Large-scale layoffs and mass terminations usually occur in the late fall or early winter. This is when companies look at 4th quarter or year-end numbers or otherwise want to make personnel adjustments to start the new year. That has traditionally been the busiest season for layoffs and terminations. In a slow economy, however, layoffs or large-scale terminations occur at other times of the year as well. Sometimes these personnel actions happen without much forewarning. A number of factors may lead to such decisions and trimming payroll or shutting down a facility may be in the organization's best interest, but there can be significant fall out from such large-scale job losses. In addition to the obvious increases in unemployment claims, costs associated with benefit conversions and subsidies, and the potential for more individual claims for wages, wrongful termination or discrimination, as well as the negative publicity and impact on moral for those who remain, there are other potential pitfalls for struggling employers. One is the potential liability for violations of federal and state laws related to notices due in advance of the layoffs or terminations.
There were several workplace bills considered by the New Hampshire legislature last session. Some died, others went to study committees and still others were signed in to law. The most noteworthy bill for employers last session was SB40. This bill was patterned after the federal Worker Adjustment Retraining and Notification ("WARN") Act and was proposed in response to several sudden plant closures or mass layoffs in New Hampshire. Those employers were not covered by the federal WARN Act and the affected employees received little or no notice before their jobs were eliminated. The Governor and other State officials responded with harsh criticism of the employers at the time and later with a legislative solution: SB40. This law establishes new notice requirements and reporting guidelines for covered employers who are shutting down operations in New Hampshire or who conduct mass layoffs here.
On August 10, 2009, Governor Lynch signed SB40 into law. This law, is now known as the New Hampshire Worker Adjustment and Retraining Act ("NH WARN Act"). While it is modeled after the federal WARN Act, there are some important differences for employers to note.
NH WARN Act differs from the federal WARN Act
The federal WARN Act requires covered employers to give employees 60 days advance notice when there is going to be a plant closure or mass layoff (involving more that 1/3 of the workforce but at least 50 employees). Under the NH WARN Act, like the federal WARN Act, the threshold for notice for a mass layoff is a reduction in force which results in an employment loss at a single site in New Hampshire involving job losses of at least 250 employees (excluding seasonal and part time employees). The NH WARN Act's notice threshold is lower than the federal WARN Act: at least 25 affected employees (excluding part time or seasonal employees) if they constitute at least 33% of the employer's full time employees. The federal WARN threshold is at least 50 affected employees. The other important difference between the NH WARN Act and the federal WARN Act is the threshold number of employees for the employer to be covered by the Act. Under the federal WARN Act it is 100 employees. Under the NH WARN Act the threshold is 75 employees.
Employers who fail to give the required notice, as outlined below, would be responsible to provide wages and benefits to those employees. In addition, the potential civil fines and penalties that could be imposed on employers are much steeper under the state law.
The federal WARN Act has several exceptions and exemptions built in to the law. The NH WARN Act has many of those same carve outs. There are two important distinctions. First, as outlined above, the thresholds are lower under state law. Sponsors of the legislation suggested that these lower thresholds would cover at least 300 more employers in New Hampshire than would have been covered under the federal WARN Act. Second, the NH WARN Act includes a first of its kind corporate liability piece that provides the New Hampshire Department of Labor the ability to make the corporation and its parent company responsible for fines and civil penalties associated with a violation of the NH WARN act. While this provision is much better than the earlier version of SB40, which held business owners and decision makers individually or personally liable, this provision has still caused some concern in the business community because of the impact the law might have on foreign and out of state investment in businesses in New Hampshire.
What Job Losses are Covered?
The NH WARN Act applies only to a "plant closing" or a "mass lay-off") in New Hampshire. A plant closing" is defined in this act as a "permanent or temporary shutdown of a single site of employment in New Hampshire, of one or more facilities or operating units, if the shutdown results in an employment loss at the single site at that occurs during any 30-day period for 50 or more employees, excluding any part-time employees." A "mass lay-off" means a reduction in force which is not the result of a plant closing and which "results in an employment loss at a single site of employment in New Hampshire during any 30-day period for at least 250 employees, excluding any part-time or seasonal employees, or at least 25 employees, excluding any part-time or seasonal employees, if they constitute 33 percent of the full-time employees of the employer." An "Employment loss" under this law includes employment terminations, or a layoff of greater than 6 months or a reduction in work hours of more than 50% during each month of any 6-month period. However, "Employment Loss" does not include a plant closing/layoff if before the closing/layoff the employer offers to transfer the employee to a different site within a reasonable commuting distance with no more than a 6-month break in employment, or if the employer offers to transfer the employee to any other site, regardless of distance with no more than a 6-month break in employment and the employee accepts the transfer within 30 days of the offer, closing or layoff, whichever is later.
Notice Requirements
The NH WARN Act requires that at least 60 days before a plant closing/mass layoff a covered employer give notice to the: affected employees; their representative(s), if any, the Commissioner of the New Hampshire Department of Labor; the state Attorney General; and, the chief elected official of each municipality in New Hampshire in which the plant closing/mass layoff occurs.
Exceptions
The NH WARN Act doesn't include notices to seasonal workers and other employees who were hired understanding that their employment was limited to the duration of a particular project or undertaking.
Covered employers are also excused from the 60-day notice requirements if:
- The company was faltering and was actively seeking capital or business which if realized would have enabled the company to avoid or postpone the layoff/closing AND the employer had a good faith belief that giving notice of a layoff/closing would have precluded the employer from getting the needed capital or business.
- The need for a mass layoff/plant closing was not reasonably foreseeable;
- The plant closing is of a temporary facility;
- The mass layoff/plant closing is necessitated by a physical calamity, natural disaster, or act of terrorism or war; or
- The mass layoff/plant closing constitutes a strike or lockout not intended to evade the requirements of this law.
These exceptions are very similar to exceptions under the federal WARN Act. Just as with the federal WARN Act, the NH WARN Act provides that any employer relying on an exception(s) to the 60 day notice requirement must provide as much notice as practicable and at that time must also provide a complete statement of the basis for not giving the full 60 days notice.
Potential Penalties for Noncompliance
The law empowers the Commissioner of the New Hampshire Department of Labor to determine whether a plant closing/mass layoff comes under this law; whether any exceptions to the notice requirement are applicable; and to determine and assess liabilities and penalties for the employer's failure to comply. An employer who fails to comply with these notice requirements may be ordered to pay:
- Back pay to each affected employee that didn't receive the required notice, and the value of the cost of any benefits to which employee would have been entitled including the cost of any medical expenses incurred that would have been covered under an employee benefit plan; and all associated costs and reasonable attorneys fees.
The New Hampshire Department of Labor is also permitted to place a lien on the employer's revenues as well as all real and personal property of the employer to pay these assessments.
In addition, an employer who fails to give notice of a mass layoff/plant closing, as required by this law, can be assessed a civil penalty of up to $2,500 and up to $100 per employee for each day of noncompliance. An employer cannot, however, be assessed these penalties if it pays all applicable employees the amounts for which it is determined by the Department to be liable within 3 weeks of the date the employer commences the mass layoff/plant closing. The Commissioner of the Department of Labor can also reduce civil penalties if he/she is satisfied that the employer's act or omission was in good faith based on a reasonable belief that the act/omission was not in violation of this law.
This new law goes into effect January 1, 2010. While mass layoffs or plant closings that occur before that date would not be subject to the NH WARN Act, the federal WARN Act might still apply to those job losses. In either case, the exceptions to notice requirements are narrow and the penalties for noncompliance are steep. A careful review of these and other legal issues with legal counsel is advised.
This article is intended to serve as a summary of the issues outlined herein. While it may include some general guidance, it is not intended as, nor is it a substitute for, legal advice. Your receipt of Good Company or any of its individual articles does not create an attorney-client relationship between you and Sheehan Phinney Bass + Green or the Sheehan Phinney Capitol Group. The opinions expressed in Good Company are those of the authors of the specific articles.
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