In this case, employers may continue to require furloughed employees to pay the employee premium by billing the employees directly or recouping the premiums once the furlough period ends. For example, there is a provision in the case of a “disaster” to not abide by the rule under federal law; however, in many states there is no similar provision. Nonetheless, “best practices would suggest that notice be given if an employer is uncertain whether a furlough will exceed six months,” she said. There is no standard legal definition of these terms. Keep up with the latest legal and industry insights, news, and events from MoFo. What should employers do if they have to extend a layoff that was originally expected to last fewer than six months? In California, any mass layoff – which includes a furlough of any duration – affecting 50 or more employees at a covered establishment in a 30-day period triggers a 60-day notice requirement. A mass layoff is defined as one involving more than 50 employees at a location. Are employers required to comply with the Worker Adjustment and Retraining Notification (“WARN”) Act for temporary furloughs or closures related to COVID-19? WARN Act Responsibilities Furloughs were appealing options for many employers early in the pandemic since furloughed employees can be recalled quickly. Does a layoff as a result of COVID-19 events trigger notice obligations under the WARN Act or state “mini-WARN” acts? 100 or more employees, including part-time employees, who work at least a combine… While employers with self-insured plans likely have flexibility to amend any hours-worked requirements, insured plans will need approval from their third-party insurer. 5th 1105 (2017), holding that furloughs exceeding a de minimis amount of time would trigger an employer’s obligations to comply with Cal-WARN. Must employers who were forced to close abruptly pay employees for time they were scheduled to work or through the end of the pay period? Furloughs What’s a Furlough? If the furlough is expected to last longer than six months, then WARN will likely apply. What payments does an employer owe to employees if a layoff (mass or otherwise) or a plant closing occurs? Private sector employers in New York State that employ more than 50 employees must issue a WARN Notice 90 days before closing a plant. Lab. Under the federal WARN Act, a furlough lasting longer than six months is treated as an “employment loss” from the date the layoff started, according to information from … However, employers should still give furloughed employees as much notice as possible. Note that the most recent draft legislation dealing with the COVID-19 pandemic does not provide for government-funded COBRA subsidies. Absent a complete waiver of employee premiums, there may be no payroll from which to deduct the employee premiums. As an employer you may already be aware that the federal government has regulations that govern situations involving mass layoffs and plant shutdowns. In conclusion, as an employer, it is imperative that you understand these implications. The impact of the novel coronavirus (COVID-19) has already seen sweeping changes in our business communities, and will inevitably continue to impact businesses. WARN Act Recommendations. Prior to implementing any furlough, layoff or reduction in force, care should be taken to ensure that compliance with all federal, state and local laws is observed, including but not limited to antidiscrimination laws, the federal WARN Act, any state WARN Acts, federal COBRA and any state healthcare continuation coverage requirements and laws relating to payment of wages and accrued … (Note that this provision can bring furloughs within the definition of “employment loss,” even though the employees’ employment may not be terminated.). Exempt (salaried) employees generally must be paid on a salary basis to maintain their exempt status. If an employer decides to proceed under one of these exceptions, the employer is still required to provide as much notice as is practicable. In addition, many states have adopted their own WARN Act regulations and, as an employer, it is your duty to abide by both federal and state guidelines. Not all employment loss requires 60 days' notice, Singer noted. Contributed by John Hayes and Carlos Arévalo, April 1, 2020 gavel on white backgruound The federal Worker Adjustment and Retraining Notification (WARN) Act and the patchwork state-law equivalents are often overlooked when employers are considering their options regarding potential layoffs or furloughs – either permanent or temporary. Company X must offer Employee Z a COBRA election as a result of the April reduction of hours even if it is presumed that Employee Z will only elect and continue COBRA coverage for three months. William Pederson is a Director in EisnerAmper's Financial Advisory Services Group with over 30 years in the areas of bankruptcy, commercial litigation, business valuation, accounting and auditing, and forensic accounting services. The WARN Act’s requirements generally do not apply to furloughs if employers communicate to employees that the furlough is temporary and that employees will return to their jobs within six months. Given that it is now foreseeable that the layoff or furlough extension is necessary that would result in an employment loss exceeding six months, an employer’s failure to provide WARN notice to its affected employees (and other required recipients) could expose the employer to liability under the WARN Act. Further analysis of this Executive Order and its potential impact on employers can be found here. Do mass layoffs or plant closings due to the COVID-19 pandemic fall within any exceptions under the WARN Act or state “mini-WARN” laws? Prior to approving any hardship withdrawal requests, the terms of any underlying plan should be carefully reviewed to determine whether the plan allows for relief in this particular situation. Which employers are covered by the WARN Act? [1] The New York State Department of Labor notes that “the WARN Act already recognizes that businesses cannot predict sudden and unexpected circumstances beyond an employer’s control, such as government-mandated closures, the loss of your workforce due to school closings, or other specific circumstances due to the [C]oronavirus pandemic,” and urges employers to provide notice as soon as possible. Law §§ 860 to 861-I; 12 NYCRR § 921-1.0 to 921-9.1. A furlough may also implicate other employment laws such as the Fair Labor Standards Act, which, amongst other things, provides for the circumstances where employees may be exempt from overtime pay. The federal Worker Adjustment and Retraining Notification Act (WARN Act) was enacted in 1988. • Check federal or state WARN laws –furloughs lasting less than 6 months generally won’t trigger WARN obligations –check state law - particularly an issue in California • Use of vacation and sick time –Families First Coronavirus Response Act includes paid sick time and leave for … EisnerAmper discusses a summary of CARES Act and how self-employed individuals, independent contractors or sole proprietors must submit necessary documentation. A mass layoff is defined as one involving more than 50 employees at a location. Failure to give the 60-day notice entitles the employees to damages for wages and benefits they would have earned during the notice period.[2]. Or if the lay-off that affects either: 33 percent of the workforce (at least 25 workers), or 250 workers from a single employment site, Any business that has been open for three years and employs 100 or more full-time employees, Any business with 100 or more employees. To the extent feasible, follow usual protocols for disabling network access of terminated employees. Under the federal WARN Act, a full-time employee is an employee who works more than 20 hours per week and has been employed for at least 6 out of the last 12 months (some states have different definitions; for example, California doesn’t have the 20 hours-per-week requirement). The “unforeseeable business circumstances” exception arguably applies but neither the DOL nor any courts have definitively said so. As we all know, the situation is developing rapidly, seemingly by the minute. Employers should take extra caution when implementing an employee furlough policy to avoid activating the WARN Act. Regular federal, state, and local government entities which provide public services are not covered. What are the exceptions to the 60-day advance notice requirement? Not all employment loss requires 60 days’ notice, Singer noted. The employer cannot complete the planned layoff until the 60 days have expired. Before we dive into the substance of this discussion, we provide our definitions so we and our readers are on the same page. 100 or more employees, including part-time employees, who work at least a combined 4,000 hours per week. A few other states raise additional issues. Federal WARN Act. A “mass layoff” is a reduction in force that: A “plant closing” is a permanent or temporary shutdown, resulting in an employment loss for at least 50 employees during a 30-day period, of either (i) a single site of employment; or (ii) facilities or operating units within a single site of employment. There are exceptions where the 60-day notice period may be shortened, but in those cases, employers must still provide notice as soon as is practicable. Like the federal WARN Act, Illinois’ statute exempts closings or layoffs that result in a loss of employment for fewer than six months. Employee handbooks may have policies on how layoffs and furlough are to be addressed, and it may also be in your employment contract. If an employer’s group health plan cannot accommodate continued coverage during a furlough, will the employer be required to offer COBRA to employees who are furloughed? N.Y. If an employer’s plans change and a temporary furlough extends beyond six months or becomes a permanent layoff, then the WARN Act’s notice obligations can be triggered. Prepare for an increase in 401(k) plan financial hardship withdrawals and loan requests by employees. Knowing the differences will help you adjust and be prepared during these economic uncertainties. New York, on the other hand, continues to require that businesses covered by the state’s “mini-WARN” law provide 90 days’ advance notice. The WARN Act is not triggered for employers who furlough employees for less than six months. ©2020 EisnerAmper LLP. As employers develop return-to-work strategies, they may be unable to recall or re-hire all workers who have been furloughed or laid off. Non-striking employees who experience an employment loss as a direct or indirect result of a strike and workers who are not part of the bargaining unit(s) which are involved in the labor negotiations that led to a lockout are still entitled to notice. Does not include employees who have worked less than 6 months in the last 12 months and not counting employees who work an average of less than 20 hours a week. If the furlough is expected to last longer than six months, then WARN will likely apply. [1] The New York State Worker Adjustment and Retraining Act typically applies to private businesses with 50 or more full time workers in New York State that are implementing relocations, closures, or mass layoffs affecting at least 25 fulltime workers (if the 25 or more workers make up at least 33% of the workforce at the site) or 250 full time workers. However, the Internal Revenue Code provides an exception for certain amounts in the case of a federal “qualified disaster,” which President Trump declared on March 13, 2020. In the case of both insured and self-insured plans, it is imperative that employers coordinate with any third-party insurer or third-party administrator when implementing any amendment. 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