Leading Layoffs With Care: WARN Notice, Releases and Dignity

Few things a leader does carry as much weight as a layoff. For the people leaving, it upends income, health coverage and routine. For the people staying, it reshapes trust in the organization. How it is handled, from the legal notice to the individual conversation, matters almost as much as the decision itself.

This guide covers the main US federal rules leaders should know, how to run the notification conversations with care, and how to lead the team that remains. It is general information, not legal advice. Layoff rules vary by state and by situation, so involve HR and employment counsel early.

Check whether the WARN Act applies

The Worker Adjustment and Retraining Notification (WARN) Act, passed in 1988, requires covered employers to give written notice at least 60 calendar days before covered plant closings and mass layoffs. Under the federal regulations (20 CFR Part 639):

• Covered employers are businesses with 100 or more employees, not counting part-time employees, or 100 or more employees who together work at least 4,000 hours a week, excluding overtime. Nonprofits of that size are covered; regular federal, state and local governments are not.
• A plant closing is the shutdown of a single site, or of one or more facilities or operating units within it, that causes an employment loss for 50 or more employees, excluding part-timers, during any 30-day period.
• A mass layoff is a reduction in force, not caused by a plant closing, that causes an employment loss at a single site during any 30-day period for at least 50 employees who also make up at least 33 percent of active employees, or for 500 or more employees regardless of percentage. Part-time employees are excluded from these counts.

Employment loss is broader than firing. The regulations define it as a termination (other than a discharge for cause, a voluntary departure or a retirement), a layoff of more than six months, or a cut in an individual's hours of more than 50 percent during each month of any six-month period.

Who must be notified, and what happens if you don't

Notice goes to each affected employee, or to their union representative if they have one, plus the state dislocated worker unit and the chief elected official of the local government where the layoff happens. The regulations allow shorter notice only in narrow cases: a faltering company actively seeking capital or business (which applies to plant closings only), business circumstances that were not reasonably foreseeable, and natural disasters. Even then, the employer must give as much notice as is practicable and briefly explain why the notice period was shortened.

According to the Department of Labor's employer guide, an employer that violates WARN can owe each affected employee back pay and benefits for the period of the violation, up to 60 days, and failing to notify the local government can bring a civil penalty of up to $500 for each day of violation. WARN is enforced through the federal district courts, not by the Department of Labor.

The regulations also say WARN does not override laws or collective bargaining agreements that provide additional notice or rights. Check your state's rules, which may be stricter.

Severance agreements and age-discrimination waivers

Many employers offer severance in exchange for a release of claims. If you ask employees age 40 or older to waive age-discrimination claims, the Older Workers Benefit Protection Act sets specific requirements, which the U.S. Equal Employment Opportunity Commission explains in its guidance on severance agreements. Among them:

• The waiver must be written in a way the employee can understand and must refer to the Age Discrimination in Employment Act by name.
• It must advise the employee in writing to consult an attorney.
• The employee must get at least 21 days to consider it, or at least 45 days when the offer is part of a group layoff.
• The employee must have seven days after signing to revoke, and that period cannot be changed or waived.
• In a group program, the employer must disclose in writing the decisional unit, eligibility factors, time limits, and the job titles and ages of those selected and not selected.

That last rule is a useful test: selection criteria you would be uncomfortable writing down deserve rethinking.

Pay, benefits and help people will ask about

People will have practical questions right away. Have accurate answers ready in a written packet:

• Final pay. Federal law does not require employers to give a final paycheck immediately, but some states do, according to the Department of Labor.
• Health coverage. COBRA generally requires group health plans of employers with 20 or more employees to offer continuation coverage. When employment ends for reasons other than gross misconduct, it must be available for 18 months, and people may have to pay up to 102 percent of the plan's cost. The Department of Labor's COBRA guide also notes that losing job-based coverage opens a chance to choose a Health Insurance Marketplace plan within 60 days before or after the loss of that coverage.
• Unemployment insurance. Each state runs its own program under federal guidelines, and eligibility generally covers people unemployed through no fault of their own who meet the state's other requirements.
• Reemployment help. Rapid Response, carried out by states and local workforce agencies with American Job Centers, can provide services on-site, including job search help and training. The Department of Labor's employer guide notes that filing a WARN notice is typically what starts the Rapid Response process.

Run the conversations with care

The notification meeting should be short, private and clear. A few practices help:

1. The person's direct manager delivers the news, with HR present, in person where possible.
2. State the decision in the first minute. "Your position is being eliminated, and your last day will be May 30." Don't build up to it.
3. Give a brief, truthful reason and don't debate it.
4. Hand over the written details: pay, benefits, severance terms, deadlines, who to contact.
5. Treat people with dignity in the logistics. Give them a way to say goodbye and collect belongings without a public walk out, unless there is a specific security reason.

For example, imagine a hypothetical manager at a 150-person software company. She meets each affected person alone, delivers the news in two sentences, pauses, then answers questions about the packet. She doesn't say "I know how you feel."

Lead the people who stay

The remaining team has lost colleagues and is wondering whether they are next. Tell them the same day, in person, with the facts you can share: what happened, why, whether more reductions are planned and how work will be redistributed. Don't promise no more cuts unless you know it's true.

Then reset priorities out loud: if the team is smaller, say which work stops. Expecting the same output from fewer people without dropping anything is how one round of layoffs turns into a wave of resignations.

Job loss and the uncertainty around it can be very hard on people's wellbeing. Point both departing and remaining employees to your employee assistance program if you have one, and encourage anyone who is struggling to talk with a health professional. This guide is not a substitute for professional care. In a crisis in the US, call or text 988, and if someone is in immediate danger, call 911.

Key takeaways

• Check early whether the WARN Act's 60-day notice applies, and check state laws that may require more.
• Notice goes to affected employees or their representative, the state dislocated worker unit and the local chief elected official.
• Releases from employees 40 and older must meet OWBPA requirements, including 21 or 45 days to consider and a seven-day revocation period.
• Prepare accurate written answers on final pay, COBRA, unemployment insurance and reemployment services.
• Deliver the news clearly and privately, then reset priorities for the team that remains.

Sources

• U.S. Department of Labor, WARN Act Compliance Assistance
• U.S. Department of Labor, Employer's Guide to Advance Notice of Closings and Layoffs
• Electronic Code of Federal Regulations, 20 CFR Part 639: Worker Adjustment and Retraining Notification
• U.S. Equal Employment Opportunity Commission, Q&A: Understanding Waivers of Discrimination Claims in Employee Severance Agreements
• U.S. Department of Labor, An Employer's Guide to Group Health Continuation Coverage Under COBRA
• U.S. Department of Labor, Last Paycheck
• U.S. Department of Labor, How Do I File for Unemployment Insurance?
• U.S. Department of Labor, Rapid Response Services