As we reported earlier this year, the New York State Department of Labor ("NYS DOL") recently issued revised, emergency regulations concerning the New York State Worker Adjustment and Retraining Notification Act ("NY WARN"), Section 860 of the New York Labor Law. The revised regulations, 12 NYCRR Part 921, are effective immediately and replace the regulations first published by the agency in January 2009. This two-part post provides an overview of NY WARN, and specifically addresses the major revisions contained in the revised regulations, including the use of e-mail to notify employees, expanded information now required in the notices, a requirement that an employer representative "attest to the truthfulness of all information" contained in the WARN notices, and a specification that WARN notice may be required even where the triggering event was caused by a bankruptcy. In today’s post, we address coverage questions and triggering events. In tomorrow’s post we will cover notice requirements, exceptions to the notice requirements, and penalties and enforcement.

NY WARN Coverage

Generally, NY WARN requires 90 days advance notice to employees and other designated officials prior to a mass layoff, plant closing, relocation, or covered reduction in hours which, in general, affects 25 or more employees. Employers in New York have been required to comply with the federal WARN Act notice requirements for over 20 years. NY WARN however, applies to more employers and requires more notice than the federal WARN statute. Failure to comply with the advance notice requirements before laying off workers may subject an employer to significant back pay liability and other penalties.

Who is Covered by the NY WARN Act?

Employers with 50 or more employees within New York State must comply with NY WARN. The regulations require an employer to count every employee, other than part-time employees, toward the 50-employee threshold. In addition, an employer must count all employees (other than part-time employees) on temporary layoff or on leave, if the individual has a reasonable expectation of recall. The NY WARN regulations, like the federal WARN Act, define a "part-time employee" as an employee who is employed for an average of fewer than 20 hours per week OR an employee who has been employed for fewer than 6 of the 12 months preceding the date on which notice is required.

An employer may also be required to comply with NY WARN even if it does not employ 50 or more full-time employees. Specifically, if the employer employs 50 or more employees (including all employees regardless of status as part-time or full-time), and those employees work in the aggregate 2,000 or more hours per week, the employer must comply with the NY WARN Act.

What Triggers the Requirement for NY WARN Notice?

According to the statute and the revised regulations, there are four events that trigger the notice requirement under NY WARN:

Mass Layoff

The notice requirements under NY WARN are triggered where there is a reduction in the work force that results in an employment loss at a single site of employment during any 30-day period for:

1. 25 employees, excluding part-time employees, constituting at least 33% of the employees at the site (For example, a layoff of 30 employees at a single site with a total of 90 employees); or

2. 250 or more employees, excluding part-time employees.

Plant Closing

The 90-day NY WARN notice is also required for the permanent or temporary shutdown of a single site of employment, or of one or more facilities or operating units within a single site of employment, if the shutdown results in an employment loss during any 30-day period for 25 or more employees, excluding part-time employees. The NY regulations follow the federal WARN Act and define an "operating unit" as "an organizationally or operationally distinct product, operation, or specific work function within or across facilities at a single site of employment." Under NY WARN, a covered plant closing may occur where an employer closes a department or assembly line in a plant or facility, if it results in an employment loss for at least 25 employees.

Relocation

A "relocation" is a unique triggering event under NY WARN and is not included in the federal WARN statute. Under the regulations, a relocation is defined as "the removal of all or substantially all of the industrial or commercial operations of an employer to a different location 50 miles or more away from the original site of operation, where 25 or more employees, excluding part-time employees, suffer an employment loss"

Covered Reduction in Hours

The NY WARN notice requirement is also triggered where there has been a 50% or more reduction in the hours of work during each month of any consecutive six-month period. The revised regulations specify that to be covered, the reduction of hours must affect:

1. at least 25 employees constituting at least 33% of the employees at the site; or

2. 250 or more employees.

Notably, the NY regulations specifically exclude from the definition of "employment loss" a covered reduction of hours where an employer participates in NYS DOL's Shared Work Program. The Shared Work Program permits an employer to reduce the hours of work of employees, up to a maximum of 60%, and the employees are able to supplement lost income with partial unemployment insurance benefits from NYS DOL. Therefore, as long as an employer validly participates in NYS DOL's Shared Work Program, a reduction in hours of work that would otherwise trigger the NY WARN Act requirements, would be exempt from the notice requirement.

Aggregation

When determining whether notice is required for NY WARN, employers must aggregate employment losses over a 90-day period. Generally, an employer should look backward 90 days and forward 90 days to assess whether actions, taken and planned, will in the aggregate, reach the minimum number to trigger notice. The only exception to aggregating employment losses is where the employer can demonstrate that the losses resulted from separate and distinct actions and causes.

Transfer of Employees

No notice is required if the employer offers to transfer employees to a different site of employment within a reasonable commuting distance, which is defined by the revised regulations to mean "the distance an individual could be reasonably expected to commute." However, in no event shall that distance exceed that which can reasonably be traveled in one and one-half hours, when the site of employment is being moved to a location within New York City or Long Island, or one hour anywhere else in the state. The revised regulations add a provision that eliminates the transfer offer notice exception where the new job otherwise constitutes a constructive discharge. 

In tomorrow's post we will cover notice requirements, exceptions to notice requirements and penalties and enforcement.
 

At a time when many companies are owned or heavily leveraged by private equity firms, a decision by the District Court for the District of Connecticut in Austen v. Catterton Partners V, LP serves as a warning that such entities may be held liable for WARN Act violations by companies in which they have invested. The Federal WARN Act generally requires at least 60 days’ notice prior to a mass layoff or plant closing.  In New York, the state WARN Act requires 90 days’ notice of such events.

Catterton Partners V, LP, a Greenwich, Connecticut-based private equity firm, with over $2.0 billion in holdings such as Outback Steakhouse, Breyers Yogurt and Restoration Hardware, also owned Archway & Mother’s Cookies, Inc., (“Archway”) whose companies produced various brands of cookies, including cookies sold under private label programs for national retailers such as Target and Kroger.

Archway filed for bankruptcy protection in October 2008, shortly after it closed its factories and laid off hundreds of workers without notice. In a class action WARN Act complaint filed in August 2009, plaintiffs, who are former Archway employees, alleged that Catterton was an “employer” for WARN Act purposes and should be held liable for the failure to provide workers with notice prior to shutdown of the factories and termination of their employment.
 

On February 17, 2010, the United States District Court for the District of Connecticut denied Catterton’s motion to dismiss, holding that the private equity firm and the bankrupt cookie company may be considered a “single employer” for WARN Act purposes.  In so concluding, the Court adopted a five-part test contained in the federal regulations implementing the WARN Act, which assesses whether two separate entities should be combined for purposes of WARN Act liability. 20 C.F.R. § 639.3(a)(2). The test assesses whether: (1) the entities are subject to common ownership; (2) the directors and/or officers of the entities are the same; (3) the parent exercises de facto control over the subsidiary; (4) there is a unity of personnel policies emanating from a common source; and (5) there is a dependency of operations among the entities.

Notably, the Court concluded that the de facto control prong is perhaps the most important aspect of the test, because it assesses whether the parent was the decisionmaker who is responsible for the actions giving rise to the litigation. Because the complaint alleged that Catterton made the decision to shut down the factories, terminate the employees and file for bankruptcy, there was no dispute as to the extent of Catterton’s control over Archway. Based on application of the test to the allegations of the complaint, the Court’s ruling means that Catterton may be held liable for WARN Act damages for a class of perhaps 600-700 employees.  Given the widespread nature of private equity investment in American companies and the ongoing economic downturn, Austen v. Catterton Partners V, LP may be a harbinger of other efforts to reach into the “deep pockets” private equity firms.
 

On February 12, 2010, the New York State Department of Labor issued revised, emergency regulations concerning the New York State Worker Adjustment and Retraining Notification Act (“NY WARN Act”), Section 860 of the New York Labor Law. The revised regulations are effective immediately and replace the regulations first published by the agency in January 2009. The NY WARN Act requires 90 days advance notice to employees and other designated officials prior to a mass layoff, plant closing, relocation or covered reduction in hours, which, in general, affects 25 or more employees.

Employers considering upcoming employee layoffs or plant shutdowns should review closely the revised regulations. Included among the many changes made by the revised regulations are the following:

• use of email to notify employees; 
•  a requirement that the notice from the employer be signed by an individual who can bind the employer and that the individual attest to the truthfulness of all information contained in the notice;
• an expansion of the types of information that must be included on the various notice forms; and
• a specification that an employer’s violation of NY WARN may be shared with other public entities in New York.