Layoffs and workforce reductions are painful for everyone involved.
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As hard as it is for you to let go of workers you've counted on for years, it's even harder for employees who are now facing a very uncertain financial future. Emotions can run high during the period leading up to a reduction, but as the business owner you need to keep your wits about you and execute the reduction in an orderly manner.
It goes without saying, but employers should avoid layoffs whenever possible. Prematurely announcing a round of reductions during a temporary dip in revenues can create permanent chaos and resentments in the workplace, even if you ultimately decide to change course. But if a workforce reduction is unavoidable, there are legal requirements you need to know about before you make an announcement.
To protect the needs of displaced workers, the federal government has enacted laws and regulations that require employers to give advanced notice of workforce reductions. The WARN (Workforce Adjustment and Retraining Notification) Act of 1998 mandates that certain employers provide notice of impending reductions so affected workers have time to prepare for a job transition or retraining opportunities. If you're considering layoffs in your business, here's what you need to know to comply with WARN and other legal requirements.
- Affected employers. The WARN Act only applies to companies with 100 or more full-time employees. If your small business employs less than 100 workers, you won't be subject to WARN requirements, but you should still consider providing advanced notice as a matter of integrity.
- Nature of reduction. Advanced notice requirements kick in for both "plant closing" and "mass layoffs". Mass layoffs are defined as reductions of between 50 and 499 employees (if those employees represent at least 33% of the total full-time workforce) or any reduction in workforce of 500 or more employees. Plant closings are permanent or temporary shutdown of an employment site, or the shutdown of a facility or unit within an employment site that employs 50 or more full-time employees.
- Exceptions. The government does grant exceptions to the notification period based on situations like unforeseen business circumstances, natural disasters and scenarios in which the business is trying to secure capital to avoid a shutdown. But even then, notice must be given as soon as possible and the company must disclose the reason for the exception.
- Requirements. If WARN legislation is applicable, your business is required to provide 60 days advance notice of plant closings and mass layoffs to employees who will be personally affected by downsizing. Failure to comply with notice requirements can result in fines and back pay for affected workers.