Pennsylvania businesses that temporarily laid off large numbers of employees at the beginning of the COVID-19 crisis may be coming up on a deadline.

Because of a complicated and nuanced set of legislation, some businesses in the state have long been required to report mass layoffs well in advance.

Temporary layoffs often don’t meet those requirements — unless the job loss goes on too long or becomes permanent. In that case, employers might be on the hook to explain why they didn’t provide advance notice and to possibly compensate employees for that time.

“They’re not going to be able to sustain a limbo period for forever,” said Jack Raisner, a partner at New York City-based Raisner Roupinian LLP, a law firm that has spent the last 20 years working on cases about the Worker Adjustment and Retraining Notification (WARN) Act.

“The timing now is putting to the test whether employers are going to be diligent in giving employees the necessary information,” he said.

A creation of the 1980s

Part of federal legislation, the WARN Act was enacted in the 1980s to ensure advance notice of qualified plant closings and mass layoffs. It generally applies to businesses with 100 or more full-time employees, according to the U.S. Department of Labor.

In Pennsylvania, WARN notices are one way to trigger state assistance at companies, including management assistance and help during the transition period for employers, as well as unemployment compensation and job placement for workers. 

Under the act, businesses are required to provide employees, state and local officials and any collective bargaining units 60 days notice ahead of mass layoffs or worksite closures.

Though it’s a federal law, each state has flexibility in creating its own guidance around the WARN Act. For example, New Jersey maintains a 90-day notice requirement. In Pennsylvania, notices are posted publicly. That’s not true for all states.

The definition of a mass layoff is where things start to get tricky.

“It’s a very technical statute; it’s just full of traps for the unwary,” said Lindsey Conrad Kennedy, a Pittsburgh-based attorney with Eckert Seamans.

A mass layoff can be defined as employment loss in a number of different ways: If 500 or more employees are affected in a 30-day period; if 50-499 employees are affected at the same time but they make up 33% of the employer’s active workforce; or if a combination of job losses in a 90-day period adds up to either of those stipulations.

Several months into the COVID-19 pandemic, the interpretation of those legal terms get even murkier.

“Part of the trick to this, like so many other laws, is figuring out how a law that was enacted decades ago is meant to apply to today’s current work environment and even then, how it applies to unprecedented times like we’re in,” Ms. Kennedy said.

COVID-19 ‘grace period’

In March and April, when some businesses sent employees out the door with promises to return once operations ramped up again, those temporary layoffs and furloughs likely did not trigger WARN Act reporting requirements.

Six months later, that may have changed.

When temporary layoffs hit the six-month mark, they count toward employment loss under the WARN Act. A 50% reduction in work hours over a six-month period does the same.

“The grace period is ending, and so a brighter light is going to be shone on how employers are dealing with this — or not — and the consequences of that presumably are going to be felt,” Mr. Raisner said.

Between March and September, the Pennsylvania Department of Labor posted nearly 360 WARN notices. Most came in the first three months, with 53 filed in March, 128 in April and 52 in May.

Mr. Raisner thinks those numbers may be too low to accurately represent job loss in the state over the past several months.

“I don’t know that there’s been some sort of reprieve or oasis from layoffs in Pennsylvania,” he said.

“There’s some hesitation perhaps on both ends — [employers and employees] — to necessarily comply with the law and also to enforce it,” Mr. Raisner said. “But the law is not being complied with.”

What counts as unforeseeable?

The U.S. Department of Labor provides guidance about the WARN Act but does not enforce it — enforcement comes from private legal action brought in district courts.

Ms. Kennedy said her firm is starting to see the first wave of class-action lawsuits brought against businesses, and they anticipate the lawsuits will continue to roll in.

If an employer violates the WARN Act by not providing appropriate notice, that organization may be on the hook to pay employees’ wages and benefits for a period of up to 60 days, according to the state and federal departments of labor.

The act does give employers some leniency if the lack of notice was due to an unforeseen business circumstance. For example, if a major client suddenly and unexpectedly pulls out, or, if there is a dramatic economic downturn.

Whether COVID-19 will qualify as an unforeseen business circumstance is yet to be seen.

One side could argue the pandemic was out of the employer’s control. But another could say by the time that six-month grace period was up in September or October, it was no longer unforeseeable.

Kimberly Kisner, a partner in the employment practices law group at Pittsburgh-based firm Leech, Tishman, Fuscaldo and Lampl, said that exception may have held up in the summer months when COVID-19 case numbers briefly went down — but it likely won’t anymore.

Businesses should err on the side of providing notice even if they think an exception could be made for them, Ms. Kisner said, “Because going forward, the argument regarding an unanticipated or unforeseeable business circumstance is not going to be accepted within the law.”

For example, an entertainment company that canceled events and furloughed most employees in April, with the intent of restarting events that summer, should still file a WARN notice if management realized in August that those events won’t be happening until at least 2021, she said. 

Concerns over how to properly follow the act started in the first month of layoffs, Ms. Kisner said.

Now, she is starting to see new types of lawsuits pop up, including disputes over paid leave, allegations of unfair retaliation against whistleblowers and discrimination claims over the reason behind a layoff.

“We’re going to have a whole new line of case law related to worker’s compensation for those employees who claim they contracted COVID-19 at work,” Ms. Kisner said. “It’s certainly going to create a lot of new employment cases for the employment bar here in Pittsburgh, on both sides.”

Lauren Rosenblatt: lrosenblatt@post-gazette.com, 412-263-1565.

First Published: October 12, 2020, 10:30 a.m.