in already
existing and continuing work. It appears from the description of these workers
that most of them will be part-time workers for WARN purposes (i.e., they will
work less than 6 months in any 12-month period) and thus are not counted in
determining whether a plant closing or mass layoff has occurred.
Another commenter suggested that the definition of temporary project
include project-specific fabrication or component manufacturing. To the extent
that workers are hired specifically and only to work on fabrication or
component manufacturing that relates to a specific project, they will be
working on a temporary project. To the extent that workers manufacture or
fabricate components for more than one project, they will not qualify. DOL
believes that the regulation adequately covers those workers in any industries
to which it is applicable.
(d) Section 639.5(d) Strikes and Lockouts Exemption This section
discusses the strikes and lockouts exemption of section 4(d) of WARN. That
exemption provides that notice is not required to be given where a plant
closing or mass layoff "constitutes" a strike or lockout not intended to evade
the requirements of the Act. Notice is also not required when an employer
permanently replaces "a person who is deemed to be an economic striker" under
the NLRA. The exemption provision in the Act also indicates that nothing in
WARN affects judicial or administrative rulings relating to the hiring of
permanent replacements for economic strikers under the NLRA. Because this
language is so closely tied to another law, administered by another agency
having expertise in this area, DOL has chosen not to attempt any extensive
regulatory explanation of this provision.
The Department solicited comments on issues related to strikes and
lockouts. One commenter recommended that the regulations should include the
definition of lockout which appears in the Conference Report on H.R. 3, i.e., a
lockout occurs when, for tactical reasons relating to collective bargaining, an
employer refuses to utilize some or all of its employees for the performance of
available work. (H.R. Rep. 100-576, 100th Cong., 2d Sess., 1051 (April 20,
1988).) The Department agrees, and has included this definition in
§639.5(d). Consequently, a layoff that occurs in response to a decrease in
orders, and thus a lack of work, in anticipation of a possible labor dispute
cannot be characterized as a lockout.
The Department also is aware that lockouts may occur for defensive
reasons in the course of a labor dispute. The Conference Report definition does
not appear to take account of that possibility. In the final regulations, the
definition of lockout has been modified to cover defensive lockouts that occur
during labor disputes.
Several commenters objected to the inclusion of the phrase "in the
normal course of collective bargaining" in the regulation, arguing that it
could be construed to exclude sympathy or wildcat strikes from the coverage of
the exemption. The Department agrees that this construction is possible but was
not intended and has deleted the phrase. Whether a strike or other form of
concerted activity will fall under this exemption is ultimately a question
which will have to be decided under the NLRA or other applicable laws.
A commenter suggested that the regulations should make it clear that
work slowdowns also are included under the strikes/lockouts exemption. This is
a complex area of law under the NLRA and other federal statutes. Because other
agencies with responsibility to administer these statutes regularly are
involved in these areas, the regulations will not address the issue.
A commenter questioned whether notice is required when an employer
permanently shuts down or relocates an operation after the commencement of a
lockout. The exemption for a lockout is applicable only if the closing or
layoff constitutes a lockout. If, after the commencement of a lockout, another
decision is made which results in employment loss for a sufficient number of
workers (including locked-out workers), as might occur if an employer decided
to relocate, notice would be due based on the new circumstances.
A commenter suggested that the regulation should be revised to provide
that an employer need not give notice when replacing an unfair labor practice
striker since it will be required to rehire that worker at the end of the
strike. WARN specifically mentions the permanent replacement of economic
strikers but provides no other exceptions for notice of replacement for other
kinds of strikers. Also, as discussed above, the Department does not view the
strikes/lockouts exemption as applying to situations in which plant closings or
mass layoffs are ordered because of other conditions than the particular strike
or lockout. For these reasons, and because the status of strikers raises many
complex questions under the NLRA and other federal laws, the Department has not
revised the regulations in the manner suggested.
A commenter suggested that the regulations provide for some method to
determine whether a lockout is intended to evade the purposes of the Act. The
commenter suggested that if an employer remains closed for 4 months, it should
be required to demonstrate an intent to reopen. The Department does not view
this as a practical suggestion, since WARN provides no administrative mechanism
for monitoring compliance. Also, given the complexities of the collective
bargaining process, DOL can see no basis for imposing arbitrary time limits on
the length of strikes or lockouts.
In the preamble to the proposed regulations, the Department also
indicated its intent to provide in the final regulations that notice is due to
non-strikers at the site at which the strike is occurring and to provide that
the strikes/lockouts exemption does not apply to plant closings or mass layoffs
that occur at other sites as an indirect result of the strike. It also was
indicated that the regulations would be clarified to indicate that the
unforeseeable business circumstances exception may well apply to the indirect
effects of strikes. The Department invited comments on these issues.
A number of commenters opposed notice to non-strikers. The commenters
gave a number of reasons for their opposition, including: (1) The NLRA only
requires a union to provide 60 days' notice of contract termination or
modification and thus the employer may not know that the strike might happen in
time to give WARN notice. (2) The NLRA requires employers to negotiate in good
faith and notice might be used as evidence of a lack of good faith. (3) The
strike or lockout will generally be for 6 months or less and notice will not be
required. (4) The type of employment loss that will occur in a strike situation
is not the same type that WARN was intended to address, i.e., the kind of loss
that requires planning to get a new job or training. (5) Requiring notice will
lead to "preventive" notices or to rolling or periodic notices that WARN seeks
to avoid. (6) Since the union alone decides to strike, it makes no sense that
Congress intended to cover this situation; also, it would require notice to the
union that initiated the strike. (7) Requiring notice to non-strikers gives
unions a powerful weapon to expand the impact of strikes and is inconsistent
with WARN's philosophy of neutrality with respect to labor law.
While the Department recognizes that the comments raise several good
policy arguments for application of the strikes/lockouts exemption to
non-strikers, at least at the plant at which the strike occurs, the Department
believes that the legislative history is clear that non-strikers were intended
to receive notice. During the Senate debates on the bill, Sen. Quayle offered
an amendment that would have extended the exemption to non-strikers. (134 CONG.
REC. S8667 (daily ed. June 28, 1988) (remarks of See Quayle)). Sen. Metzenbaum,
the floor manager of the bill, opposed the amendment and it was defeated. (134
CONG. REC. S8669 (daily ed. June 28, 1988) (remarks of Sen. Metzenbaum)). The
final regulations contain language making it clear that notice is due to
non-strikers. Where a union which is on strike represents more than one
bargaining unit at a single site, non-strikers include the non-striking
bargaining unit(s). Notice is also due to those workers who are not part of the
bargaining unit which is involved in the labor negotiations that led to the
lockout.
The Department notes that if, as a commenter pointed out, most strikes
do not last over 6 months, no notice is required under WARN for temporary
layoffs that last 6 months or less. Employers should exercise care in deciding
not to give notice for this reason in a strike situation, since, as discussed
earlier, WARN does apply if the layoff is extended beyond 6 months and the
extension is not caused by business circumstances not reasonably foreseeable at
the time the layoff was announced.
Commenters also urged, if the strikes/lockouts exemption is not to apply
to plants other than the plant at which the strike is occurring, that the
regulations state that the unforeseeable business circumstances basis for
reduced notice applies. The Department agrees that it is generally the case
that strikes will not be foreseeable. The Department also acknowledges that the
unforeseeable business circumstances exception to the 60-day notice requirement
may well be applicable in most situations where a strike has effects at other
plants, either other plants of the same employer or other plants of other
employers. The unforeseeable business circumstances exception equally may apply
to the plant at which the strike is occurring. The Department also notes that
the "faltering company" exception may also apply in strike/lockout situations
and has modified the final regulation accordingly.
The final regulations have been revised to make it clear that the
exemption does not apply to the effects of strikes or lockouts at plants other
than those at which the strike or lockout actually is occurring and to make it
clear that the unforeeable business circumstances exception to the 60-day
notice requirement may be applicable to these direct and indirect effects and
to layoffs at the struck plant.
(7) Section 639.6 Who Must Receive Notice Notice must be given to
affected employees' representatives, directly to unrepresented affected
employees, to the State dislocated worker unit, and to the chief elected
official of the unit of local government. Section 639.6 of the regulations
clarifies who is to receive notice in each case. The prefatory paragraph
describes the general rule and discusses the provision in section 2(b)(1) of
WARN relating to the status of employees of the seller in a sale of all or part
of the business. This discussion has been revised to make it clear that the
provision preserves notice rights, but creates no other employment rights and
that the technical termination that may be deemed to occur upon the
consummation of the sale does not, in itself, create notice rights. Other than
the comments relating to the business sale provisions of WARN, already
discussed in the review of §639.4(c) of these regulations, there were no
comments on this section and no other revisions have been made.
(a) Section 639.6(a) Notice to Representatives of Affected Employees
This section states the rule that notice must be served on the chief
elected official of the exclusive representative or bargaining agent
representing affected employees. It also recommends that, if this person is not
an official of the affected local union, notice also be served on the local
official.
Commenters suggested that the regulations be revised to clarify that if
an employer provides notices to a union, it is not required to provide notice
to the individual workers represented by the union or liable if these workers
do not receive notice. DOL agrees that both these propositions are correct, but
believes that the regulations adequately cover these points.
A commenter suggested that the regulations clarify that in right to
work States, notice to the union is effective as notice to both the members of
the union and to those non-members who it represents. Another commenter
suggested that non-members of a union should receive individual notice. The
Department agrees with the first comment, although it applies in non-right to
work States as well. The Department believes that this duty to represent
non-members in appropriate situations is inherent in the definition of
"representative" in §639.3(d) of this Part. WARN provides that, where
there is a representative of affected employees as of the time of notice, an
employer must provide notice to that representative rather than directly to the
workers. Thus, the second suggestion would not be appropriate.
Commenters suggested that an employer should be required to give notice
only to one individual on behalf of a union. While this proposition is
generally correct, there may be situations in which a collective bargaining
agreement recognizes more than one entity, for example, both a national and a
local union, as the exclusive representative. In such cases, notice to the
chief elected officer of both entities would be required.
A commenter suggested that the regulations should provide that a union
must give notice to the affected employees it represents within 3-5 days and
that a penalty should be imposed upon the union for failure to give notice.
WARN contains no provisions imposing any notice obligations on unions. The
suggestion cannot, therefore, be adopted.
(b) Section 639.6(b) Notice to Affected Employees This section has
been substantially revised in accordance with the previous discussion of the
comments on notice to "bumpees" under §639.3(e). The final regulations
provide that notice is required to be given to employees who may reasonably be
expected to experience an employment loss, including those workers who lose
their jobs because of bumping rights and other factors, to the extent that they
can be identified at the time notice is required to be given. If, at the time
notice is required to be given, the employer cannot identify the employee who
may reasonably be expected to experience an employment loss due to the
elimination of a particular position, it is acceptable for the employer to
provide notice to the incumbent in that position. The rule also provides that
affected employees entitled to notice include part-time as well as full-time
employees, since WARN specifically excludes part-time employees from being
counted for threshold determination purposes but does not exclude them
otherwise.
It is clear that such factors as voluntary separations, early
retirements and transfers which occur after notice is given may make it
difficult to determine which employees will actually experience employment
loss. Commenters asked if, in a situation where it is uncertain who will be
terminated or laid off, it is acceptable to give notice to more employees than
will actually experience employment loss. Where it is not possible at the time
notice is required to be given to determine who may reasonably be expected to
experience employment loss, it may also be adviseable for an employer to give
notice to other workers who may lose their jobs as the result of the seniority
system, both to forewarn them and to avoid potential liability. However, it is
not appropriate for an employer to provide blanket notice to workers. As noted
earlier, intermediate bumpees need not receive notice if they have bumping
rights they can exercise.
A commenter suggested that the regulations be clear that there is no
obligation to notify employees of independent contractors and that such
employees are not included in the "employee count" for threshold determination
purposes. The Department concludes that this principle is adequately covered in
the definition of "affected employee" in §639.3(e).
A commenter opposed any requirement of giving notice to part-time
employees. For the reasons just stated, DOL disagrees that part-time employees
are not entitled to notice; part-time employees have the same need to find
other work or training as full-time workers.
(c) Section 639.6 Notice to the State Dislocated Worker Unit States
are required, under section 311(b)(2) of the Job Training Partnership Act and
section 6305(a) of EDWAA, to have operating disclocated worker units as of July
1, 1989. To meet the requirement for notice to these units before they become
fully operational and to permit States to set in motion existing worker
adjustment assistance programs, the regulations specify that notice served upon
the State Governor constitutes service upon the State dislocated worker unit.
A commenter suggested that service on the Governor should be sufficient
service on the State dislocated worker unit and that DOL should publish a list
of State dislocated worker units. DOL believes that the regulations provide
appropriate recognition of the fact that all States will not have finally set
up their dislocated worker units by the time these regulations are published
and of the need for service of notice on the unit at the same time that workers
or their unions get notice so that the States can engage in the rapid response
activities that are stressed under EDWAA.
(d) Section 639.6(d) Notice to the Chief Elected Official of the
Affected Unit of Local Government Questions were raised about the identity
of the chief elected official of a unit of local government, given the variety
of local government structures. In particular, clarification was sought in the
situation where local government is run by an elected board. The regulations
clarify this situation by providing that the chairperson of the elected board
is to receive notice.
(8) Section 639.7 Content of Notice (a) Section 639.7(a) Notice Must
Be Specific The proposed regulations provide that notice must be specific,
that conditional notice may be given in certain circumstances and that notice
must contain all of the elements required by the regulations.
The provision on conditional notice provoked numerous comments. Several
commenters supported this provision of the regulations. Other commenters
opposed it, claiming that the WARN language about ordering plant closings means
that notice must be unconditional and must be about a definite event. They also
argued that if an event is not foreseeable 60 days in advance, the
unforeseeable business circumstances exception should apply to it. The
commenters argued that conditional notice under WARN could be used to
legitimate kinds of notice which could be illegal under the NLRA. These
commenters raised concerns that a conditional notice requirement could lead to
"rolling" or overbroad notice and to liability for employers who fail to give
conditional notice. They suggested that optional notice providing useful
information to workers should be encouraged.
While acknowledging these views, there may nonetheless be situations in
which a plant closing or mass layoff are quite foreseeable if a known event,
such as the non-renewal of a contract, occurs. If the event and the
consequences are foreseeable, the unforeseeable business circumstances
exception cannot be available. If notice can be given only when the necessity
of the layoff becomes definite, the employer cannot avoid liability. The
Department believes that the best remedy for the problem is to permit
contingent notice to cover these cases. The final regulations have, therefore,
been revised to permit optional conditional notice to serve as compliance with
WARN, while narrowing the definition so that the commenters' concerns are
ameliorated. Thus, conditional notice is permitted only if there is a definite
event, like the renewal of a major contract, the consequences of the occurrence
or non-occurrence of which will definitely lead to a covered plant closing or
mass layoff less than 60 days after the event. The final regulations provide
that conditional notice may not be used to legitimate notices which would be
violations of other laws. Further, the regulations specify that conditional
notice is optional to avoid the problem of imposing liability on employers for
failing to give a conditional notice.
An example of a situation in which conditional notice might be
applicable was provided by one commenter, a utility. The commenter operates a
nuclear power plant which is the subject of some opposition. A referendum is
scheduled to take place to decide whether the utility should continue to
operate the plant. If the voters decide that the plant should be closed, the
utility may have to begin terminating workers fairly quickly after the
referendum occurs. In these circumstances, if a schedule of layoffs can be
determined 60 days in advance of the first layoff, conditional notice may be
advisable.
(b) Section 639.7(b)-(f) Elements of Notice These sections in the
proposed rule prescribed the elements which must be included in the notices to
each of the individuals or entities who are entitled to receive notice. A
number of commenters argued that the proposed rule imposed too many
requirements on employers and went beyond the requirements of the Act. Comments
were, in fact, received on each and every element of the notice. The commenters
argued that WARN does not require a specific form of notice and that only
simple notice is required under the Act; that the requirements can create other
grounds for suit for technical violations of the requirements; that the
requirements will discourage employers from providing longer notice and from
voluntary compliance. On the specific elements of notice, the commenters were
particularly opposed to any requirement that a specific date be given, claiming
that employers cannot anticipate a specific date when a layoff will take place
60 or more days in advance. The commenters also opposed identification of the
workers involved (in notice to unions) claiming that complex seniority systems
made such identification difficult. One commenter supported all the elements of
notice specified in the regulation and suggested that the name and address of a
company contact person be included in the notice to affected employees.
While the Act does not enumerate specific elements which should be
included in the advance written notice of an order for a plant closing or a
mass layoff, the purpose of providing notice to the parties mentioned in the
Act is to allow each of them to take appropriate action to facilitate training,
employment or other adjustments for affected employees. The content of notice
to each party is designed to provide information necessary for each of them to
take responsible action. The information requested is not difficult to obtain
and care was taken to keep the elements of notice to a minimum.
Nonetheless, DOL has reexamined the regulations to ensure that the
notice requirements are not overly burdensome on employers while providing
sufficient information to permit the other actors in the WARN process to
receive the full protection intended by the Act and to perform their functions.
Several changes, including clarifying language changes, have been made in the
final regulations. In recognition of the difficulty of identifying specific
separation dates for individuals 60 days in advance, the final regulations
provide for a 14-day period of flexibility. An employer may give a specific
separation date, the beginning date of a 14-day period during which the
separation is expected to occur or a combination of specific dates and 14-day
periods, if appropriate. This revision applies to the dates in the individual
workers' notices and to the date or schedule of dates in notices to
representatives and government units.
In the final regulations prescribing the elements of notice to unions,
the first and last elements have been combined. The requirement that unions be
notified of the identity of other affected unions, the requirement that
employers provide the number of affected employees and the requirement for a
statement about applicable bumping rights have been eliminated. In the final
regulations prescribing notice to affected employees, the requirement that the
notice state the name and address of the plant has been eliminated and a
requirement that the employer provide the name and telephone number of a
company contact person has been added.
The notice provisions for the State dislocated worker unit and the chief
elected official of the affected local government have been combined into one
paragraph in the final regulation, although separate notices still are required
by WARN for each. The first and last elements of notice have been combined and
the provision about the statement of bumping rights has been clarified.
In all of the notices, the requirement that the notice identify whether
the proposed action is a plant closing or mass layoff also has been eliminated
and the requirement has been revised to require that the employer state whether
the planned action is temporary or permanent and, if applicable, to state that
the entire single site of employment will be closed.
A new provision has been added to provide an alternative form of notice
to the State dislocated worker unit and to the chief elected official of the
affected local government. Under this alternative, an employer may provide an
abbreviated notice to these parties which states the name and address of the
plant at which the action is to take place, the name and telephone number of a
company contact person, the first data on which an employment action is
expected to take place, and the number of affected employees. All other
information required by the regulation must be maintained by the employer at a
readily accessible place for use by the State dislocated worker unit and the
local government. DOL believes that this alternative provides a reasonable way
to ease some of the perceived burden on employers.
DOL believes that the remaining elements of notice are important if the
parties are to receive notice which will provide them with the information they
need to take the appropriate actions to minimize the effects of the affected
employees' employment loss. The name and address of the plant and of a contact
person provides basic information to identify the employer who is giving
notice, the place at which the plant closing and mass layoff will occur and
someone to provide them with additional information, if needed. The date of the
layoff or schedule of layoff dates is essential to enable all recipients of
notice to understand when employment losses actually will occur. Whether the
planned action is permanent or temporary and the date on which it is to occur
are important pieces of information to enable workers and service providers to
plan and to make decisions about what kind of services workers may need and
when the services will be needed. The job titles of the positions to be
eliminated and the names of the workers holding those positions (or the numbers
of workers for the State dislocated worker unit and the local government)
enable unions and service providers to quickly identify the workers who will be
affected and the size and scope of the action and the services needed to
respond to it. The statement about whether bumping rights exist enables the
governmental actors to determine that the workers who will actually need
services may be difficult to determine at the outset. The name of each union
representing affected employees, and the name and address of the chief elected
officer of each union in the notices to State dislocated worker units and local
governments is needed for the governmental actors to be able to contact the
unions with which they will work to provide services. The statement about
whether the entire plant will close provides needed information about job and
general economic prospects in the local community and enables workers and the
State and local governments to more accurately gauge the kinds of actions that
will be needed.
DOL also agrees with commenters who were concerned that technical errors
in providing the information required in the regulation could lead to claims
that employers violated the Act. Language has been added to the final
regulation, in §639.7(a)(3), to make it clear that the notice must contain
the best information available to the employer when the notice is given. The
intent of adding this language is to attempt to prevent claims that might arise
when an employer makes what turns out to be a factual error because
circumstances later changed. DOL recognizes that in developing notices,
considerable amounts of information may be required to be reviewed and
considered by employers. While the Department expects employers to use their
best efforts to be accurate in providing the information required by the
regulations, DOL also recognizes that minor, inadvertent errors may be made.
The final regulations provide that such minor errors should not be the basis
for liability.
DOL notes that it is not the intent of WARN to interfere with
collective bargaining contract provisions calling for notice to employees or
their unions in advance of WARN's 60-day notice period. The content of notice
requirements provide for some flexibility where this situation exists. Such
long term notice need not contain all the elements required by this section as
long as the remaining information is provided in writing 60 days in advance of
the covered action. For example, where such long-term notice is given that
otherwise includes all required notice elements but does not identify a
definite termination date or 14-day period, the giving of an additional notice
specifying a termination date or 14-day period 60 days in advance of that date
or period constitutes full compliance with WARN.
In §639.7(d) of the proposed regulations, prescribing the
requirements of notice to affected workers, the regulations require that the
notice be "in language understandable to the employee". Several commenters
suggested that this statement be revised to make it clear that there is no
requirement that notice be in a language other than English. Other commenters
asked that the regulations be clarified to reflect that the standard is that
the notice be understandable to the average worker. It was not DOL's intention
that the regulations require that notices be in a language other than English
and the Department does not believe that the language of the proposed
regulation suggests such a requirement, so no change has been made. Employers
should, however, be aware that under various civil rights laws, notices of
various kinds have been required to be given in languages other than English
where substantial numbers of recipients of those notices primarily speak
another language. Employers whose workforces contain large numbers of such
workers may wish to consider whether to provide notices in a language other
than English. The Department agrees with those commenters who suggest a
standard of understandability to the average worker and has changed the word
"employee" to "employees" to make this point clearer.
(9) Section 639.8 How Is Notice To Be Served This section provides
that any reasonable method of serving notice is acceptable, as long as the
intended recipient has the notice in hand 60 days before the separation occurs.
Additionally, the regulation indicates that a ticketed notice fails to meet the
requirements of WARN. Commenters suggested that rules should be added to state
when mailed notice is deemed to be timely mailed or that mailed notice is
deemed served on the date it is postmarked.
Commenters also asked that the regulations state that a notice sent in a
pay envelope is deemed to be served on the date of the payday on which it is to
be delivered. Since WARN and the regulation focus on receipt of the notice and
since the time it will take for mailed notice to be received will vary with
local conditions and with the location of the recipient, DOL does not believe
that any additional rule for when notice is deemed served is appropriate.
Employers should mail notice far enough in advance, given local mail
conditions, so that the notice will be received 60 days in advance of the date
of the plant closing or mass layoff. Section 8(b) of WARN specifies that
mailing notice to the employee's last known address or inserting notice in the
employee's paycheck are acceptable methods of service. DOL does not view this
language as requiring that each employee actually receive notice 60 days in
advance of a covered event as long as the method of service is timed so that
the employees generally receive timely notice. For the same reason, deeming
notice to be served when postmarked will not ensure timely delivery. Similarly,
because notice served by insertion in a pay envelope may be delivered or mailed
or directly deposited in the worker's bank account with a pay stub being
delivered later, DOL does not think that an absolute rule deeming notice to be
served on the payday on which the paycheck is to be delivered is appropriate.
(10) Section 639.9 When May Notice Be Given Less Than 60 Day in Advance
The prefatory paragraph of the proposed regulation indicates that three
exceptions to giving a full 60 days' notice exist and that they are to be
construed narrowly. The paragraph also states that they are to be construed
narrowly. The paragraph also states that if one of the exceptions is invoked,
the employer must still give as much notice as is practicable, and must give
notice containing a brief statement of the reason of the reason for giving less
than 60 day's notice and the elements of notice required in §639.7.
Several commenters disagreed with the statement that all the exceptions
should be narrowly construed. Some of these commenters cited specific aspects
of the legislative history to show that the unforeseeable business
circumstances and natural disaster exceptions should not be narrowly construed.
The Department has reviewed the legislative history and agrees that it may not
have been appropriate to say that the unforeseeable business circumstances and
natural disaster exceptions should be narrowly construed. While the Conference
Report on H.R. 3 (H.R. Rep. No. 100-576, 100th Cong., 2nd Sess., 1049 (April
20, 1988)) may be read to suggest a narrow construction of the unforeseeable
business circumstances exception because of the various requirements for
proving the applicability of the exception that appear in the report, the
debates on the bill suggest that the exception was not intended to be narrowly
construed. (133 CONG. REC. S9435 (daily ed. July 8, 1987) (remarks of Sen.
Kennedy); 134 CONG. REC. S8856, S8857 (daily ed. July 6, 1988) (remarks of Sen.
Metzenbaum); 134 CONG. REC. H2370 (daily ed. April 21, 1988) (remarks of Cong.
Ford); see also H.R. Rep. No. 100-285, 100th Cong., 1st Sess., 16, 34-35
(August 8, 1987)). Particularly significant are the continued references to the
exception when questions were raised about how the bill would work. The
legislative history does indicate that the faltering company exception ws
intended to be narrowly construed. (H.R. Rep. No. 100- 576, 100th Cong., 2nd
Sess., 1048 (April 20, 1988)). In the final regulations, the reference to
narrow construction has been deleted from the prefatory paragraph. In
§639.9(b), covering the unforeseeable business circumstances exception,
the definition of what constitutes an unforeseeable business circumstance has
been revised to be more in line with the language of the Conference Report by
the addition of the word "dramatic". The language in §639.9(a), discussion
the faltering company exception has been revised to indicate that exception
should be narrowly construed.
(a) Section 639.9(a) The "Faltering Company" Exception This section
describes the "faltering company" exception in the language of the Conference
Report. (Id.). This exception requires that an employer must have been actively
seeking capital or business at the time 60-day notice was due to be given, that
there must have been a realistic chance to obtain the capital or business; that
if the capital or business were obtained it would have been sufficient to keep
the business operating for a reasonable period of time; and that the employer
must have believed in good faith that giving notice 60 days in advance would
have precluded the employer from obtaining the needed capital or business. The
regulation also provides that the employer's financial situation will be viewed
in a company-wide context.
A commenter suggested that the test for the "faltering company"
exception should be whether "similarly situated employers would have followed a
similar course of action" and that the regulation should clearly state that
failure to obtain the capital or business is not a factor under the test. DOL
believes that the first point is correct, or, stated another way, that an
employer must demonstrate that it exercised "commercially reasonable business
judgment" in its actions. The Department believes that the regulations reflect
this standard and has not changed them. The commenter's second point is
confusing since the exception requires that the business or financing must have
been sufficient to keep the company or the plant open for some reasonable time.
Thus, the need for notice will only be triggered if the employer fails to
obtain the business or financing it seeks.
Another commenter, representing the food marketing industry, objected to
the language that the "faltering company exception will be viewed in a
company-wide context". The commenter argued that since retail grocery stores
operate on slim profit margins, closing one store may save others and under the
regulatory language that would not be possible. DOL does not think this
language must be read as narrowly as the commenter does. Congress was concerned
with situations in which a company has substantial assets or cash which it
simply chooses not to use to save a faltering branch. If the whole position of
the company shows that the closing of one branch to save others was a
reasonable business judgment, the faltering company exception is available. It
should also be noted that, in some circumstances, it may be appropriate for a
company to make a judgment not to use its other assets to save a branch. In
this case, the company simply cannot avail itself of the faltering company
exception and it must give 60 days' notice.
The same commenter suggested a broad reading of the "faltering company"
exception so that grocery stores that run sales and try to attract customers
can avail themselves of the exception. The commenter argued that faltering
stores will lose employees and customers if they give notice, which will become
a self-fulfilling prophecy. The commenter also suggested that the regulations
should address cases in which secured creditors intervene and force the closing
or sale of one or more stores or in which creditors seek time to sell the
business before foreclosing.
The Department believes that the suggestion about running sales is too
broad for general application. Any business can make a general claim it was
seeking more customers or orders. The faltering company exception requires some
more specific efforts to get customers. If the store can show an unusually
great effort to attract customers and that there was valid reason to believe
that the customers would abandon the store if they knew it would close, the
exemption would appear to apply. On the questions about actions by secured
creditors, DOL thinks that if it can be shown that the creditors do not want
their efforts to be known, the exception would apply.
One commenter suggested that since WARN section 3(b)(3) merely requires
the employer to give a brief statement of the reasons for giving less than 60
days' notice, the regulations should follow the burden of proof model of Title
VII of the Civil Rights Act and impose the burden on the challenging party to
prove that the claim of exception was a pretext if the employer proffers a
sworn statement as part of the notice process. The commenter also suggested
that the rule should define the terms "good faith" and "reasonable". The
commenter also asserted that the rules create a much tougher standard than
Congress intended. DOL notes that the language the regulation comes directly
from the Conference Report, and that the statements about the burden of proof
are a reasonable interpretation of the Report's statements that the employer
must show that various of the elements of the exception are met. (Id). DOL does
not think that the Title VII model is appropriate since, in the case of the
assertion of an exception to full notice, the employer is in the position of
the proponent of an affirmative defense, i.e., the employer must prove that it
is entitled to use the exception. DOL believes that, by referring to
"commercially reasonable business judgments", the regulations do define
"reasonable" and "good faith" in the context of the faltering company
exception.
Another commenter asserted that the narrowness of the "faltering
company" exception will preclude any unionized company from using it because it
could lead to onerous information disclosure requirements under the NLRA. While
the Department is not the agency charged with expertise with respect to the
NLRA, DOL believes that the regulations accurately reflect the statutory
language and Congressional intent.
(b) Section 636.9(b) The "Unforeseeable Business Circumstances"
Exception This section also draws its language from the Conference Report
on H.R. 3. (Id.) The regulations define the exception as applying to
circumstances that are not reasonably foreseeable at the time 60 days' notice
would have been required. The regulation cites some examples of events which
might be unforeseeable business circumstances. It focuses the test for
determining whether business circumstances were reasonably unforeseeable on the
employer's commercially reasonable business judgment.
A commenter suggested that the test for the application of the
unforeseeable business circumstances exception is that an event could not
"reasonably" have been foreseen and that reasonableness should be determined on
an objective standard. The Department agrees with this formulation and believes
that the regulations provide an objective test by focusing on the commercial
reasonableness of the employer's actions.
The same commenter pointed out that the unforeseeable business
circumstances exception still requires that an employer give as much notice as
feasible. DOL agrees and has so provided in the regulation.
The same commenter pointed out the provision in the Conference Report
that the exception applies only where "it is not economically feasible to
require the employer to give notice and wait until the end of the notice period
before effecting the plant closing or mass layoff" (id.) and asserted that the
burden is on the employer to prove feasiblity. The Department believes that the
quoted language simply describes an element of the factual predicate that must
extist for an event to be an unforeseeable business circumstance; but does not
create any kind of separate test. DOL believes that the quoted language merely
requires an employer to show that a "sudden, dramatic and unexpected" event
occurred which precipitated a covered employment action, which, in light of the
circumstances at that plant, could not have been postponed. The test of whether
the action could have been postponed is one of commercially reasonable business
judgment.
The Deparment solicited comments on examples of unforeseeable business
circumstances that might be included in the regulations as illustrating
principles applicable to employers generally, and the circumstances in which
they might apply. Commenters suggested that DOL include as examples of
unforeseeable business circumstances strikes or lockouts elsewhere, loss of or
failure to award contracts, unexpected major market downturns, fires, changes
in prices and costs, declines in customer orders, State and local regulatory
changes, cases in which layoffs become larger than originally expected, loss of
raw materials, loss of financing, legislation, court decisions, unavailability
of a ship to be repaired, force majeure, actions related to public health and
safety, other, and "secondary effects of economic conditions". While the
commenters did not respond to the second part of the invitation and state any
generally applicable principles, DOL agrees that many of these factors may
constitute unforeseeable business circumstances, and has included four examples
in the regulations.
What emerges from consideration of the variety of factors mentioned by
the commenters is that it is not appropriate to develop a rule defining certain
conditions as per se unforeseeable business circumstances. While many of the
factors suggested by the commenters will, in most cases, be unforeseeable
business circumstances, for example, strikes at another plant of the same
company, one can conceive of situations in which they would not be reasonably
unforeseeable, as where the strike is part of a union busting strategy. Some of
the factors mentioned do not seem unforeseeable in many cases. For example,
regulatory changes are often preceded by lengthy notice and comment procedures,
often have delayed effective dates and sometimes have time to attain compliance
built in. The effects of such regulations will not be unforeseeable. The same
is true of legislation, which often has delayed effective dates and is the
subject of lengthy public debate. Similarly, while the timing and content of
court decisions may not be foreseeable 60 days in advance, the execution of the
judgement may be delayed for a long time for a variety of reasons and prudent
businessmen make provision for the consequences of adverse judgments. Finally,
loss of contracts, particularly government contracts may be preceded by notice
and by the opportunity to respond. (It also must be pointed out that DOL does
not understand the last of the factors listed and does not mean to suggest
approval of this factor.)
What is important is that the circumstance be "sudden, dramatic and
unexpected". Each claim of unforeseeable business circumstances must be
examined on its own merits, in these terms and in terms of whether the employer
reasonably (exercising commercially reasonably business judgment) could not
foresee that the even would occur or that it would have the effects it had. The
FHLBB suggested that persons or institutions that take over ailing savings and
loan institutions should be considered covered under the unforeseeable business
circumstances exception since they may not know all of the problems they face
in taking over the ailing institution. While there will be circumstances in
which surprise discoveries of bad debts or assets may require covered
employment actions to be ordered in less than 60 days and where the
unforeseeable business circumstances exception will clearly apply, the
Department cannot agree to a blanket application of the exception. These buyers
must exercise commercially reasonable business judgement in discovering the
problems of the institution it is acquiring and in deciding what employment
actions to take in light of these problems; they may not simply rely on the
fact that their action was assisted by the Federal Government.
(c) Section 639.9 The "Natural Disaster" Exception This section
discusses the exemption for plant closings and mass layoffs caused by natural
disasters. The regulation lists some of the conditions that are natural
disasters. It provides that the natural disaster exception applies to the
direct results of a natural disaster, while the indirect results of a natural
disaster may be covered under the unforeseeable business circumstances
exception. It also provides that notice must be provided when a natural
disaster causes a covered closing or layoff, even if the notice is after the
fact.
Several commenters opposed the provision of the regulations that applies
the natural disaster exception only to events directly caused by natural
disasters. These commenters cited remarks in the floor debates by the sponsor
of the natural disaster exception amendment suggesting that the exception
applies to the "downstream" effects of natural disasters. (134 CONG. REC. S8687
(daily ed. June 28, 1988) (remarks of Sen. Dole)). These commenters did not
discuss the entire debate on the amendment. The amendment originally offered
specifically included the direct and indirect effects of natural disasters.
(Id. at S8686). The floor manager opposed the amendment because of the language
about indirect effects. (Id. at S8687 (remarks of Sen. Metzenbaum). The
amendment was withdrawn, the language stricken and the amendment accepted. (Id.
at S8688). DOL thinks that the legislative history, considered in its entirety,
supports the position taken in the proposed regulations and no change has been
made in the final regulations.
Other commenters objected to the requirement that after the fact notice
be given when a natural disaster causes a plant closing or mass layoff. In this
regard, the statutory language may be confusing. The natural disaster
exception, section 3(b)(2)(A), begins with the words "[n]o notice under this
Act shall be required". On the other hand, the final subsection of section 3(b)
of WARN, section 3(b)(3), which, by its terms, applies to the entire section,
to all the exceptions, requires that as much notice as practicable be given
when one of the exceptions is invoked. The Department believes that the
approach that it has decided upon is the best approach in this ambiguous
situation since it is consistent with the needs of workers to have information
on whether their jobs will continue to exist and how long they may be without
work and thus is consistent with the intent of WARN to provide such information
to workers. The final regulation has been revised to conform to the statutory
language and to make it clear that such after the fact notice need only contain
such information as is available to the employer at the time the notice is
given.
(11) Section 639.10 When May Notice Be Extended This section covers
the length of time after the date (or the ending date of the 14-day period)
specified in the notice for which the notice is valid. To ensure that the
parties who are due notice have the most current and helpful data available
and, thus, can make appropriate plans, additional notice is due if the original
date or the ending date of the 14-day period is not met. If the postponement is
for less than 60 days, the notice need only contain a reference to the earlier
notice, the date to which the planned action is postponed, and the reasons for
the postponement. This type of notice will provide the parties with needed
information and be less burdensome to the employer. If the postponement extends
for 60 days or more, the additional notice should be treated as new notice and
meet the specified requirements.
Several commenters disagreed with this interpretation, arguing that
there is no specific statutory requirement to support it; that a 180-day period
is more in keeping with the rolling 90-day aggregation period for determining
employment loss under section 3(d); that if any "secondary" notice is required,
posting general notice on a bulletin board should be sufficient; that the
reasons for extending the layoff date may not enable the employer to make
precise calculations of how long the plant may remain open; and that such
notices might require the disclosure of confidential information. One commenter
supported the approach taken in the regulations and suggested that the
regulations make it clear that the short term, less than 60-day postponement
notice is mandatory.
DOL believes that the approach it has adopted is most consistent with
Congressional intent in two important respects. First, it furthers the
Congressional purpose that notice to workers provide the workers and
governmental authorities with specific information in order to react to a
dislocation event and to obtain new employment or training to minimize the
effects of that event. If workers are not informed of changes in planned
termination dates their planning will be disrupted and either they will run the
risk of losing other opportunities or the employer will lose employees who it
may need to carry on its operations. Secondly, DOL's approach is in accord with
Congress' express intent to prohibit rolling notice. (134 CONG. REC. S8680
(daily ed. June 28, 1988) (remarks of Sens. Kennedy and Metzenbaum)). The
Department also notes that some of the concerns expressed by the commenters
will be ameliorated by the provision that notices can identify a 14-day period
during which the layoff may take place. The Department does recognize that the
notice of short term postponements can create a burden on employers. The final
regulations have, therefore, been revised to make it clear that any form of
notice or method of providing the information about a postponement for less
than 60 days is acceptable as long as the information about the postponement is
effectively communicated to all the affected workers.
A commenter asked the following questions about the application of this
provision. If an employer gave notice on January 1, 1989 of a layoff scheduled
for December 31, 1989 and then realizes on December 15, 1989 that it can keep
open until January 15, 1990, is notice required to be given and, if so, must it
be 60 days' notice Under the regulations, the employer is not required to give
a new 60-day notice for a 15-day postponement; but it is required to inform its
employers of the postponement in any reasonable way which will get the
information to all affected workers. The commenter also asked if a new 60-day
notice was required on November 1, 1989 if the employer adheres to the original
closing date. The answer is no in the circumstances stated. One notice is
sufficient no matter how far in advance it is given if it contains the
information required in section 639.7.
(12) Effective Date Several commenters continued to oppose DOL's
"interpretation" of the effective date. These commenters suggested that the
final regulations should adopt a definition of the effective date provision of
section 11 of WARN that requires notice to begin to be given on the February 4,
1989 effective date of WARN for plant closings or mass layoffs that occur on
April 5, 1989. DOL believes that the course it took in the preamble to the
proposed regulations was the most correct and appropriate one. DOL recognized
that there were three supportable interpretations of the effective date
provision. The Department chose not to adopt any interpretation but simply to
inform employers of the interpretations and of their possible liability. DOL
continues to believe that the issue of the meaning of the effective date is a
purely legal issue that the courts will decide without giving any deference to
any interpretation that DOL might adopt. Thus, any interpretation that might be
adopted possibly could mislead employers to their detriment.
Regulatory Impact The final rule interprets the provisions of the
Worker Adjustment and Retraining Notification Act. It does not have the
financial or other impact to make it a major rule and, therefore, preparation
of a regulatory impact analysis is not necessary. See Executive Order No.
12291, 5 U.S.C. 601 Note.
At the time the interim interpretative and proposed rules were
published, the Department of Labor notified the Chief Counsel for Advocacy,
Small Business Administration, and made the certification pursuant to the
Regulatory Flexibility Act at 5 U.S.C. 605(b), that the rule would not have a
significant economic impact on a significant number of small entities. No
significant economic impact would be imposed by the rule.
Paperwork Reduction Act Pursuant to the Paperwork Reduction Act,
information collection requirements imposed by these regulations have been
approved by the Office of Management and Budget as a final rule under OMB No.
1205-0276, expiring December 31, 1990.
Public reporting burden for this collection of information is estimated
to vary from 64 to 168 hours for 960 responses with an average of 112 hours per
response, including the time for reviewing instructions, searching existing
data sources, gathering and maintaining the data needed, and completing and
reviewing the collection of information. Send comments regarding this burden
estimate or any other aspect of this collection of information, including
suggestions for reducing this burden, to the Office of Information Management,
Department of Labor, Room N-1301, 200 Constitution Avenue, NW., Washington, DC
20210; and to the Office of Management and Budget, Paperwork Reduction Project
(1205-0276), Washington, DC 20503.
*Pursuant to the U.S. Department of Labor's Confidentiality Protocol
for Compliance Assistance Inquiries, information provided by a telephone caller
will be kept confidential within the bounds of the law. Compliance assistance
inquiries will not trigger an inspection, audit, investigation, etc.
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