oversight

The Worker Adjustment and Retraining Notification Act: Revising the Act and Educational Materials Could Clarify Employer Responsibilities and Employee Rights

Published by the Government Accountability Office on 2003-09-19.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                 United States General Accounting Office

GAO              Report to Congressional Requesters




September 2003
                 THE WORKER
                 ADJUSTMENT AND
                 RETRAINING
                 NOTIFICATION ACT

                 Revising the Act and
                 Educational Materials
                 Could Clarify
                 Employer
                 Responsibilities and
                 Employee Rights




GAO-03-1003 

                                                  September 2003


                                                  THE WORKER ADJUSTMENT AND
                                                  RETRAINING NOTIFICATION ACT

Highlights of GAO-03-1003, a report to            Revising the Act and Educational
Congressional Requesters
                                                  Materials Could Clarify Employer
                                                  Responsibilities and Employee Rights


In 2001, 1.75 million workers lost                About one quarter of the 8,350 plant closures and mass layoffs in 2001 appear
jobs through extended mass                        subject to WARN’s advance notice requirements. Mass layoffs were less likely
layoffs. The Worker Adjustment                    to be subject to the requirements than plant closures. The difference between
and Retraining Notification                       mass layoffs and plant closures stems primarily from a rule exempting mass
(WARN) Act requires advance                       layoffs from WARN’s requirements if businesses lay off less than one-third of
notice of plant closures and mass
layoffs. The report discusses
                                                  their workforce (up to 499 workers).
(1) the extent to which plant
closures and mass layoffs were                    Employers provided notice for approximately one-third of layoffs and closures
subject to WARN’s requirements,                   that appear subject to WARN requirements. Specifically, employers provided
(2) the extent to which employers                 notices for almost one-half of plant closures, compared with approximately
with mass layoffs and plant                       one-quarter of mass layoffs. The remaining mass layoffs and plant closures
closures provided notice, and                     appear subject to WARN requirements, but notices were not provided. Two-
(3) what issues employers and                     thirds of the notices that employers provided gave the full sixty days’ advance
employees face when assessing the                 notice required by the law. Employers that did not provide notice may be
applicability of WARN to their                    engaging in other practices that limit their liability under the law. In addition,
circumstances.                                    other employers provided notice for mass layoffs and plant closures that were
                                                  not subject to WARN’s requirements as encouraged in the law and the
                                                  regulations.
The Secretary of Labor should
make enhanced educational                         Employers and employees find WARN’s definitions and calculations difficult to
materials widely available to                     apply to their circumstances. Almost all state dislocated worker units reported
employers and employees for                       that employers and/or employees contact them with basic questions on
assistance in understanding the                   WARN—GAO calculated that states received thousands of communications
regulations. Further, Congress may                from employers, employees, and their representatives per year. The courts
wish to consider amending the
                                                  have interpreted some of the provisions in the law in varying ways, which adds
WARN act by simplifying the
calculation of thresholds, clarifying             to the confusion and uncertainty when employers and employees apply WARN
the definition of employer and how                to their circumstances. Because of this uncertainty, employers, employees,
damages are calculated, and                       and courts incur costs in time and resources in determining the applicability of
establishing a uniform statute of                 WARN to specific circumstances. Finally, the enhanced educational materials
limitations. Labor provided                       being developed by the Department of Labor to address some of these issues
informal comments and technical                   have not been made widely available and therefore fail to answer many of the
clarifications on this report, which              questions asked by employers and employees. This lack of clarity and
we incorporated as appropriate.                   guidance could ultimately circumvent the purpose of advance notice—namely,
Labor informed us about efforts                   to assist dislocated workers in becoming reemployed.
that it has already made to address
                                                  Events Subject to and Not Subject to WARN Requirements in 2001
our recommendation and chose not
to comment formally.                                                       1,974                              6,376
                                                    Total events                                                                                 8,350
                                                                           24%                                76%


                                                                       948                            6,149
                                                    Mass layoffs                                                                     7,097
                                                                       13%                            87%

                                                                                    227
                                                                       1,026        18%
                                                  Plant closures
                                                                       82%
                                                                                   1,253
www.gao.gov/cgi-bin/getrpt?GAO-03-1003.

                                                                   0                 2,000            4,000             6,000            8,000            10,000
To view the full product, including the scope 
                     Total number of events
and methodology, click on the link above. 

For more information, contact 
                                 Events subject to WARN requirements                   Events not subject to WARN requirements
Robert E. Robertson at (202) 512-9889 or 

                                                  Source: GAO analysis and BLS, May 2003.
robertsonr@gao.gov. 

Contents 



Letter                                                                                                       1
                            Results in Brief                                                                 3
                            Background                                                                       5
                            An Estimated 24 Percent of All Mass Layoffs and Plant Closures
                              Appear Subject to WARN’s Advance Notice Requirements                           7
                            Employers Provided Notice for about One-Third of Layoffs and
                              Closures Subject to WARN Requirements, Most of Which Were
                              Timely                                                                       10
                            Employers and Employees Find WARN’s Definitions and
                              Calculations Difficult to Apply Due to Ambiguities in the Statute
                              and Limited Guidance                                                         13
                            Conclusions                                                                    19
                            Recommendation for Executive Action                                            19
                            Matter for Congressional Consideration                                         20
                            Agency Comments and Our Evaluation                                             20

Appendix I: Objectives, Scope, and Methodology                                                             22
                            Mass Layoff Statistics Data                                                    23
                            WARN Notices                                                                   26
                            Interviews                                                                     28
                            Review of Court Cases                                                          29

Appendix II: Tests Applied to Find Liability in Parent/Subsidiary, Sister
                            Corporation, and Lender/Borrower Situations                                    31


Appendix III: Reported Court Cases under WARN Act, 1998-2002                                              32


Appendix IV: GAO Contacts and Staff Acknowledgments                                                        39
                            GAO Contacts                                                                   39
                            Staff Acknowledgments                                                          39

Related GAO Products                                                                                       40


Tables
                            Table 1: Extended Mass Layoffs and WARN Coverage in 2001                       24


                            Page i           GAO-03-1003 The Worker Adjustment and Retraining Notification Act
          Table 2: Required Elements in the Notices                                                 28
          Table 3: Different Tests Used by Courts to Determine Employer
                   Liability                                                                        31
          Table 4: Reported Court Cases under WARN Act, 1998-2002                                   32


Figures
          Figure 1: WARN Decision Matrix                                                             6
          Figure 2: Events Subject to and Not Subject to WARN
                   Requirements in 2001                                                              8
          Figure 3: Percentage of Mass Layoffs in 2001 Excluded from WARN
                   Requirements Due to the One-Third Rule                                            9
          Figure 4: Amount of Employer Advance Notice to State Officials
                   before a Mass Layoff or Plant Closure                                            12
          Figure 5: WARN-Related Court Cases by Litigation Subject 1998-
                   2002                                                                             15
          Figure 6: Overlap between WARN Notices and Events That Appear
                   Subject to WARN                                                                  26




          Abbreviations

          BLS               Bureau of Labor Statistics 

          DWU               dislocated worker unit 

          ETA               Employment and Training Administration 

          MLS               Mass Layoff Statistics 

          WARN              Worker Adjustment and Retraining Notification Act 



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          Page ii             GAO-03-1003 The Worker Adjustment and Retraining Notification Act
United States General Accounting Office
Washington, DC 20548




                                   September 19, 2003 


                                   The Honorable George Miller 

                                   Ranking Minority Member 

                                   Committee on Education and the Workforce 

                                   House of Representatives 


                                   The Honorable Major R. Owens 

                                   Ranking Minority Member 

                                   Subcommittee on Workforce Protections 

                                   Committee on Education and the Workforce 

                                   House of Representatives 


                                   The Honorable Robert E. Andrews 

                                   Ranking Minority Member 

                                   Subcommittee on Employer-Employee Relations

                                   Committee on Education and the Workforce 

                                   House of Representatives 


                                   In 2001, job losses through extended mass layoffs1 reached 1.75 million, 

                                   the highest level since 1995. To assist workers who have recently been laid

                                   off with job training and to facilitate their reemployment, Congress 

                                   enacted the Worker Adjustment and Retraining Notification (WARN) Act2

                                   in 1988, which requires employers to provide advance notice to employees 

                                   and state and local officials in the event of a mass layoff or plant closure. 

                                   Advance notice allows workers and their families some transition time to 

                                   adjust to the prospective loss of employment, to seek and obtain 

                                   alternative jobs, and if necessary, to enter skill training that will allow 

                                   these workers to compete successfully in the job market. According to 

                                   both business and labor leaders, advance notice allows time for state 

                                   officials to provide information about skill training and retraining services 

                                   before the layoff or closure occurs. 





                                   1
                                    The Bureau of Labor Statistics defines an extended mass layoff as an employment loss, at
                                   a job site, that affects at least 50 people who file a claim with Unemployment Insurance
                                   over a 5-week period and are involved in a layoff that lasts at least 31 days. The data
                                   collected by the Bureau do not directly measure WARN criteria. (See app. I.)
                                   2
                                    Pub. L. No. 100-379 (1988); 29 U.S.C. 2101-2109.



                                   Page 1               GAO-03-1003 The Worker Adjustment and Retraining Notification Act
WARN generally requires employers with 100 or more workers to provide
60-days advance notice for both mass layoffs and plant closures involving
50 or more employees. WARN requirements differentiate between mass
layoffs and plant closures by including a provision in the law, called the
“one-third” rule, which only applies to mass layoffs and requires employers
to give advance notice for layoffs of 50-499 employees only if they are
reducing their workforce by at least 33 percent. The employer is
responsible for determining if the layoff or closure meets WARN criteria,
and providing a notice that contains certain information about the mass
layoff or plant closure as outlined in the regulations. The Department of
Labor is not responsible for enforcing WARN; enforcement is done entirely
through the federal courts. However, Labor was required to issue
implementing regulations, which it did in 1989. Labor is also responsible
for providing assistance in understanding these regulations and has
provided educational materials to facilitate employers’ and employees’
understanding of WARN.

To identify issues about compliance with and implementation of the
WARN Act, you asked us to provide you with information on (1) the extent
to which mass layoffs and plant closures were subject to WARN’s advance
notice requirements, (2) the extent to which employers with mass layoffs
or plant closures that appear subject to WARN’s advance notice
requirements provided notice, and (3) what issues employers and
employees face when assessing the applicability of WARN to their
circumstances.

To determine the extent to which mass layoffs and plant closures appear
subject to WARN’s advance notice requirements, we used the Bureau of
Labor Statistics3 (BLS) Mass Layoff Statistics (MLS) data for 2001 to
determine which events appear subject to WARN according to the criteria
included in the statute and the regulations. To determine the extent to
which employers with mass layoffs and plant closures subject to WARN’s
advance notice requirements provided notice, we obtained all WARN
notices received for mass layoffs and plant closures in 2001 from all
50 states and the District of Columbia.4 BLS then matched its MLS data for


3
 BLS is an agency within the Department of Labor. The MLS program, run by BLS, collects
data on mass layoff actions that result in workers being separated from their jobs.
4
 We asked the state dislocated worker units to provide us with notices because they are the
only recipient of all WARN notices for the entire state and because no data are collected on
WARN compliance. We use these notices as a proxy measure for employers notifying all
relevant parties.




Page 2              GAO-03-1003 The Worker Adjustment and Retraining Notification Act
                   2001 with the notices states sent us, which provided an estimate of the
                   number of events subject to WARN’s advance notice requirements where
                   the employers provided notice.5 To assess the extent to which notices met
                   the requirements of the WARN Act, we analyzed a random, nationwide
                   sample of 600 WARN notices from 2001 to determine the extent to which
                   the notices contained the required elements outlined in the law.6 To
                   determine what issues employers and employees face when assessing the
                   applicability of WARN to their circumstances, we interviewed dislocated
                   worker officials in all 50 states7 and the District of Columbia, labor
                   experts, employee and employer groups, law firms, and selected a random
                   sample of 50 employers that provided states with a WARN notice in 2001.8
                   Finally, we reviewed the WARN Act provisions, WARN Act regulations,
                   Department of Labor’s educational materials, and all reported court cases
                   decided between 1998 and 2002 that discuss or apply WARN provisions to
                   describe the key issues raised through the courts by laid-off workers and
                   employers. We conducted our work between October 2002 and July 2003
                   in accordance with generally accepted government auditing standards.
                   (See app. I for our scope and methodology.)


                   On the basis of 2001 data from BLS, we found that an estimated 24 percent
Results in Brief   of all mass layoffs and plant closures appear subject to WARN’s advance
                   notice requirements. However, mass layoffs were less likely to be subject
                   to WARN’s advance notice requirements than plant closures. Specifically,
                   employers were required to provide advance notice for approximately
                   13 percent of the 7,097 mass layoffs, while employers were required to
                   provide advance notice for approximately 82 percent of the 1,253 plant
                   closures. This difference between mass layoffs and plant closures stems
                   primarily from the law’s “one-third” rule, which applies only to mass
                   layoffs. In 2001, while approximately 661,000 workers were involved in a
                   mass layoff or plant closure that met WARN criteria, over 415,000 workers


                   5
                    These numbers are an estimate from the available data. Like any data set, these estimates
                   include limitations. See app. I for further explanation.
                   6
                    Notices sent to the state officials should include the expected date of first separation,
                   address of employment site, name and contact information, number of affected workers,
                   and if the notice is sent less than 60 days in advance, an exception should be listed with a
                   brief statement of why the exception is applicable.
                   7
                    We did not formally interview state officials in Nevada, but they provided all WARN
                   notices and other relevant information.
                   8
                   From the 50 employers, we interviewed 23. See app. I for further explanation.




                   Page 3               GAO-03-1003 The Worker Adjustment and Retraining Notification Act
were involved in mass layoffs that did not meet the one-third rule;
therefore, their employers were not required to provide advance
notification.

On the basis of 2001 data from BLS, we found that employers provided
notice for an estimated 36 percent of mass layoffs or plant closures that
appear subject to WARN’s advance notice requirements. Specifically,
employers provided notices for almost one-half (46 percent) of plant
closures, compared with approximately one-quarter (26 percent) of mass
layoffs. The remaining mass layoffs and plant closures appear subject to
WARN requirements, but notices were not provided. This discrepancy
might be explained partially by the use of other practices, not precluded
by WARN, that employers and employee representatives reported, such as
asking employees to sign waivers of their rights to advance notice. Of the
36 percent of mass layoffs and plant closures with a WARN notice, about
two-thirds of the notices (an estimated 68 percent) provided at least the
required 60-day advance notice. Almost all of the notices included all
required elements outlined in the regulations. In addition, other employers
provided notice for mass layoffs and plant closures that were not subject
to WARN’s requirements as encouraged in the law and regulations.

On the basis of interviews with interested parties and a legal review of
court cases, we found that certain definitions and requirements of WARN
are difficult to apply when employers and employees assess the
applicability of WARN to their circumstances. In particular, employers,
employee representatives, and others reported it problematic to apply the
statute’s provisions when calculating the layoff threshold (i.e., whether the
requisite number of employees have been laid off within prescribed time
frames) that triggers WARN requirements. In addition, the courts have
applied the statute’s provisions in varying ways, resulting in decisions that
do not always clarify employer responsibilities and employee rights under
the law. For example, the courts have interpreted the damages for
violating the statute’s advance notice provision in two ways; in some cases
the courts have calculated damages using calendar days, while in other
cases they have used work days. The use of one calculation versus the
other either increases or decreases the amount of money the employer is
required to pay for a WARN violation by approximately 30 percent and
affects the amount of money workers receive when they do not receive
60-days advance notice of a layoff or closure. Finally, although the
Department of Labor has taken steps to improve educational materials on
WARN originally developed in 1989, Labor has not made these materials
widely available to employers or employees.



Page 4           GAO-03-1003 The Worker Adjustment and Retraining Notification Act
             To educate and inform employers and employees about WARN, we
             recommend that the Secretary of Labor take immediate action to make
             revised educational materials widely available to employers and
             employees for assistance in understanding the regulations. In responding
             to preliminary findings of this report, Labor officials said that updating the
             regulations would not address many of the issues outlined in this report.
             Consequently, we include a Matter for Congressional Consideration to
             clarify employer responsibilities and employee rights under WARN,
             specifically clarifying definitions and layoff thresholds through amending
             the statute. Labor provided informal comments and technical clarifications
             on this report, which we incorporated as appropriate. Labor informed us
             about efforts that it has already made to address our recommendation and
             chose not to comment formally.


             WARN generally requires that employers with 100 or more full-time
Background   workers give their affected employees or their representatives, the state’s
             dislocated worker unit, and local government officials 60 days advance
             notice of an impending closure or layoff. Employers with 100 or more full-
             time workers generally account for less than 2 percent of all employers.
             However, these employers employ 64 percent of the labor force.

             The purpose of advance notice is twofold. First, advance notice provides
             workers and their families with an appropriate amount of time to
             transition and adjust to the prospective job loss, to seek and obtain
             alternative jobs, and if necessary, to participate in skill training and
             retraining so that these workers can re-enter the job market. Second,
             advance notice promotes the delivery of rapid response services to the
             affected workers through the state’s dislocated worker unit (DWU), by
             allowing the DWU to go to the employment site and provide information
             about job services before workers are laid off and more difficult to locate.

             A number of factors determine whether employers are required to provide
             notice under WARN. (See fig. 1.) First, employers must decide if the mass
             layoff or plant closure at a single site will affect at least 50 employees,
             excluding part-time workers. For a mass layoff, employers must also
             consider if the layoff will affect at least 33 percent of the workforce
             (excluding part-time workers) and will be expected to exceed 6 months.9



             9
             The employer must also determine whether there has been a reduction in hours of work of
             more than 50 percent during each month of any 6-month period.




             Page 5             GAO-03-1003 The Worker Adjustment and Retraining Notification Act
Alternatively, employers with 100 or more employees who in the aggregate
work at least 4,000 hours per week (excluding overtime) are covered.
Employers must then determine if at least 50 full-time workers will be laid
off during any 30-day period, or for two or more groups, over a 90-day
period.10 If the mass layoff or plant closure has met all these criteria, it
would be subject to WARN’s requirements and notice must be provided at
least 60 days before the first layoff. Certain layoffs and closures are
exempt from advance notice, including those that involve the completion
of a particular project, certain transfers or reassignments, and strikes or
lockouts.

Figure 1: WARN Decision Matrix



                     Employer has 100 or more full-time
                       workers, and layoffs affecting at
                      least 50 full-time workers will last
                                over 6 months

                                           Yes

                              Is the employer closing           Yes
                                   a plant or unit?

        No                                 No

                                 Is the number of
                              workers to be laid off at            Are the layoffs due to factors
                     No                                   Yes     other than strikes, lockouts, or
                               least one-third of the
                                                                    completion of a particular
                                   workforce (for
                                                                              project?
                               businesses laying off
                             fewer than 500 workers)
                             or a total of 500 workers                             Yes


                                                                        Notice required
       No notice                                 No                      for workers,
       required                                                         DWU, and chief
                                                                        elected official

 Source: GAO data.




10
 The 90-day period applies unless employers demonstrate in court that the layoffs are the
result of separate and distinct actions and causes and are not an attempt to evade WARN’s
requirements.




Page 6                    GAO-03-1003 The Worker Adjustment and Retraining Notification Act
                      WARN also lists three exceptions that allow employers to give less than
                      60 days advance notice. These are (1) “faltering company,” which is
                      defined as those employers involved in a closure who are trying to seek
                      new business or raise capital at the time that 60-day notice would have
                      been required; (2) “unforeseeable business circumstances,” which applies
                      to closings and mass layoffs caused by business circumstances that were
                      not reasonably foreseeable at the time that 60-day notice would have been
                      required; and (3) a natural disaster. Employers that wish to use these
                      exceptions must still provide notice in as much time as possible and also
                      give a brief statement of why the exception is being used in the WARN
                      notice.

                      Congress did not assign any agency responsibility for enforcing WARN.
                      The Department of Labor is responsible for issuing regulations, providing
                      educational information about the act, and for providing any future
                      revisions to the regulations as may be necessary. Employees seeking
                      redress under WARN must pursue their cases through the federal courts.11
                      The time frames for employees to file under WARN vary by state because
                      the act does not contain a statute of limitations. Courts can award
                      damages of up to 60 days back pay and benefits as remedy to workers for
                      WARN violations.12 The courts must reduce the damages for each day the
                      employer gave notice, if less than 60 days, or for any wages paid during the
                      violation period. The courts may also award the winning party reasonable
                      attorney’s fees.


                      Of the 8,350 mass layoffs and plant closures in 2001, 24 percent appear
An Estimated 24       subject to WARN advance notice requirements and involved
Percent of All Mass   approximately 661,000 workers. Fewer mass layoffs appear subject to
                      these requirements than plant closures (13 percent vs. 82 percent). This is
Layoffs and Plant     due primarily to the one-third rule that only applies to mass layoffs,
Closures Appear       specifically layoffs affecting at least 33 percent of the workforce. Figure 2
                      provides a summary of events subject and not subject to WARN
Subject to WARN’s     requirements in 2001.
Advance Notice
Requirements
                      11
                        Cases are initially filed with one of the U.S. district courts located in the 50 states, District
                      of Columbia, or the U.S. Territories. Each state has at least one district court. A decision of
                      the district court may be appealed to 1 of the 13 U.S. courts of appeal, also referred to as
                      circuit courts. Parties may request review of circuit court decisions by the U.S. Supreme
                      Court, but the Supreme Court accepts only a small percentage of such requests.
                      12
                       Courts can also award up to $500 per day, for up to 60 days, to local governments.




                      Page 7                GAO-03-1003 The Worker Adjustment and Retraining Notification Act
Figure 2: Events Subject to and Not Subject to WARN Requirements in 2001

                         1,974                                 6,376
  Total events                                                                            8,350
                         24%                                   76%


                     948                             6,149
  Mass layoffs                                                                 7,097
                     13%                             87%

                                  227
                     1,026        18%
Plant closures
                     82%
                                 1,253

                 0                 2,000            4,000              6,000      8,000           10,000
                  Total number of events


                             Events not subject to WARN requirements

                             Events subject to WARN requirements

Source: GAO analysis and BLS, May 2003.



The 948 mass layoffs that appear subject to WARN involved about
300,000 workers. In comparison, the 6,149 layoffs not subject to WARN’s
requirements involved over 1 million workers. Forty-five percent of the
mass layoffs were not subject to WARN because the “single event” did not
affect at least one-third of the employer’s workforce. (See fig. 3.) These
layoffs affected approximately 415,000 workers whose employers were not
required to provide notice.




Page 8                       GAO-03-1003 The Worker Adjustment and Retraining Notification Act
Figure 3: Percentage of Mass Layoffs in 2001 Excluded from WARN Requirements
Due to the One-Third Rule

                                                               Layoffs not subject to WARN




                         87%                                          45%
                                                                                One-third rule




      13%
                                                                      41%
                                                                               Other exclusions




                                                               WARN layoffs
Source: BLS, May 2003 and 2001 WARN Notices from state DWUs.

Note: Exclusions do not total 87 percent due to rounding. Other exclusions include layoffs that affect
less than 100 workers and public sector layoffs. It also includes those workers who are seasonal,
involved in labor disputes, involved in weather-related layoffs, on leave, and finished with a contract.


In contrast to mass layoffs, 82 percent of plant closures appear subject to
WARN’s requirements. (See fig. 2.) These 1,026 plant closures affected
about 360,000 workers. In comparison, the 227 plant closures were not
subject to WARN’s requirements and involved approximately 20,000
workers. Plant closures may be excluded from WARN’s requirements for a
variety of reasons; for example, plant closures that involve seasonal
workers or workers who have completed a contract. (See app. I for further
explanation.)




Page 9                     GAO-03-1003 The Worker Adjustment and Retraining Notification Act
                             While 1,974 mass layoffs and plant closures appear to be subject to
Employers Provided           WARN’s advance notice requirements in 2001, BLS estimated that
Notice for about One-        employers provided notice for only 717 of these events. Most of the
                             notices provided gave at least the required 60-day advance notice. In
Third of Layoffs and         addition, almost all notices included the required elements outlined in the
Closures Subject to          regulations. Other employers provided notice for mass layoffs and plant
                             closures that were not subject to WARN’s requirements as encouraged in
WARN Requirements,           the law and the regulations.
Most of Which Were
Timely

Employers Provided           Data from BLS indicated that employers provided notices for 717, or
Notice for about One-Third   36 percent, of the 1,974 mass layoffs and plant closures that appear subject
of WARN-Covered Mass         to advance notice requirements under WARN in 2001. Employers provided
                             notices for plant closures at a higher rate than for mass layoffs.
Layoffs or Closures          Specifically, they provided notices for almost one-half (46 percent) of
                             plant closures, compared with approximately one-quarter (26 percent) of
                             mass layoffs. The remaining two-thirds (64 percent) of mass layoffs and
                             plant closures appeared to be subject to WARN requirements, but
                             employers did not provide notices. (See app. I.)

                             In those cases where notices were not provided, employers may be
                             engaging in other practices, not precluded by WARN, that limit their
                             liability under the law. Representatives for both employers and employees
                             told us about two practices in particular: pay in lieu of notice and waivers.
                             For the former, employers offer employees money instead of their full
                             60-days notice.13 For the latter, employers ask employees to sign a contract
                             waiving their rights under WARN—sometimes in exchange for a severance
                             package.14 In both cases, employees might receive payment for foregoing
                             the advance notice, but the lack of an advance notice means that the state
                             is less likely to be able to deploy services to facilitate workers’



                             13
                               The Department of Labor states that neither the act nor the regulations recognize the
                             concept of pay in lieu of notice and that failure to give notice does a significant disservice
                             to workers and undermines other services that are part of the purpose of the WARN Act.
                             However, the statute does specifically provide that the amount for which the employer is
                             liable must be reduced by any wages paid during the period of violation. 29 U.S.C. 2104
                             (a)(2)(A).
                             14
                              Neither the act nor the regulations address waivers under WARN; however, the courts
                             have upheld employees’ waiver of WARN Act claims. See Joe v. First Bank System, Inc.,
                             202 F.3d 1067 (8th Cir. 2000).




                             Page 10              GAO-03-1003 The Worker Adjustment and Retraining Notification Act
                           reemployment before the plant closure or mass layoff. An employer
                           representative told us that some employers use these other practices
                           because they are confused, in general, about the law, and its applicability
                           to their circumstances. According to employers and their representatives,
                           employers have difficulty determining when WARN requirements apply to
                           mass layoffs, in particular, because of the layoff threshold requirements. In
                           addition, employer representatives told us about concerns that employers
                           have about providing advance notice, which might influence an employer’s
                           decision to engage in other practices.15 Specifically, some employers fear
                           that providing advance notice will affect their businesses negatively by
                           causing employees to leave before the scheduled layoff or commit
                           sabotage. Although 17 of the 23 employers we interviewed that provided
                           advance notice told us that some employees resigned after they received
                           advance notice, only 2 employers indicated that this was a hardship. Two
                           experienced acts of sabotage.

                           Interestingly, employers provided more notices than there were WARN
                           events in 2001. Employers provided 5,349 notices, but there were only
                           1,974 plant closure and mass layoffs that appeared to meet the WARN
                           criteria for advance notice. The volume of notices provided suggests that
                           employers appear to be heeding the portion of the law and regulations that
                           encourages advance notice in ambiguous situations even if it is not
                           required by WARN. Providing advance notice when not required may lead
                           to the delivery of rapid response services for dislocated workers. Some
                           state officials told us that they provide rapid response services for layoffs
                           and closures that do not meet WARN requirements if they receive notice.


Of the Notices Provided,   On the basis of a sample of WARN notices, we found that employers with
Two-Thirds Were Timely 	   mass layoffs or plant closures that were subject to WARN requirements
                           and sent a notice to their state officials generally provided notice on time
                           and almost always included all of the required elements as outlined in the
                           law. We estimated that two-thirds (68 percent) of the notices that state
                           officials received were dated 60 or more days before the mass layoff or



                           15
                             A previous GAO report found that researchers and opponents of WARN expressed
                           concerns about the cost of providing notice, but parties we spoke with did not express this
                           as a concern. See U.S. General Accounting Office, Dislocated Workers: Worker Adjustment
                           and Retraining Notification Act Not Meeting Its Goals, GAO/HRD-93-18 (Washington,
                           D.C.: Feb. 23, 1993). Employers’ estimates of costs of providing the notice ranged from $0
                           to $5,800, with an average cost of less than $1,300. This range excludes costs from lawsuits
                           related to WARN.




                           Page 11              GAO-03-1003 The Worker Adjustment and Retraining Notification Act
plant closure; the estimated average advance notice was 49 days.16
(See fig. 4.) We further estimated that 32 percent of employers gave state
officials less than 60 days to prepare for the event.17 Regardless of when
states received notice, approximately 90 percent of all notices included all
of the required elements as outlined in the regulations.

Figure 4: Amount of Employer Advance Notice to State Officials before a Mass
Layoff or Plant Closure

                                                   Employers that provided notice
                                                   after the event


                              7%



                                        25%        Employers that provided notice less
                                                   than 60 days before the event




                  68%                              Employers that provided at least 60 days
                                                   notice before the event



Source: 2001 WARN Notices from state DWUs..




16
  This estimate includes those employers that provided notice after the layoff or plant
closure and those employers that used exceptions to account for less than 60 days notice.
17
 This estimate includes those employers that used exceptions to account for less than
60 days notice. The most commonly used exception was unforeseeable business
circumstance.




Page 12                    GAO-03-1003 The Worker Adjustment and Retraining Notification Act
                             On the basis of our interviews with interested parties and a legal review of
Employers and                court cases, we found that certain definitions and calculations of WARN
Employees Find               are difficult for employers and employees to apply when assessing the
                             applicability of WARN to their circumstances. The courts have applied the
WARN’s Definitions           statute’s provisions in varying ways, resulting in decisions that do not
and Calculations             always clarify employer responsibilities and employee rights under the
                             law. In addition, Labor has made several efforts to enhance educational
Difficult to Apply Due       materials on the WARN Act, but these materials are not yet widely
to Ambiguities in the        available to employers and employees.
Statute and Limited
Guidance
Employers and Employees      A variety of indicators suggest that employers and employees find WARN
Find WARN’s Definitions      definitions and calculations difficult to apply. These include inquiries
and Calculations Difficult   made regarding WARN provisions, litigation stemming from the
                             provisions, and an examination of the steps necessary to decide if and
to Apply                     when WARN is applicable. In our 1993 report,18 we found that the
                             employers had similar issues with WARN.

                             The questions employers and employees ask about the application of
                             WARN provides one indicator of the difficulties they have in applying its
                             provisions. State DWUs, the Department of Labor, and employer groups all
                             reported that employers and employees contact them with basic questions
                             about WARN.19 Of the state DWU’s able to provide an estimate, 36 states
                             reported receiving thousands of inquiries each year on WARN. This
                             number does not include the additional eight dislocated worker units in
                             states that reported receiving inquiries but could not estimate the number.
                             Moreover, the amount of inquiries surpasses the amount of events that
                             appear to meet WARN criteria and even surpasses the amount of total
                             events in 2001. According to dislocated worker officials, employers called
                             to ask whether their circumstances required compliance with WARN and
                             where to send notices, while employees called to ask whether their layoff
                             was covered and what their rights were. An Employment and Training
                             Administration (ETA) official within the Department of Labor reported
                             receiving


                             18
                              See U.S. General Accounting Office, Dislocated Workers: Worker Adjustment and
                             Retraining Notification Act Not Meeting Its Goals, GAO/HRD-93-18 (Washington, D.C.:
                             Feb. 23, 1993).
                             19
                              Callers also included unions, legislative staff, and others.




                             Page 13              GAO-03-1003 The Worker Adjustment and Retraining Notification Act
553 inquiries on the WARN Act in 2002. She also reported that employees
were the most frequent callers and most often asked about practices
employers used in lieu of notice or about severance. Additionally,
employer groups reported receiving inquiries about WARN from
employers and their representatives, and one employer representative told
us his organization provides WARN information sessions for employers
twice each year.

In addition to these queries, litigation over certain provisions provides
further evidence of the difficulties experienced by employers and
employees in applying WARN provisions. During our legal review of court
cases from 1998-2002, we found that certain provisions resulted in more
litigation in the courts. (See fig. 5.) In this time frame, we identified
68 reported decisions addressing WARN. (See app. III.) The most
commonly litigated issues in these cases were related to layoff thresholds.
Lawyers who litigated WARN cases told us that layoff threshold issues
involved multiple definitions that were difficult to comprehend.
Employers, employer and employee representatives, and lawyers cited the
statute’s definition of calculating the 50 employees who have been laid off,
the one-third rule, and the aggregation of multiple layoffs within a 90-day
period as difficult to apply to their specific circumstances. Lawyers we
spoke with said that neither the statute nor Labor’s guidance were
sufficient for helping them understand these definitions. In addition,
because the WARN Act does not have a statute of limitations, the court
must decide for each case whether the case was filed within the
appropriate time period. To do this, the courts look to the most analogous
state statute of limitations as opposed to federal law.20 The applicable state
statute of limitations, however, is not always easy to identify and often
varies from state to state.




20
     North Star Steel Co. v. Thomas, 515 U.S. 29 (1995).




Page 14                GAO-03-1003 The Worker Adjustment and Retraining Notification Act
Figure 5: WARN-Related Court Cases by Litigation Subject 1998-2002

Issues


            Single sitea                                          6



       Sale of company                                            6



Affected employeesb                                               6


    Employers acting in
          good faith to                                                   8
               comply


              Back pay                                                         10



Employer definitionc                                                           10



    Unforseen business
                                                                                    11
          circumstance



       Layoff threshold                                                                                  18


                           0        2          4              6       8       10         12   14   16   18
                           Number of cases by issues
Source: GAO analysis, Guild Law Center, Lexis, and Westlaw.

Note: Only major issues are represented in the graphic; therefore, they do not add up to the
68 reported decisions addressing WARN.
a
 WARN requires that layoffs or closures occur at a single site of employment in order to calculate the
requisite number of workers affected by a layoff or closure. These cases discuss a “single site” as
being geographically connected. Even where several distinct operations are performed at a
geographically connected site, that building or complex will be counted as one site. In some limited
cases, geographically separate sites may still be considered a single site of employment because of
other business-related connections; for example, sites that share the same staff and management
and are used for the same purpose.
b
WARN notices are required to be provided to all “affected employees.” These court cases have dealt
with this issue and found, for example, that workers who are temporarily laid off prior to a WARN
event are entitled to notice.
c
 Establishes who the employer is for purposes of WARN notification. These cases discuss, for
example, the relationship between parent and subsidiary companies when determining the employer
responsible for providing advance notice.




Page 15                        GAO-03-1003 The Worker Adjustment and Retraining Notification Act
Some labor law attorneys we spoke with said that applying the layoff
threshold definitions is difficult because doing so involves multiple steps
they characterized as complicated. In determining whether or not the
WARN threshold has been met, employers must first decide if at least
50 employees or one-third of the workforce have suffered an employment
loss21 at a single site. Employers must exclude all employees who have
worked fewer than the last 6 out of 12 months or fewer than 20 hours per
week. The layoff threshold calculations are further complicated when a
short-term layoff (i.e., a layoff lasting less than 6 months) that is not
covered under WARN is extended beyond 6 months becoming a long-term
layoff (i.e., a layoff lasting more than 6 months) and thus triggering the
WARN requirements.

In addition, applying the layoff threshold definitions can be further
complicated when multiple layoffs occur across a 90-day period. If there
are waves of layoffs within a 90-day period that result in an employment
loss for at least 50 workers and one-third of the workforce, then these
combined events may be subject to WARN. For example, if a company
employs 150 employees and has three layoff events involving 20 workers
during each event over 90 days, then these events in aggregate would be
subject to WARN’s requirements. Waves of layoffs are not always
aggregated for purposes of determining whether WARN is triggered;
however, if the issue is challenged, the employer must demonstrate that
the employment losses were the result of separate and distinct causes and
not an attempt to evade WARN’s requirements. Moreover, if there are
multiple layoffs within a 90-day period and one of them alone triggers
WARN, the rest are not subject to WARN’s requirements unless they
otherwise meet WARN’s requirements. For example, if a company employs
150 employees and has three layoffs within a 90-day period involving
20 workers for the first and second events but 60 employees in the third,
then this last event alone would be subject to WARN’s requirements, while
the other two would not be subject to WARN’s requirements even though
they all took place within a 90-day period.

Lawyers also told us that the difficulties in applying the layoff thresholds
allow some employers to manipulate numbers to qualify under the one-
third rule or lay off workers in waves over a period of time so that WARN


21
 Employment loss is an employment termination, other than a discharge for cause,
voluntary departure, or retirement, a layoff exceeding 6 months, or a reduction in hours of
work for individual employees of more than 50 percent during each month of any 6-month
period.




Page 16              GAO-03-1003 The Worker Adjustment and Retraining Notification Act
                            thresholds do not apply during a 90-day period. According to lawyers
                            representing employers and employees, some employers have a difficult
                            time applying these standards while other employers are so savvy at
                            manipulating the numbers that it is difficult for employees to know if and
                            when their rights have been violated.


Court Decisions Interpret   Areas of inconsistency among the courts’ interpretations of certain WARN
Certain WARN Provisions     Act provisions have caused difficulties for employers, employees, and
Inconsistently              their lawyers when assessing the applicability of WARN to their
                            circumstances. Depending upon the circuit,22 the courts interpret two
                            WARN provisions differently: (1) the calculation of damages and (2) the
                            definition of “employer” when two companies are closely related—an
                            issue that is associated with determining the employer responsible for
                            giving notice.

                            When calculating damages, the law states that employees are entitled to up
                            to 60 days back pay for a violation of WARN. However, the law does not
                            state if the 60 days should be interpreted as calendar days or as workdays.
                            The difference between the calendar day versus workday approach would
                            be the difference between 60 and 42 days pay, which decreases or
                            increases the amount an employer must pay for a WARN violation by
                            approximately 30 percent. The courts have different interpretations of the
                            law, and the regulations do not address the calculation of damages.

                            Because of this uncertainty, much litigation surrounds the calculation of
                            back pay and whether the law intended workers to receive 60 or 42 days of
                            pay for a WARN violation. The third circuit alone has found that back
                            wages should be calculated as calendar days—1 day of wages multiplied
                            by 60. The other circuit courts that have addressed the calculation of
                            WARN damages have all upheld the workday interpretation and use the
                            rationale that the back pay was meant to describe the wages that would
                            have been earned on average during a 60-day time period.




                            22
                              District court judges are required to follow decisions of the circuit court for the region in
                            which the district court sits. For example, a district court Judge in Maryland is bound by
                                                                             th
                            the decisions of the Court of Appeals for the 4 Circuit, which is located in Richmond,
                            Virginia, but includes all the districts in Maryland, Virginia, North Carolina, South Carolina,
                            and West Virginia. District courts may look to other circuit courts for guidance if their
                            regional circuit court has not addressed a particular issue. District court judges are not
                            bound by other district court decisions.




                            Page 17              GAO-03-1003 The Worker Adjustment and Retraining Notification Act
                            Lawyers representing both employers and employees would like the law to
                            be clarified, regardless of whom the outcome favors. For example, if the
                            calendar day approach were decided as the mandatory way to calculate
                            damages, then employers would be paying more money in damages, but
                            employers wishing to settle a WARN violation could better estimate pay
                            because they would know exactly how much they were liable for if the
                            case went to court.

                            The courts also have taken various approaches in determining who the
                            “employer” is for purposes of complying with WARN. Different courts
                            have chosen to use varying tests as outlined in several laws to determine
                            the employer responsible for providing WARN notice. Specifically, there is
                            no uniformity among the courts around the issue of identifying the
                            responsible employer when there are two closely related companies (e.g.,
                            the parent of a subsidiary), and it is unclear as to who is responsible for
                            sending the notice prior to a layoff. The WARN statute defines an
                            employer as a business enterprise but does not further define the term to
                            address parent and subsidiary companies.

                            To give employers, employees, and the courts guidance on determining
                            who the employer is, WARN’s regulations outline a five-factor employer
                            test. However, this test differs from other federal and state employer tests,
                            which results in the application of various tests when making
                            determinations regarding the employer and inconsistent outcomes for
                            employers and employees in court. As a result, the tests the courts have
                            applied have varied from case to case. (See app. II.) Each test examines a
                            number of factors meant to determine which of the two closely related
                            companies can be identified as the employer. For some cases, the courts
                            have used the five-factor test established in the WARN regulations. In
                            others, they have used a slightly different four-factor test called “federal
                            common law” in combination with the five-factor test. And in still other
                            cases, courts have looked to state law in addition to the other laws. In
                            most cases, the courts have used some combination of these three.
                            According to ETA officials, in promulgating regulations and the five-factor
                            test they contain, Labor did not intend to create a new employer test that
                            could be used instead of existing federal common law.


The Department of Labor’s   Organizations representing both employers and employees indicated that
Enhanced Educational        confusion over WARN definitions and calculations may stem, in part, from
Materials Are Not Widely    a lack of guidance. The implementing regulations that the Department of
                            Labor published in 1989 tasked Labor with providing assistance in
Available                   understanding the regulations. In the same year, Labor produced an


                            Page 18          GAO-03-1003 The Worker Adjustment and Retraining Notification Act
                       eight-page informational brochure on the WARN Act for employers and
                       later made the regulations available over the Internet. However, the
                       inquiries about WARN discussed earlier indicate that employers and
                       employees still have basic questions about WARN and find its definitions
                       and calculations difficult to apply to their circumstances. Further, the
                       brochure published in 1989 does not address case law established since
                       the act passed in 1988.

                       The Department of Labor has made several efforts to enhance educational
                       materials on the WARN Act, but these materials are not yet widely
                       available to employers and employees. These efforts have taken place over
                       the past 3 years and include taking steps to revise the brochure for
                       employers and developing an additional brochure for employees. In
                       addition, ETA officials told us that they have made some efforts to put
                       explanatory information about WARN regulations on the Internet. Labor
                       has also taken the initial steps to develop an interactive flow chart that
                       employers could use to determine if WARN is applicable. Labor’s
                       enhanced educational materials can be made widely available independent
                       of any changes to the law and will begin to address the need for additional
                       educational materials on WARN.


                       The assessment of the applicability of WARN is important, because for
Conclusions 
          every potential mass layoff or plant closure employers are responsible for
                       determining if their circumstances require compliance with WARN, and
                       employees are responsible for determining if their rights have been
                       violated. Although the Department of Labor has issued implementing
                       regulations and educational materials on WARN, these efforts have not
                       been sufficient to clarify employer responsibilities and employee rights
                       under the WARN Act. The lack of clarity stems, in part, from the statute
                       that contains provisions the courts, employers, and employees find
                       difficult to apply to specific situations. Because of this uncertainty,
                       employers, employees, and courts incur costs in time and resources in
                       determining the applicability of WARN to individual circumstances. This
                       lack of clarity could ultimately circumvent the purpose of advance
                       notice—namely, allowing states to prepare for workforce reductions and
                       quickly return dislocated workers to the workforce.


                       To educate and inform employers and employees about WARN, we
Recommendation for 
   recommend that the Secretary of Labor take immediate action to make
Executive Action 
     revised educational materials widely available to employers and
                       employees for assistance in understanding the regulations.


                       Page 19          GAO-03-1003 The Worker Adjustment and Retraining Notification Act
                     To clarify employer responsibilities and employee rights under WARN and
Matter for           to address varying court decisions, the Congress may wish to consider
Congressional        amending WARN by simplifying the calculation of layoff thresholds,
                     clarifying how damages are calculated, defining the term “employer” to
Consideration        address closely related corporations, and establishing a uniform statute of
                     limitations.


                     We provided the U.S. Department of Labor with a draft of this report for
Agency Comments      review and comment. Labor generally concurred with our conclusions
and Our Evaluation   about the difficulties in WARN implementation and provided informal
                     comments and technical clarifications, which we incorporated as
                     appropriate. Labor informed us that it has already made efforts to address
                     our recommendation and thus chose not to comment formally.
                     Furthermore, officials have indicated that they will continue to work
                     towards making enhanced educational materials widely available. In July
                     2003, the department published new WARN educational brochures for
                     employers and employees. However, distribution of the brochures is
                     currently limited to individuals inquiring about WARN through the
                     department, and the brochures have not yet been posted on ETA’s Web
                     site. Additionally, Labor is developing a WARN e-law advisor program to
                     help employers and employees understand their rights and responsibilities
                     under federal employment laws. However, department officials were
                     unable to provide an estimate on when the e-law advisor program would
                     be finished.


                     As agreed with your offices, unless you publicly announce the contents of
                     the report earlier, we plan no further distribution until 30 days from the
                     report date. At that time, we will send copies of this report to the Secretary
                     of Labor, appropriate congressional committees, and other interested
                     parties. In addition, the report will be made available at no charge on
                     GAO’s Web site at http://www.gao.gov.




                     Page 20          GAO-03-1003 The Worker Adjustment and Retraining Notification Act
If you or your staf have any questions about this report, please contact me
at (202) 512-9889. Other contacts and staff acknowledgments are listed in
appendix IV.




Robert E. Robertson
Director, Education, Workforce, and
  Income Security Issues




Page 21          GAO-03-1003 The Worker Adjustment and Retraining Notification Act
Appendix I: Objectives, Scope, and
Methodology

              We were asked to provide information on (1) the extent to which mass
              layoffs and plant closures appear subject to the Worker Adjustment and
              Retraining Notification (WARN) Act’s advance notice requirements, (2) the
              extent to which employers with mass layoffs or plant closures that appear
              to meet WARN criteria provided notice, and (3) what issues employers and
              employees face when assessing the applicability of WARN to their
              circumstances.1 To attain the objectives for this engagement, we began by
              reviewing the WARN Act provisions, the U.S. Department of Labor’s
              regulations, and the preamble to the regulations. We also reviewed Labor’s
              explanatory brochure on WARN for employers, as well as the draft
              brochures for employers and employees.

              To determine the extent to which mass layoffs and plant closures appear
              subject to WARN’s advance notice requirements, we asked the Bureau of
              Labor Statistics (BLS)2 to determine which events in its Mass Layoff
              Statistics (MLS) data for 2001 appear subject to WARN according to the
              criteria included in the statute and the regulations. To determine the
              extent to which employers with mass layoffs and plant closures that
              appear subject to WARN’s advance notice requirements provided notice,
              we asked all 50 states and the District of Columbia to provide us with all
              WARN notices received for mass layoffs and plant closures in 2001.3 BLS
              then matched its MLS data for 2001 with the WARN notices states sent us,
              which provided an estimate of the number of events subject to WARN’s
              advance notice requirements where the employers provided notice.4 To
              assess the extent to which notices met the requirements of the WARN Act,
              we conducted analysis on the content of a random, nationwide sample of
              600 WARN notices to determine the extent to which the notices contained




              1
               Because these questions were similar to those answered in our 1993 report on WARN, we
              replicated much of the methodology from the earlier report. See U.S. General Accounting
              Office, Dislocated Workers: Worker Adjustment and Retraining Notification Act Not
              Meeting Its Goals, GAO/HRD-93-18 (Washington, D.C.: Feb. 23, 1993).
              2
               BLS is an agency within the Department of Labor. The MLS program, run by BLS, collects
              data on mass layoff actions that result in workers being separated from their jobs.
              3
               We asked the state dislocated worker units to provide us with notices because they are the
              only recipient of all WARN notices for the entire state. We used these notices as a proxy
              measure for employers notifying all relevant parties.
              4
               These numbers are only an estimate from the available data. Like any data set, they
              include sampling errors and other data limitations.




              Page 22             GAO-03-1003 The Worker Adjustment and Retraining Notification Act
                         Appendix I: Objectives, Scope, and
                         Methodology




                         all of the required elements outlined in the law.5 To determine what issues
                         employers and employees face when assessing the applicability of WARN
                         to their circumstances, we talked to dislocated worker officials in all
                         50 states and the District of Columbia, labor experts, employee and
                         employer groups, law firms, and 23 employers from a random sample of
                         50 employers that provided WARN notices to states in 2001. Finally, we
                         reviewed all reported court cases decided between 1998-2002 that discuss
                         or apply WARN provisions to describe the key issues raised through the
                         courts by laid-off workers and employers.


                         In order to determine the extent to which mass layoffs and plant closures
Mass Layoff Statistics   appear subject to WARN’s advance notice requirements, we asked BLS to
Data                     perform some work utilizing its MLS data. There are no data collected on
                         the WARN Act, and although the type of information obtained by MLS and
                         the information required by the WARN provisions differ slightly (see next
                         paragraph),6 the MLS data are the best available for measuring WARN
                         layoffs and closures. Due to the differing criteria, BLS could only assess
                         whether mass layoffs and plant closures in the analysis “appear” to meet
                         WARN requirements. Because MLS does not generate sufficiently detailed
                         information about all the circumstances involved in each event and BLS’s
                         confidentiality pledge to employers prevented us from contacting the
                         employers directly, we could not conclusively determine whether every
                         closure that appeared to meet the WARN criteria actually met each
                         provision of the law. With these caveats in mind, we asked BLS to provide
                         us with information on the total number of extended mass layoffs in 2001
                         and to subtract from that total the mass layoffs and plant closures that did




                         5
                          Notices sent to the state officials should include: the date of first separation, address of
                         employment site, name and contact information, number of affected workers, and if the
                         notice is sent less than 60 days in advance, an exception should be listed with a brief
                         statement of why the exception is applicable.
                         6
                          An example of the difference between WARN and MLS would be events that affected at
                         least 50 workers during a 90-day period (appearing subject to WARN requirements) that
                         prompted fewer than 50 dislocated workers to submit claims for Unemployment Insurance
                         during a 5-week period. This event would not meet MLS criteria but appears subject to
                         WARN. Another example of the difference would be an employer that mistakenly reported
                         the reason for the extended mass layoff as one that was covered by WARN when the
                         correct reason would not have been covered by WARN. This event would meet MLS criteria
                         and would appear subject to WARN but should not be counted as subject to WARN.




                         Page 23               GAO-03-1003 The Worker Adjustment and Retraining Notification Act
Appendix I: Objectives, Scope, and
Methodology




not appear to meet the WARN criteria due to exclusions7 and exemptions8
that are provided in the law. BLS provided us with a list of 1,974 extended
mass layoffs9 from its MLS data that appear to meet WARN criteria. Table
1 shows the process by which BLS arrived at its list of events that
appeared to meet WARN criteria.

Table 1: Extended Mass Layoffs and WARN Coverage in 2001

    Extended mass layoff events, 2001              Layoffs         Closures              Total
    Events                                            7,097            1,253            8,350
    Less exclusions:                                  4,611              210            4,821
                                      a
      Employment level not provided                   1,070               50            1,120
      Employment level less than 100                    206              159                 365
      Ownership not private                             125                 1                126
      Events with 50-499 separations not
                                                                            b
      meeting the one-third criteria                  3,210                             3,210
    Subtotal, less exclusions                         2,486            1,043            3,529
    Less exemptions:                                  1,538               17            1,555
      Seasonal work                                   1,254               10            1,264
      Labor disputes                                     17                 1                18
      Employees on leave                                 75                 0                75
      Weather-related                                    25                 0                25
      Natural disaster                                    2                 0                 2
      Contract completed                                165                 6                171
    Appear to meet WARN criteria                        948            1,026            1,974
Source: BLS.
a
For closures, includes those events for which no employment was provided and between 50-99
workers were separated.
b
Not applicable.




7
 BLS deleted events from its list when factors of the extended mass layoff were outside the
scope of WARN. These included layoffs at establishments where (1) the employment level
was not provided, (2) the employment level was less than 100, (3) the ownership was not
private, or (4) the layoff did not affect at least one-third of the workforce.
8
 BLS deleted events from its list when the reason for the extended mass layoff was outside
the scope of WARN. These included events due to (1) seasonal layoffs, (2) labor disputes,
(3) leave, (4) weather, (5) natural disasters, or (6) completed contracts.
9
 BLS defines an extended mass layoff as an employment loss at a job site of at least
50 people who file claims with Unemployment Insurance over a 5-week period and the
employer indicates that the layoff of at least 50 people would last at least 31 days.




Page 24                  GAO-03-1003 The Worker Adjustment and Retraining Notification Act
Appendix I: Objectives, Scope, and
Methodology




WARN provisions do not match exactly with the data collected in MLS.
WARN requires that notice be provided for plant closures and mass layoffs
affecting at least 50 workers during a 30- or 90-day period, with some
exclusions and exemptions. MLS uses reports of layoffs involving at least
50 workers and lasting more than 30 days. Information on extended mass
layoffs is developed initially from each state’s Unemployment Insurance
database using a standardized automated approach for identifying
establishments that have at least 50 initial claims filed against them during
a consecutive 5-week period (the “extended mass layoff”). The state
agency then contacts these establishments by telephone to determine if a
“permanent” layoff or plant closing has occurred. A permanent layoff is
one that lasts more than 30 days. An establishment is considered closed if,
at the time of contact, the employer plans to close, is closing, or has
already closed the work site. The telephone survey obtains specific
information on the nature of the extended mass layoff, including the
number of separations, the reason for and the duration of the extended
mass layoff, and whether the establishment is remaining open.

To determine the extent to which employers with mass layoffs and plant
closures that appear to meet WARN criteria provided notice to their state
DWU, we asked BLS to link its MLS data with WARN notices we collected
from states. First, we asked the DWUs from all 50 states and the District of
Columbia to provide us with a list of all WARN notices that they received
for mass layoffs and plant closures in 2001 (n = 5,349).10 Then BLS



10
 We asked the states to send us records of notices that they determined to be WARN
notices provided for layoffs and closures that occurred during calendar year 2001.
However, the following caveats apply:
Arizona, Georgia, and Tennessee provided both WARN and non-WARN notices that they
received because their data systems did not distinguish between the two; we included all
the notices these three states sent to us for both the matching procedure and the content
analysis. The inclusion of some potentially non-WARN notices does not affect the matching
procedure result, which focuses on compliance, because these notices would be counted
as “overcompliance” (encouraged by the law) and not noncompliance (prohibited).
Kentucky, Michigan, Minnesota, New Mexico, New York, and North Carolina provided
records of notices received between July 2000 and December 2001 because their data
systems record the date of the notice, not the layoff or closure. The inclusion of some
notices for events in 2000 does not affect the matching procedure result, which focuses on
compliance, because these notices would be counted as “overcompliance” (encouraged by
the law) not noncompliance (prohibited).
Pennsylvania reported that it was unable to provide us with data for layoffs and closures
occurring in July 2001 due to data systems conversion.




Page 25             GAO-03-1003 The Worker Adjustment and Retraining Notification Act
                 Appendix I: Objectives, Scope, and
                 Methodology




                 matched the mass layoffs and plant closures that appear subject to
                 WARN’s advance notice requirements with the list of WARN notices. This
                 match was conducted using employer name and state to determine if there
                 was a match; it also provided us with an estimate of the number of events
                 that appear to be covered by WARN where the employers also provided
                 notice to the state dislocated worker unit. The number of notices, mass
                 layoffs and plant closures, and the overlap are in figure 6.

                 Figure 6: Overlap between WARN Notices and Events That Appear Subject to
                 WARN



                                                               5,349 WARN notices provided
                                                               to state dislocated worker units




                                                                                                                 4,632 WARN
                                                                                                                 notices provided,
                                                                                                                 but no matching
                                                                                                                 WARN event
                          717 WARN events
                           matching WARN
                           notices provided

                                                                                           1,257 WARN covered
                                                                                           events, but no matching
                                                                                           WARN notice




                                                        1,974 WARN-covered events
                                                        captured by Mass Layoff Statistcs



                 Source: State dislocated worker units and Bureau of Labor Statistics, May 2003.




                 To determine the extent to which WARN notices were timely and
WARN Notices 	   complete, we performed a content analysis on a random, national sample
                 of notices we collected. From the list provided by the dislocated worker
                 units, we selected a random sample of 600 notices and asked states to
                 provide us with copies of those notices. We performed a content analysis

                 Washington, D.C. could not provide us with any notices for 2001, but according to BLS,
                 there were no WARN events in D.C. for the year 2001.




                 Page 26                       GAO-03-1003 The Worker Adjustment and Retraining Notification Act
Appendix I: Objectives, Scope, and
Methodology




to determine the extent to which notices provided the amount of advance
notice required in the law and contained required elements (see table 2.)
Specifically, we evaluated the extent to which employers included the
name and address of the employment site, the date of first separation, a
contact person for the company, the number of affected workers, and, if
applicable, exemptions and a brief statement of the exemption. 11 After
reviewing copies of the notices provided by the state DWUs, we eliminated
five WARN notices from the sample because they occurred in 2000 or
2002. We also eliminated 40 notices because states told us they were not
able to provide those missing notices because either the employer did not
provide a notice (the DWU learned of the event through other means, such
as a newspaper article), the DWU lost the notice after it was received or
the DWU destroyed the notice after it was archived. The final sample of
555 WARN notices represents about 10 percent of the adjusted universe of
WARN notices for layoffs and closures in 2001.




11
  Sampling errors of estimated percentages from this sample were 4 percent or less. The
sampling error for the estimated average advance notice is between 3 and 4 days.




Page 27             GAO-03-1003 The Worker Adjustment and Retraining Notification Act
               Appendix I: Objectives, Scope, and
               Methodology




               Table 2: Required Elements in the Notices

                                                            Dislocated worker
                                                              units and chief         Worker
                   Information                               elected officialsa    representative           Workers
                                                                                                                        b



                   Name and address of
                   employment site                                  X                      X
                   Name and telephone
                   number of company official
                   to contact                                       X                      X                    X
                   Expected date of first
                                                                                            c
                   separation                                       X                     X                     Xc
                   Number of affected workers                       X
                   Statement of type of layoff                                             X                    X
                   Titles of positions to be 

                   affected and names of the 

                   workers currently holding 

                   these jobs                                                              X                                

                   Existence of bumping
                   rightsd                                                                                      X
               Source: Department of Labor’s regulations.
               a
                The following information is not required to be included in the notices to dislocated worker units and
               local officials, but must be made available upon request by the dislocated worker unit or elected
               officials: (1) job titles of positions to be affected, (2) statement of type of layoff, (3) existences of
               bumping rights, (4) name of union representative, and (5) name and address of chief elected officer of
               each union.
               b
                   If no representative.
               c
                   Must also include schedule of separations.
               d
                “Bumping rights” include displacing the least senior person in the affected employee’s job
               classification. For example, a carpenter with seniority could bump the least senior carpenter in order
               to remain employed.


               To determine what issues employers and employees face when potentially
Interviews 
   affected by WARN, we conducted semistructured interviews with (1) state
               DWUs or rapid response officials from all 50 states and the District of
               Columbia;12 (2) academic and professional experts on the WARN Act,
               including officials from the Guild Law Center; (3) employer groups, such
               as Labor Policy Association and Small Business Administration;
               (4) employee groups, such as the AFL-CIO and United Auto Workers; and
               (5) lawyers with experience litigating WARN cases, from both the



               12
                We did not formally interview state officials in Nevada, but they provided all WARN
               notices and other relevant information.




               Page 28                       GAO-03-1003 The Worker Adjustment and Retraining Notification Act
                  Appendix I: Objectives, Scope, and
                  Methodology




                  employer and employee sides. These groups provided us with a
                  multifaceted look from the employer and employee perspective at the
                  issues faced when potentially affected by WARN. In our interviews with
                  the state dislocated worker units in all 50 states and the District of
                  Columbia, we asked the officials to estimate the number of inquiries they
                  receive per year. Thirty-six states were able to provide estimates.

                  To collect information on employer perspectives and experiences
                  regarding the clarity of provisions and the consequences associated with
                  filing a WARN notice, we conducted structured interviews13 with a small,
                  randomly selected set of employers who provided a WARN notice to their
                  state dislocated worker unit for a mass layoff or plant closure in 2001. We
                  attempted to contact 50 employers. Of those, 18 had closed entirely and/or
                  we were unable to locate any current contact information for them. From
                  the remaining 32 employers, 9 declined to participate in the interview for a
                  variety of reasons. We interviewed 23 employers. With these data, among
                  other sources, we were able to assess which WARN provisions were
                  unclear to the employers, other practices used to limit potential WARN
                  liability, and costs associated with providing notice.


                  To determine what issues employers and employees face when potentially
Review of Court   affected by WARN, we reviewed court cases from 1998-2002 that were
Cases             substantively about the WARN Act. In order to find all of the relevant
                  court cases that dealt with the WARN Act, we used Lexis, Westlaw, and
                  the Guild Law Center’s Plant Closing (WARN Act) Project.14 The
                  Department of Labor’s ETA also provided us with a list of cases that we
                  checked against our own research and the Guild Law Center’s Plant
                  Closing Project to establish a list of cases addressing WARN during the
                  past 5 years.

                  From our list of all reported court cases that discuss or apply WARN
                  provisions, we summarized the outcomes of each case and then coded
                  each case according to the issues addressed. (See app. III and fig. 5.) We
                  reviewed the cases to identify patterns between the interviews and court
                  cases where employers and employees seem to be confused with the law


                  13
                    The structured interview questions were based on the survey of employers conducted for
                  the 1993 report.
                  14
                   Through the Plant Closing Project, the Guild Law Center publishes a WARN Act
                  Practitioner’s Guide and WARN Act Case Law Updates and Summaries.




                  Page 29             GAO-03-1003 The Worker Adjustment and Retraining Notification Act
Appendix I: Objectives, Scope, and
Methodology




and its regulations. In addition, we reviewed law review articles discussing
the inconsistencies in the application of various WARN provisions by the
courts. We also reviewed articles discussing the evolution of WARN and
general information regarding the law and its regulations.




Page 30             GAO-03-1003 The Worker Adjustment and Retraining Notification Act
Appendix II: Tests Applied to Find Liability in
Parent/Subsidiary, Sister Corporation, and
Lender/Borrower Situations
                                                   State law tests: Generally focus on the extent of actual control the
                                                   company has over its own business decisions.

                                                   Federal common law test: Also referred to as single employer, integrated
                                                   enterprise or single business enterprise test: (1) common ownership;
                                                   (2) common management; (3) centralized control of labor relations;
                                                   (4) functional integration of operations; focus on whether two nominally
                                                   independent enterprises really constitute one integrated enterprise
                                                   (absence of arms length dealing).

                                                   WARN: Department of Labor’s regulations (20 C.F.R. 639.3(a)(2)):
                                                   (1) common ownership; (2) common directors and/or officers; (3) de facto
                                                   exercise of control; (4) unity of personnel policies emanating from a
                                                   common source; (5) dependency of operations.

Table 3: Different Tests Used by Courts to Determine Employer Liability

                                                                                       Tripartite 

 Test(s) 
                                              WARN and federal               (state law, federal common 

 applied               State law and WARN 
             common law                     law, WARN)                         WARN only 

 Cases                 Wholesale & Retail Food          United Mine-workers of Am. Watts v. Marco Holdings, L.P.,         Local 217 Hotel & Rest.
                       Distribution Local 63 v. Santa   v. Florence Mining Co., 855 1997 WL 578783 (N.D. Miss.            Employees Union v.
                       Fe Terminal Servs., Inc., 826    F. Supp. 1466 (W.D. Pa.     1997)                                 MHM, Inc., 976 F.2d
                       F. Supp. 326 (C.D. Cal. 1993)    1994)                                                             805 (2nd Cir. 1992)
                       Hollowell v. Orleans Reg’l       Int’l Bd. of Teamsters Local   United Paperworkers Int’l          Pearson v. Component
                       Hosp., 217 F.3d 379 (5th Cir.    952 v. Am. Delivery Serv.      Union v. Alden Corrugated          Tech. Corp., 247 F.3d
                       2000)                            Co.,50 F.3d 770 (9th Cir.      Container Corp., 901 F. Supp.      471 (3rd Cir. 2001)
                                                        1995)                          426 (D. Mass. 1995).
                                                        Childress v. Darby Lumber      Local 397, Int’l Union of Elec.,   United Auto., 

                                                        Inc., 126 F.Supp.2d 1310       Elec., Salaried Mach. &            Aerospace & Agric. 

                                                        (D. Mont. 2001)                Furniture Workers v. Midwest       Implement Workers of 

                                                                                       Fasteners, Inc., 779 F. Supp.      Am. Local 157 v.
                                                                                       788 (D. N.J. 1992) 	               OEM/Erie Westland,
                                                                                                                          LLC., 203 F.Supp.2d
                                                                                                                          825 (E.D. Mich. 2002)
                                                                                                                          Bledsoe v. Emery
                                                                                                                          Worldwide Airlines,
                                                                                                                          2003 WL 1907798
                                                                                                                          (S.D. Ohio 2003)
Source: GAO analysis, Westlaw, and Lexis.




                                                   Page 31              GAO-03-1003 The Worker Adjustment and Retraining Notification Act
Appendix III: Reported Court Cases under
WARN Act, 1998-2002

Table 4: Reported Court Cases under WARN Act, 1998-2002

Case                                                 State filed      Year    Outcome
Air Trans. Local 504, Transp. Workers Union of       New York         1998    Court found that Ogden, seller company, was not
Am. v. Ogden Aviation Servs., No. 96 CV 4506                                  responsible for providing WARN notices to workers
SJ, 1998 WL 191297 (E.D.N.Y. Apr. 20, 1998).                                  subsequently laid off by buyer company; case proceeded
                                                                              toward trial.
Amalgamated Serv. & Allied Indus. Joint Bd. v.       New York         1998    Corporation failed to file notice of appearance of counsel,
Supreme Hand Laundry, Inc., 182 F.R.D. 65                                     and court entered default judgment for plaintiff.
(S.D.N.Y. 1998).                                                              Corporation was not permitted to subsequently raise a
                                                                              defense of good faith.
Amatuzio v. Gandalf Sys. Corp., 994 F. Supp.         New Jersey       1998    Court held that WARN’s definition of “affected employees”
253 (D.N.J. 1998).                                                            is not limited to those laid off after plant shutdown, but
                                                                              includes those expected to experience an employment
                                                                              loss. With respect to one group, more facts were needed
                                                                              to determine whether layoffs of two groups should be
                                                                              aggregated for purposes of determining WARN’s
                                                                              applicability.
Breedlove v. Earthgrains Baking Cos., Inc., 140      Arkansas         1998 	 Court held that back pay liability under WARN is
F.3d 797 (8th Cir. 1998).                                                    calculated based on working days.
Burns v. Stone Forest Indus., Inc., 147 F.3d         Oregon           1998    Back pay under WARN is limited to the days that would
1182 (9th Cir. Or. 1998).                                                     have been worked during the period (up to 60 days) for
                                                                              which no notice was given.
Cain v. Inacom Corp., No. ADV. 00-1724, 2001         Delaware         2001    Corporation’s motion to dismiss was denied because
WL 1819997 (Bankr. D. Del. Sept. 26, 2001). 	                                 there was a question of whether at the time of the layoffs
                                                                              it was a liquidating fiduciary or “engaged in business”—if
                                                                              the latter, it would be considered an employer under
                                                                              WARN.
Calvert v. Ladish Co. Inc., LR-C-97-577 (E.D.        Arkansas         1999    Employers’ motion to dismiss was denied because seller
Ark. 1999).a                                                                  was not relieved of obligation to provide notice where the
                                                                              seller merely transferred assets to a buyer and not its
                                                                              employees.
Calvert v. Ladish Co. Inc., LR-C-97-577 (E.D.        Arkansas         1998    Employees who were laid off as a result of a plant closing
                    a
Ark. Mar. 23, 1998).                                                          and not rehired after sale of company suffered an
                                                                              employment loss; those rehired after sale did not.
Castro v. Chicago Housing Auth., No. 99 C 6910, Illinois              2001    Factual questions to be resolved at trial were whether a
2001 WL 709445 (N.D. Ill. June 25, 2001). 	                                   single site existed for WARN purposes and whether
                                                                              employer, a quasipublic entity, is a commercial enterprise
                                                                              and thus subject to WARN requirements.
Castro v. Chicago Housing Auth., No. 99 C 6910, Illinois              2002    Court found that a group of layoffs occurred at a single
2002 WL 31324053 (N.D. Ill. Oct. 17, 2002).                                   site.
Childress v. Darby Lumber, Inc., 126 F. Supp.        Montana          2001    WARN obligations applied because parent and wholly
2d. 1310 (D. Mont. 2001).                                                     owned subsidiary were a single business enterprise that
                                                                              employed over 100 employees. Employer did not qualify
                                                                              for good faith, unforeseen business circumstance
                                                                              exception, or faltering company exception. Employer’s
                                                                              notice was inadequate because it did not state why the
                                                                              notice was for a shortened time period.




                                               Page 32             GAO-03-1003 The Worker Adjustment and Retraining Notification Act
                                           Appendix III: Reported Court Cases under
                                           WARN Act, 1998-2002




Case                                              State filed       Year    Outcome
Ciarlante v. Brown & Williamson Tobacco Corp.,    Pennsylvania      1998 	 Court reversed ruling for plaintiffs because it was not
143 F.3d 139 (3rd Cir. 1998).                                              clear whether plaintiffs, traveling salesmen, were at a
                                                                           “single site of employment.” The case was remanded to
                                                                           district court.
Corbo v. Tompkins Rubber Co., 146 Lab. Cas.       Pennsylvania      2002    District court dismissed plaintiff’s case because employer
(CCH) P 10071, 2002 WL 1969653 (E.D. Pa.                                    did not have more than 100 employees, which is the
2002).                                                                      threshold for WARN coverage.
DePalma v. Realty IQ Corp., No. 01 CIV 446        New York          2002    Defendant’s motion to dismiss on the grounds that
RMB, 2002 WL 461647 (S.D.N.Y. Mar. 25,                                      employees had waived their WARN claims was denied;
2002).                                                                      questions remained about the whether signed releases
                                                                            were voluntary, and case will proceed toward trial.
Dingle v. Union City Chair Co., 134 F. Supp. 2d   Pennsylvania      2000    Court found that fewer than 50 employees suffered an
441 (W.D. Pa. 2000). 	                                                      employment loss; thus WARN notice requirement was not
                                                                            triggered.
Gomez v. Am. Garment Finishers Corp., No. EP- Texas                 2000    Employees previously laid off could be affected
99-CA-260-DB, 2000 WL 33348730 (W.D. Tex.                                   employees entitled to notice subsequently if they had a
Oct. 12, 2000).                                                             reasonable expectation of recall.
Graphic Communs. Int’l Union, Local 31-N v.       Maryland          2002    Employer was entitled to use “good faith” defense even 

Quebecor Printing Providence Inc., F. Supp. 2d,                             though it did not initially raise this defense. 

(D. Md. Apr. 25, 2002). 

Graphic Communs. Int’l Union, Local 31-N v.       Maryland          2001    Notice was required when the plant was shut down even
Quebecor Printing (USA) Corp., 252 F.3d 296                                 though workers were previously laid off and had received
(4th Cir. 2001).                                                            notice of temporary layoff. When shutdown occurred,
                                                                            employees suffered an “employment loss,” triggering new
                                                                            notice.
Halkias v. General Dynamics Corp., 137 F.3d       Texas             1998    Court found that an unforeseen business circumstance
333 (5th Cir. 1998).                                                        relieved the employer from providing notice where there
                                                                            was not a foreseeable probability that a significant
                                                                            government contract would be cancelled.
Hollowell v. Orleans Regional Hosp. LLC, 217      Louisiana         2000    Court affirmed district court’s decision in favor of plaintiffs,
F.3d 379 (5th Cir. 2000).                                                   finding that two groups of workers laid-off over a 90 day
                                                                            period were appropriately combined for purposes of
                                                                            establishing that at least 50 workers suffered an
                                                                            employment loss, thus triggering the WARN notice
                                                                            requirements.
Hotel Emples. and Rest. Emples. Int’l Union       New Jersey        1999    Court affirmed district court’s decision in favor of 

Local 54 v. Elsinore Shore Associates, 173 F.3d                             employer—failure to provide notice was excused by 

175 (3rd Cir. 1999).                                                        unforeseeable business circumstance exception where 

                                                                            government ordered the shutdown of a casino.
Hotel Emples. & Rest. Emples. Int’l Union v.      New York          2000    Unforeseeable business exception did not apply because
Paroc, Inc., No. 99 Civ. 3078 MBM, 2000 WL                                  employer could not show that successful completion of
204537 (S.D.N.Y. Feb. 2, 2000).                                             negotiations was not reasonably foreseeable as of the
                                                                            date that closure notices would have been required.
In re Arrow Transp. Co. of Delaware, 224 B.R.     Oregon            1998    Bankruptcy court found that the debtor/employer was a
457 (Bankr. D. Or.1998).                                                    “prevailing party” under the WARN Act and that it is
                                                                            entitled to an award of attorneys’ fees incurred in
                                                                            objecting to that claim.




                                           Page 33               GAO-03-1003 The Worker Adjustment and Retraining Notification Act
                                             Appendix III: Reported Court Cases under
                                             WARN Act, 1998-2002




Case                                                State filed       Year    Outcome
In re Beverage Enters., Inc., 225 B.R. 111          Pennsylvania      1998 	 WARN Act claims arising or earned as a result of events,
(Bankr. E.D. Pa. 1998).                                                      which take place post-petition are entitled to
                                                                             administrative claim status under the Bankruptcy Code.
In re Fidelity Bond & Mortgage Co., No. 99-         Pennsylvania      2000    Layoffs at different sites in Philadelphia did not occur at a
18427 DAS, 2000 WL 1218358 (Bankr. E.D. Pa.                                   “single site,” and insufficient evidence was presented that
(Aug. 22, 2000)).                                                             50 employees were laid off at any one site.
In re Jamesway Corp., 235 B.R. 329 (Bankr.          New York          1999    Court found a violation of the WARN Act, and the reliance
S.D.N.Y. 1999).                                                               on unforeseeable business circumstance, faltering
                                                                              company, and good faith exceptions were not applicable;
                                                                              WARN claims for back pay do not receive priority in
                                                                              bankruptcy.
In re Jamesway Corp., 242 B.R. 130 (Bankr.          New York          1999    Claim for attorneys’ fees awarded to a group of workers
S.D.N.Y. 1999). 	                                                             who brought successful WARN case were given priority in
                                                                              bankruptcy.
In re Kitty Hawk, Inc., 255 B.R. 428 (Bankr. N.D.   Texas             2000 	 WARN claims are not administrative claims receiving high
Tex. 2000).                                                                  priority against a bankrupt debtor; WARN claims are
                                                                             treated as wages or salaries—a “third priority” claim.
In re United Healthcare Sys., Inc., 200 F.3d 170    New Jersey        1999    Court of appeals reversed lower court ruling for plaintiffs;
(3rd Cir. 1999).                                                              Court held that a bankrupt company winding up its affairs
                                                                              was not an “employer” required to give WARN notice.
International Assoc. of Machinists and              Texas             2000    Appeals court affirmed lower court’s decision that
Aerospace Workers v. Compania Mexicana de                                     employees’ release of rights constituted a waiver, and the
Aviacion, S.A. de C.V., 199 F.3d 796 (5th Cir.                                court held that the release does not have to specifically
2000).                                                                        mention WARN.
International Oil, Chem. & Atomic Workers, Local Illinois             1999    The appeals court affirmed a lower court decision that the
7-517 v. The Uno-Ven Co., 170 F.3d 779 (7th                                   laid-off workers who were rehired after the sale of a
Cir. 1999).                                                                   company did not suffer an employment loss and thus not
                                                                              entitled to notice.
International Union, Oil, Chem. & Atomic        Illinois              1998    The laid-off workers who were rehired after sale of
Workers, Local 7-517 v. Uno-Ven Co., No. 97 C                                 company did not suffer an employment loss.
2663, 1998 WL 341617 (N.D. Ill. June 23, 1998).
Joe v. First Bank Sys., Inc., 202 F.3d 1067 (8th    Nebraska          2000    The appeals court affirmed a lower court decision finding
Cir. 2000).                                                                   that one employee waived his WARN Act notice, and
                                                                              another, who did not sign the waiver, received a defective
                                                                              notice (no likely date of when the layoff will occur or the
                                                                              date of separation).
Johnson v. Telespectrum Worldwide, Inc., 29         Delaware          2002    The court found that the plaintiffs failed to establish that at
Fed. Appx. 76, 2002 WL 54693 (3rd Cir. 2002)                                  least 50 employees suffered an employment loss, noting
145 Lab. Cas. (CCH) P 11228 (NO. 01-1985).                                    that employees who quit voluntarily are not considered to
                                                                              have suffered an employment loss for meeting the
                                                                              threshold.
Johnson v. Telespectrum Worldwide, Inc., 61 F.      Delaware          1999    Court declined to decide the case without a trial, finding
Supp. 2d 116 (D. Del. 1999). 	                                                that issues of fact remained concerning whether the
                                                                              requisite number of layoffs occurred to trigger WARN
                                                                              notice requirements and whether an offer to transfer
                                                                              workers relieved the employer of the obligation to provide
                                                                              workers notice; case proceeded toward trial.




                                             Page 34               GAO-03-1003 The Worker Adjustment and Retraining Notification Act
                                             Appendix III: Reported Court Cases under
                                             WARN Act, 1998-2002




Case                                                State filed      Year    Outcome
Kelly v. Sabretech Inc., 106 F. Supp. 2d 1283       Florida          1999 	 Court held that back pay damages are to be based on
(S.D. Fla. 1999).                                                           work days, not calendar days.
Kildea v. Electro-Wire Prods., Inc., 144 F.3d 400   Michigan         1998    Laid-off employees who had a reasonable expectation of
(6th Cir. 1998).                                                             recall were “affected employees” entitled to notice when
                                                                             the plant announces a permanent shutdown. Employer
                                                                             was entitled to good faith defense where it interpreted the
                                                                             statute reasonably and otherwise complied with
                                                                             requirements.
Kildea v. Electro-Wire Prods., Inc., 60 F. Supp.    Michigan         1999    Despite a finding of a violation of WARN by the circuit
2d 710 (E.D. Mich. 1999).                                                    court, on remand, the district court reduced the amount of
                                                                             damages to zero based on a finding of good faith and did
                                                                             not award attorney’s fees.
Kirby v. Cyprus AmaxMinerals Co., 203 F. 3d         New Mexico       2000    Plaintiffs sought relief for WARN violation from the
835 (10th Cir. 2000)                                                         successor company and not the companies that had
                                                                             terminated the employees without notice. Since the
                                                                             defendant was not the employer at the time, court found
                                                                             that the employer was not liable.
Local 1239, Int’l Bhd. of Boilermakers, Iron        Illinois         1998    Following a finding of WARN Act violation, court
Shipbuilders, Blacksmiths, Forgers and Helpers                               concluded that employer was liable for back pay only for
v. Allsteel, Inc., 9 F. Supp. 2d 901 (N.D. Ill.                              days worked during violation period. Alleged knowledge
1998).                                                                       by employees that plant would close did not excuse
                                                                             employer from complying with WARN.
Local 1239, Int’l Bhd. of Boilermakers, Iron     Illinois            1998    Court found that where a layoff for which a WARN notice
Shipbuilders, Blacksmiths, Forgers and Helpers                               was provided was postponed, employees were entitled to
v. Allsteel, Inc., No. 94 C 3552, 1998 WL 808981                             additional notice referring back to the earlier notice.
(N.D. Ill. 1998).
Local 819, Int’l Bhd. of Teamsters v. Textile       New York         2000    Court found that there was a genuine issue for trial as to
Deliveries, Inc., No. 99CIV. 1726 (JGK), 2000                                whether employees, who were terminated and offered
WL 1357494 (S.D.N.Y. Sept. 20, 2000).                                        new employment, suffered a break in employment
                                                                             constituting an employment loss.
Local Joint Exec. Bd. of Culinary Bartender Trust Nevada             2001    Back pay under WARN includes tips and holiday pay; this 

Fund v. Las Vegas Sands, Inc., 7 Fed. Appx.                                  court reversed the lower court’s denial of class 

753, 2001 WL 366784 (9th Cir. 2001) (NO. 98-                                 certification as a “damages” class. 

17065, 98-17322). 

Local Union No. 1992, Int’l Bhd. of Elec. Workers New Jersey         1999    Reversing the district court’s decision, Appeals court held
v. Okonite Co., 189 F.3d 339 (3rd. Cir. 1999).                               that plaintiffs’ waiver of WARN notice may have been
                                                                             valid because of ambiguous provisions of a collective
                                                                             bargaining agreement. The district court had found that
                                                                             the plaintiffs’ waivers in exchange for severance benefits
                                                                             were invalid for lack of consideration because they were
                                                                             entitled to those benefits under the agreement without
                                                                             signing the waiver. Case was remanded to district court
                                                                             for further proceedings.
Local Union No. 1992, Int’l Bhd. of Elec. Workers New Jersey         1998    The district court reduced the attorneys’ fees awarded to
v. Okonite Co., 34 F. Supp. 2d 230 (D.N.J.                                   a Union, which had brought a successful WARN action.
1998).




                                             Page 35              GAO-03-1003 The Worker Adjustment and Retraining Notification Act
                                           Appendix III: Reported Court Cases under
                                           WARN Act, 1998-2002




Case                                               State filed       Year    Outcome
Michigan Regional Council of Carpenters v.         Michigan          2002    On motion for reconsideration, the court reversed an
Holcroft L.L.C., 195 F. Supp. 2d 908 (E.D. Mich.                             earlier decision that fewer than 50 employees suffered an
2002).                                                                       employment loss, finding several questions of fact, such
                                                                             as whether certain laid off employees had a reasonable
                                                                             expectation of recall.
New England Health Care Emples. Union,            Massachusetts      1998    Court found that issues of fact were present concerning
District 1199 S.E.I.U. v. Fall River Nursing Home                            the applicability of the WARN Act’s strike exemption;
Inc., 14 I.E.R. Cas. (BNA) 400, 1998 WL 518188                               shutdown of a health care facility resulting from a strike
(D. Mass 1998).                                                              notice would constitute a strike under WARN unless the
                                                                             notice were rescinded in a timely way. Case proceeded
                                                                             toward trial.
North Star Steel Co. v. Thomas, 515 U.S. 29        Pennsylvania      1995    Supreme Court resolved a split in the circuits and held
(1995).                                                                      that in the absence of a statute of limitations in the WARN
                                                                             Act, federal courts should look to analogous state law, not
                                                                             federal law, to determine the time period for filing an
                                                                             action under WARN.
Oil, Chem. and Atomic Workers v. RMI Titanium, Ohio                  2000    Three employees who were working on a special project
199 F.3d 881 (6th Cir. 2000). 	                                              and terminated could not be aggregated for purposes of
                                                                             meeting threshold number of layoffs in 90-day period,
                                                                             since they were laid off for separate and distinct reasons.
                                                                             No reduction in force occurred when temporarily laid-off
                                                                             employees were again laid off, but replaced by
                                                                             employees returning from voluntary layoff status, and
                                                                             thus not counted toward the threshold criteria.
Paper, Allied-Indus., Chem. & Energy Workers,      Maine             2000    Magistrate recommendation that WARN claim be denied
Int’l Union et al. v. Sherman Lumber Co., 2000                               because employer had fewer than 100 employees during
U.S. Dist. LEXIS 10450 (D. Me. July 11, 2000).                               the 12-month period preceding the snapshot date (the
                                                                             date that notice was to be given).
Pearson v. Component Tech. Corp., 247 F.3d         Pennsylvania      2001    Court affirmed lower court finding that that employer’s
471 (3d. Cir. 2001).                                                         creditor was not liable for employer’s failure to provide
                                                                             notice using the test contained in regulations for
                                                                             determining the employer.
Pearson v. Component Tech. Corp., 80 F. Supp.      Pennsylvania      1999    The creditor was not liable for employer’s failure to
2d 510 (W.D. Pa. 1999).                                                      provide notice.
Pena v. Crowley Am. Transp., Inc., 172 F. Supp.    Puerto Rico       2001    Plaintiff raised multiple claims, including one WARN
2d 321 (D. P.R. 2001). 	                                                     allegation. Court found that only 14 employees were laid
                                                                             off; therefore, the notice requirement was not triggered.
Ramos Pena v. New P.R. Marine Mgmt., Inc., 84 Puerto Rico            1999    Multiple count case, including WARN allegation; court
F. Supp. 2d 239 (D. P.R. 1999). 	                                            found that layoffs did not occur at a single site (Ponce
                                                                             and San Juan); therefore, the threshold requirement was
                                                                             not met.
Reyes v. Greater Texas Finishing Corp., 19 F.      Texas             1998    Court found that a factual issue remained about whether
Supp. 2d 709 (W.D. Tex. 1998). 	                                             50 employees suffered an employment loss. Thus, case
                                                                             could proceed toward trial.
Roquet v. Arthur Anderson, LLP, No. 02 C 2689,     Illinois          2002    Court held that part-time employees can experience an
2002 WL 1900768 (N.D. Ill. Aug. 16, 2002). 	                                 employment loss and may bring suit against employer for
                                                                             failing to provide 60 day’s notice of mass layoff.




                                           Page 36                GAO-03-1003 The Worker Adjustment and Retraining Notification Act
                                              Appendix III: Reported Court Cases under
                                              WARN Act, 1998-2002




 Case                                                 State filed        Year    Outcome
 Snider v. Commer. Fin. Servs., Inc., 288 B.R.        Oklahoma           2002    Court held that employer did not establish unforeseen
 890 (N.D. Okla. 2002).                                                          business circumstance defense for failing to provide
                                                                                 timely notice, but that the notice given for the shortened
                                                                                 time period contained the required information.
 Teamsters Local 838 v. Laidlaw Transit, Inc., 156 Montana               1998    Court held that seasonal employees did not suffer an
 F.3d 854 (8th Cir. 1998). 	                                                     employment loss because they were laid off every year at
                                                                                 the time of plant closing and had sufficient notice that
                                                                                 they would not be recalled.
 Teamsters Nat’l Auto. Transporters Indus.       Virginia                2002    Court dismissed plaintiff’s claim for civil penalties ($500 

 Negotiating Comm. v. Hook Up, Inc., No. Civ. A.                                 per day, available only to local government). 

 7:02CV00035, 2002 WL 1066954 (W.D. Va. May 

 23, 2002). 

 United Auto., Aerospace & Agric. Implement           Michigan           2002    Employer’s motion for summary judgment was denied
 Workers of Am. Local 157 v. OEM/Erie                                            because court found issue of fact—whether company
 Westland, LLC, 203 F. Supp. 2d 825 (E.D. Mich.                                  exercised the requisite degree of control over the plant’s
 2002).                                                                          operations to qualify as a “single employer.”
 United Food and Commer. Workers Union Local          Montana            1996    Unions have standing (legal authority) to sue on behalf of
 751 v. Brown Group, Inc., 517 U.S. 544 (1996).                                  its members under WARN.
 United Mine Workers of Am. Int’l Union v.            West Virginia      1998    Court found that workers laid off in advance of plant 

 Martinka Coal Co., C.A., #1:96-CV-156 (Filed                                    closing were entitled to WARN notice. 

                            a

 Jan. 5, 1998) (N.D. W.Va.).
 United Mine Workers of Am. Int’l Union v.       West Virginia           1999    The court found that the coal company had violated
 Martinka Coal Co., 45 F. Supp. 2d 521 (D. W.Va.                                 WARN with respect to 89 employees; the court
 1999).                                                                          addressed the issue of damages—overtime, benefits, and
                                                                                 inactive employees.
 United Mine Workers of Am. v. Martinka Coal          West Virginia      2000    The appeals court affirmed a lower court decision in favor
 Co., 202 F.3d 717 (4th Cir. 2000).                                              of the plaintiffs: When an affected employee’s layoff date
                                                                                 is earlier than the date of the plant shutdown, the affected
                                                                                 employee is entitled to notice of the closing 60 days
                                                                                 before the date of that employee’s layoff.
 Watson et al. v. Michigan Indus. Holdings, et al.,   Michigan           2000    Court found that the unforeseeable business

 Civil No. 97-76034-DT (E.D. Mich. October 13,                                   circumstances exception applied where the employer 

        a
 2000).                                                                          discontinued its operations due to unexpected failure of a 

                                                                                 customer to pay a bill.
 Watson v. Michigan Indus. Holdings, Inc., 311        Michigan           2002    Appeals court affirmed district court’s decision in favor of
 F.3d 760 (6th Cir. 2002). 	                                                     defendant based on unforeseeable business
                                                                                 circumstances exception.
 Watts v. Marco Holdings, L.P., 13 I.E.R. Cas. Mississippi               1998 	 Court found that the employer violated the WARN act,
 (BNA) 1552, 1998 WL 211770 (N.D. Miss. 1998).                                  noting that unforeseen business circumstance exception
                                                                                could have reduced notice, but employer failed to give
                                                                                any notice and a brief statement of the basis for the
                                                                                reduction of the period. Court reduced liability by 50
                                                                                percent based on good faith exception.
 Wilson et al. v. Airtherm Prods., Inc., U.S. District Arkansas          2001    Court found WARN Act violation where workers were not
 Court #2:01-CV-00055-WRW, (unpublished                                          transferred after sale of company but had to submit
                                                    a
 opinion, September 10, 2001) (E.D. Ark. 2001).                                  application for new employment.
Source: Guild Law Center, Lexis, Westlaw.




                                              Page 37                 GAO-03-1003 The Worker Adjustment and Retraining Notification Act
Appendix III: Reported Court Cases under
WARN Act, 1998-2002




Notes:

This table includes only WARN cases containing a detailed discussion of the WARN act provisions
and does not include cases focused solely on procedural issues.
This table also includes the two cases decided by the U.S. Supreme Court which address the WARN
Act, even though they were decided prior to 1998: North Star Steel Co. v. Thomas, 515 U.S. 29
(1995); United Food and Commercial Workers Union Local 751 v. Brown Group, Inc., 517 U.S. 544
(1996).
a
 Most of the cases in this table are reported decisions or available through the Westlaw or Lexis legal
databases; however, we have included some decisions that we became aware of through the Sugar
Law Center Practitioner’s Guide to Litigating the WARN Act.




Page 38                GAO-03-1003 The Worker Adjustment and Retraining Notification Act
Appendix IV: GAO Contacts and Staff
Acknowledgments

                    Joan Mahagan (617) 788-0521
GAO Contacts 	      Kara Kramer (202) 512-5434


                    Katharine Leavitt made significant contributions to this report, in all
Staff 	             aspects of the work throughout the assignment. In addition,
Acknowledgments 	   H. Brandon Haller, Christopher Moriarity, and Jerry Sandau assisted with
                    the methodology, Richard Burkard provided legal support, and
                    Patrick Dibattista assisted in the message and report development.




                    Page 39         GAO-03-1003 The Worker Adjustment and Retraining Notification Act
Related GAO Products 



              Workforce Investment Act: Issues Related to Allocation Formulas for
              Youth, Adults, and Dislocated Workers. GAO-03-636. Washington, D.C.:
              April 25, 2003.

              Workforce Investment Act: Better Guidance and Revised Funding Formula
              Would Enhance Dislocated Worker Program. GAO-02-274. Washington,
              D.C.: February 11, 2002.

              Trade Adjustment Assistance: Trends, Outcomes, and Management Issues
              in Dislocated Worker Programs. GAO-01-59. Washington, D.C.: October 13,
              2000.

              Dislocated Workers: Worker Adjustment and Retraining Notification Act
              Not Meeting Its Goals. GAO/HRD-93-18. Washington, D.C.: February 23,
              1993.

              Advance Notice: Public and Private Sector Policy and Practice.
              GAO/T-HRD-91-19. Washington, D.C.: April 18, 1991.

              Dislocated Workers: Labor-Management Committees Enhance
              Reemployment Assistance. GAO/HRD-90-3. Washington, D.C.: November
              21, 1989.

              Plant Closings: Evaluation of Cost Estimate of Proposed Advance Notice
              Requirement. GAO/HRD-88-71. Washington, D.C.: March 3, 1988.

              Plant Closings: Limited Advance Notice and Assistance Provided
              Dislocated Workers. GAO/HRD-87-105. Washington, D.C.: July 17, 1987.

              Plant Closings: Information on Advance Notice and Assistance to
              Dislocated Workers. GAO/HRD-87-86BR. Washington, D.C.: April 17, 1987.

              Dislocated Workers: Exemplary Local Projects Under the Job Training
              Partnership Act. GAO/HRD-87-70BR. Washington, D.C.: April 8, 1987.

              Dislocated Workers: Local Programs and Outcomes Under the Job
              Training Partnership Act. GAO/HRD-87-41. Washington, D.C.: March 5,
              1987.

              Dislocated Workers: Extent of Business Closures, Layoffs, and the Public
              and Private Response. GAO/HRD-86-11BR. Washington, D.C.: July 1, 1986.




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              Page 40         GAO-03-1003 The Worker Adjustment and Retraining Notification Act
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