With just a handful of words, the NYS Department of Labor has turned upside down the purpose of the state’s WARN Act and imposed a plethora of new obligations on employers that make little practical sense. What I am referring to is a recent amendment to the state’s WARN Act regulations, effective as of June 21, 2023, that now requires including remote workers aligned to the employment site in headcount calculations when determining whether a particular group termination exercise “triggers” WARN.
For those who did not understand my prior sentence, let us start with some background because this issue is important – and complicated. WARN stands for the Workers Adjustment Retraining and Notification Act. In its simplest form, WARN is a federal law that requires larger employers (those with 100 or more employees) to provide advance notice to impacted employees and certain government officials if the employer is going to be closing a facility of operating unit impacting 50 or more employees, or downsizing its workforce at a particular worksite by 500 or more employees or by at least 50 employees comprising a third or more of its workforce. Numerous states, including New York, New Jersey, California and Illinois, have their own versions of WARN, which typically expand WARN to mid-size employers that are too small to be covered by the federal law.
New York’s law, for example, applies to employers with 50 or more full-time employee equivalents (people working an aggregate of 2000 or more hours per week) (FTEs). Part-time employees working less than 20 hours per week or employed for less than six of the prior 12 months are not included in the employee headcount.
New York State WARN requires that certain notices be provided in three key situations:
- Plant closing, meaning the permanent or temporary shutdown of a single site of employment or one or more facilities or operating units within a single site of employment that impacts 25 or more FTEs over a 30-day period.
- Employment loss or a substantial (greater than 50 percent) reduction in hours of work at a single site of employment during a 30-day period (not a plant closing) that impacts at least 33 percent of FTEs (at least 25 people), or a
- Mass layoff of 250 or more FTEs at a single site of employment during a 30-day period.
If one of these three events occurs, the impacted employees must receive at least 90 days of advance notice, or be paid an amount equal to the equivalent time period. Absent certain exceptional circumstances, organizations must also give notice to:
- Any employee representative(s);
- The New York State Department of Labor (DOL);
- The Local Workforce Development Board;
- The chief elected official of the unit or units of local government where the site of employment is located;
- The school district or districts where the site of employment is located; and
- Each locality that provides police, firefighting, emergency medical or ambulance services, or other emergency services, to the locale where the site of employment is located.
What’s the Point
The concept behind WARN is that when a large number of employees are being let go by an employer in a single location, it has ripple affects on their future job prospects, and on the economy and services provided by the local community. In preparation for that, sufficient notice needs to be provided to the impacted people and representatives of the potentially impacted community to enhance the opportunity for a smoother transition and community planning.
What about Remote Employees?
The world of work has been altered by the pandemic, and a large percentage of organizations have shifted substantial portions of their employee population, either to hybrid work arrangements, or entirely remote employment. The concept of remote employees is not new. Field sales people for example, have often worked remotely, traversing their assigned territories from a base at their home. And at times, organizations would agree to continue employing highly valued workers who handled unique or discrete functions if those workers needed to relocate to another part of the country for personal reasons. Typically in both these types of situations, the remote employees reported back to an assigned brick and mortar business location. They might be expected to come to that physical location at periodic intervals throughout the year.
Things are different now. While those historic categories of remote employees still exist, many more individuals are being hired or retained to work exclusively from their personal residence. Facilitated by the expansion of high-speed Internet access, low cost video conferencing capabilities, cloud-based document filing systems, and other wonders of modern technology, and accelerated by necessity during the pandemic, employees can increasingly operate as effectively in a seemingly professional environment from their own homes. While a substantial number of organizations are calling these people back to the office, at least on a hybrid schedule, which thereby requires that employees reside within reasonable commuting distance to their employer, many others are not requiring employees to make that shift.
I see it in my own client base. Prior to the pandemic, very few of my clients had remote workers, and those that they employed comprised an exceedingly modest proportion of the employee population. Three plus years later, nearly all of my clients have remote workers, at least for the back office portion of their operations. Some have adopted a “hire from anywhere in the country”approach, granting them access to a much broader labor pool, at the cost of tremendous geographic dispersion. Others are more targeted in their geographic hiring, but also far more tolerant of the notion of retaining employees who relocate for various reasons to other parts of the country.
In this new world of remote workers, the employee is far less likely to be tied officially in any company records to a geographic location other than the employee’s personal residence. Some organizations simply do not have any true physical location; everyone from the top executive down works remotely. At other organizations there may be a subset of employees and or executives who are tied to traditional brick and mortar locations, but other business units or multiple tiers of management structure within a single business unit may have no defined location beyond each employee’s personal residence.
Why Reality Complicates the DOL’s Changes
The New York State Department of Labor got things partially right, in that it recognized a new phenomenon of large remote employee populations. With regard to the WARN act, the state amended the definition of covered employees to include those working remotely who are assigned to an impacted business location.
But what does it mean to be assigned to a business location? Does the expended definition of WARN only cover that first category of remote workers, the ones who employers do officially designate as reporting to a brick and mortar location that they are expected to visit at periodic intervals? Or does it also cover this new universe of remote only employees, whose location employers track based solely on their residence?
If an employer maintains only one physical location, which is in New York State, and that is where the most senior people in the organization go to do their work or for meetings, then do remote workers in locations ranging from Alabama to Wyoming (and every state in between), get included in the count of employees for purposes of determining whether the state WARN act applies? The literal language of the amendment would allow for that interpretation.
Currently, there is no guidance available from the state to clarify the definition, and most law firms are reporting out on the new definition without taking time to flag or address how broadly it might actually apply. Considering the purpose of WARN, it makes little sense to include impacted employees who might be let go in very discreet numbers from throughout the country. The termination, for example, of three remote employees in Colorado, five in New Mexico, two in Tennessee, and four in Maine, when aggregated with 11 employee terminations from a single New York location, would likely have little or no impact on the job prospects, local economy, or community services offered to residents of that single New York location. The only conceivable beneficial purpose that the WARN notice would serve would be to provide 90 days of additional pay or notice to the affected employees. That would likely be meaningful to them individually, but does it further the stated purpose for the WARN Act?
What is a New York Employer to Do?
Another complicating element of WARN is something known as the look-back period, that the state not only considers terminations within a 30-day period but aggregates them with other qualifying restructuring exercises that occurred in the preceding 90 days. If feasible from a business perspective, and subject to other legal considerations, the amendments may prompt employers to stagger smaller group terminations at 91-day intervals to avoid falling within the look back period.
Clarity will emerge on this point, although it may take years and various administrative and/or court actions before we get there. In the interim, employers should consult with employment counsel to assess the possible applicability of the WARN Act in the context of their own remote work arrangements. Where remote employees are reported as working for workers’ compensation, disability insurance and similar programs may ultimately be a relevant factor in determining the work location to which they have been assigned. Similarly, the nature and frequency of the employees’ contacts with management, employees or clients in New York may ultimately be considered relevant. Legal counsel can flag those and other potentially relevant factors and help employers conduct a risk assessment for various approaches to take in the group termination context.
By Tracey I. Levy