For the first time in recent memory, Illinois is not “open for business.” Either are many businesses in our surrounding states.
There are a number of retailers, small businesses and large companies that are addressing “stay-at-home” employees who are without the ability to conduct “work-from-home” business. For these companies, the COVID-19 pandemic leaves them with few workforce options. With little or limited revenue coming in, these companies are confronting layoffs and other workforce reductions.
For those companies based in Illinois, the Illinois Worker Adjustment and Retraining Notification (WARN) Act comes into play. The Illinois WARN Act generally requires a 60-day written notice to employees where a plant is closing or when a mass layoff for more than six-months will occur. This notice must be provided as soon as practical. (Generally, within days of the decision). In addition, the Illinois WARN Act uses the aggregate number of employees, not the number of employees at a single site of employment, to define an employer under the Illinois WARN Act. If, for example, you operate multiple store locations in Illinois and your total full-time employees exceed 75 (or 75 employees working at least 4000 hours a week), you need to address the Illinois WARN Act in any workforce reduction initiatives. The federal WARN Act requires notice if a company has more than 100 employees, and while it mirrors the Illinois Act in many ways, there are also significant differences that not the scope of this paper. You should address the Federal WARN Act if you’re considering application of the Illinois WARN Act.
Issues to Consider
Employers with Multiple Facilities (plant/store/office) in a Geographic Area Might Ponder How Illinois Defines “Single Site of Employment?” Under the Illinois Act, a single site of employment is simply one geographical location of an employer’s operations, such as a building, an office suite, or a group of buildings that form a campus or industrial park. Even work areas that are physically separate can be a single employment site if they are geographically close together, used for the same purpose, and share the same staff and equipment. Thus, single site is a fact intensive inquiry that examines the employment staff, operations, purpose and geographic location of each of the various noncontiguous facilities. Federal cases have upheld single site of employment status where the noncontiguous facilities were 12-14 miles apart, because they employed different employees. This seems to be the key factor in the analysis as it should be since the Act is an employee affected law. The Illinois Act specifically provides that it shall be interpreted consistently with the Federal Act, regulations and case law where not inconsistent.
Have Any New Exemptions Been Announced that Alter the WARN Act Because of the COVID-19 Pandemic? There is an exemption to the layoff notice requirement where the layoff is caused by a “physical calamity.” At this time, it is unclear whether the COVID-19 pandemic qualifies under the “physical calamity” exception. Some pundits believe it does as the world is experiencing a physical calamity to the person. This issue will be resolved in courts throughout the country. An associated argument, but not an expressed exception in the Act, is where the layoff is caused by governmental authorities who have closed the business as a nonessential business. An argument can be made that the employer did not initiate or cause the layoff in this circumstance. This issue will also be resolved in the courts. Finally, the notice requirement of the Act does not initiate unless the layoff is reasonably expected to exceed six months. Layoffs of less than six months should still come with notice and the expected return to work estimate. The Act provides for layoffs that initially are expected to last less than six months but then exceed six months. In this circumstance, the employer must give notice as soon as practical. It will not be considered an “employment loss” if the employer can establish the extended layoff was the result of business circumstances that were not reasonably foreseeable at the time of the layoff. Again, an issue for the courts to resolve in the COVID-19 era.
Does Illinois Aggregate the Number of Employees for the Purpose of Determining a “Plant Closure” or “Mass Layoff?” Again, the short answer is “no.” Illinois uses the number of employees at the “single site of employment” to determine if a mass layoff or plant closure has occurred.
There are two situations where the Illinois WARN Act may apply. The first is a “plant closure” (50 or more employees affected) and the second is a “mass layoff” (25 or more employees affected as well as 33% of the full time workforce affected). Both situations are further defined by the Act. If a business has the requisite number of impacted employees under either scenario, then the business must provide the employees with 60 days written notice of the plant closure or a mass layoff in excess of six-months unless an exception applies.
How Does the Illinois Act Define a Single Site of Employment?
The Illinois regulations define the term similarly to the federal regulations:
- A single site of employment refers to either a single location or a group of contiguous locations. Groups of structures that form a campus or industrial park, or separate facilities across the street from one another, may be considered a single site of employment.
- Several single sites of employment within a single building may exist if separate employers conduct activities within such a building. The offices of each employer will be a single site of employment.
- Separate buildings or areas that are not directly connected or in immediate proximity may be considered a single site of employment if they are in reasonable geographic proximity, used for the same purpose and share the same staff and equipment.
- Non-contiguous sites in the same geographic area that do not share the same staff or operational purpose should not be considered a single site.
- Contiguous buildings owned by the same employer that have separate management, produce different products and have separate workforces are considered separate single sites of employment.
- A single site of employment for workers whose primary duties require travel from point to point, who are out stationed or whose primary duties involve work outside any of the employer's regular employment sites, will be the site that workers are assigned to as home base or the site from which they report or receive assignments.
- A single site of employment may apply in truly unusual organizational situations where the criteria of this Section do not reasonably apply. The application of this subsection with the intent to evade the purposes of the Act to provide notice is not acceptable.
Single site is a factual inquiry that is multifaceted with staffing, business purpose and geographic location among its factors.
How Does the Illinois Act Define a Plant Closing?
Under the Act, "Plant closing" means 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, if the shutdown results in an employment loss at the single site of employment during any 30-day period for 50 or more employees excluding any part-time employees.
How Does Illinois Define a Mass Layoff?
The Act’s mass layoff definition provides:
(1) is not the result of a plant closing; and
(2) results in an employment loss at the single site of employment during any 30-day period for:
(A) at least 33% of the employees (excluding any part-time employees) and at least 25 employees (excluding any part-time employees); or
(B) at least 250 employees (excluding any part-time employees).
Is Notice Required If the Mass Layoff is Reasonably Expected to last Less Than 6 months?
A 60-day notice is not required if the layoff is reasonably expected to be less than six months. The Act does provide for layoffs intended to last less than six months, but then due to other circumstances go on longer than six months. That section provides:
“Extension of layoff period. A layoff of more than 6 months which, at its outset, was announced to be a layoff of 6 months or less shall be treated as an employment loss under this Act unless:
(1) the extension beyond 6 months is caused by business circumstances (including unforeseeable changes in price or cost) not reasonably foreseeable at the time of the initial layoff; and
(2) notice is given at the time it becomes reasonably foreseeable that the extension beyond 6 months will be required.”
If a layoff is originally for less than 6 months and then extended a question arises as to whether the extension was reasonably foreseeable at the time of the initial layoff.
What is Considered Employment Loss Under the Act?
Both plant closings and mass layoffs equate to “employment loss,” which is defined in part to state:
(1) an employment termination, other than a discharge for cause, voluntary departure, or retirement;
(2) a layoff exceeding 6 months; or
(3) a reduction in hours of work of more than 50% during each month of any 6-month period.
Issues and Best Practices
Employers are instructed to follow the best practices of the CDC as well as their state and local governments concerning the operation of their business during these unprecedented times. Directives of these and other governmental agencies will impact whether the announced layoff was reasonably anticipated or not (this answer may change as governments extend and eventually rescind current orders involving social distancing.
If you have any questions about the Illinois WARN Act and its application to your business situation, please contact Joseph F. Spitzzeri or Michael J. Lizzadro.