Legal Update - November - 2004
Fair "Warning" to Employers

New Illinois WARN Act to Apply Different Standards than Current Federal Rule

Introduction

On January 1, 2005, the Illinois Worker Adjustment and Retraining Notification Act (the "Illinois WARN Act") will take effect. The new law was fashioned primarily from the federal Worker Adjustment and Retraining Act (the "Federal WARN Act"), which has been in effect since August 4, 1988. Both the state and federal statutes strive to ensure that employees receive advance notice of any imminent loss of employment so that they may promptly begin searching or training for new jobs. While the acts are similar in purpose and in scope, there are several important distinctions between them that make the Illinois WARN Act a bit more stringent than its federal counterpart. This Legal Update provides an overview of the similarities and the distinctions. At the end of the Update there is a table highlighting the differences.

Background

Both acts require employers to provide affected employees with 60 days advance notice before closing a plant or instituting a mass layoff. In addition to notifying employees, both acts require employers to notify local government agencies as well. The advance notice period can be abridged under both statutes based on "unforeseen business circumstances" – the employer's commercially reasonable business judgment as opposed to hindsight – or where the closing is the result of a workers' strike. Moreover, "uninformed" employees can recover identical damages under either act. The slate of damages available to each employee generally consists of back pay and the value of employee benefits for a maximum of 60 days, as well as a "civil penalty" not to exceed $500 for each day of the employer’s violation. Despite these similarities, the statutes contain subtle differences that employers should bear in mind.

Applicability

The most significant difference between the two statutes concerns which employers are covered. The Federal WARN Act applies to employers with 100 or more full-time workers, or 100 or more employees who work, in the aggregate, 4,000 hours per week excluding overtime. The Illinois WARN Act, on the other hand, applies to employers with 75 or more full-time workers, or 75 or more employees who work in the aggregate, 4,000 hours per week excluding overtime. Thus, the Illinois WARN Act covers smaller employers than its federal counterpart.

Notice-Triggering Events

Both acts define a "mass layoff" as a reduction in the workforce at a single site of employment that is not a "plant closing" and results in a minimum number of employment losses during a given 30 day period. Under the Federal WARN Act, the notice requirement is triggered if a "mass layoff" causes a reduction in force of at least 50 or more full-time employees if they constitute 1/3 of the total workforce, or alternatively, if 500 or more full-time employees are laid off, regardless of the percentage. The Illinois WARN Act’s notice requirement is triggered if the "mass layoff" causes a reduction in force of at least 25 or more full-time employees if they constitute 1/3 of the total workforce, or alternatively, if 250 or more full-time employees are terminated.

Notice for "Relocation"

The Illinois WARN Act requires that an employer provide written notice at least 60 days before ordering a mass layoff, plant closing, or "relocation," yet it fails to expressly define the term "relocation." "Relocation" is not a specific notice-triggering event under the Federal WARN Act. According to both acts, however, an employee will not be deemed to have experienced an employment loss recoverable under the statute if the layoff is the result of the "relocation or consolidation" of part or all of the employer’s business. Under both statutes, to take advantage of the "relocation or consolidation" exception, an employer must also offer to transfer the employee to a different employment site within a "reasonable commuting distance" with no more than a six month break in employment.

Government Notice

In addition to requiring employers to provide 60 days notice to affected workers, both acts also require employers to provide specific governmental units with notice. According to the Federal WARN Act, employers must provide the State agency designated to carry out rapid response activities under section 134(a)(2)(A) of the Workforce Investment Act of 1998, as well as the chief elected official of the unit of local government where the plant closing or layoff is set to occur. The Illinois WARN Act requires employers to give written notice to the Department of Commerce and Economic Opportunity, in addition to the chief elected official of each unit of local government where the loss of employment will occur. The distinction here arises when there is more than one unit of local government set to receive notice. Under the Federal law, only the unit of local government to which the employer pays the highest taxes for the preceding year needs to be notified. Under the Illinois WARN Act, however, all local government units must be notified.

Enforcement

Another major difference between the two statutes concerns the means by which compliance is ensured. The Federal WARN act essentially authorizes a civil cause of action in federal court. If an employer orders a plant closing or a mass layoff without heeding the notification requirements, employees who subsequently lose their jobs can sue for back pay and the value of employee benefits, as discussed above. The federal law further provides that if an employer violates the Act in "good faith," a court may, in its discretion, reduce the employer's amount of liability accordingly. Additionally, an employee's representative is authorized to bring suit on an employee’s behalf under the Federal WARN Act. Illinois enforces its WARN Act quite differently, entrusting enforcement duties to an administrative agency. The Illinois statute authorizes the state Director of Labor to "prescribe such rules as may be necessary" to carry out the Act, while guaranteeing all aggrieved persons the right to administrative hearings for resolution of disputes. The Illinois WARN Act also vests the Director of Labor with investigative powers to determine whether a violation of the law has occurred.

Attorney's Fees

The Federal WARN Act expressly provides that a court may, in its discretion, award the prevailing party a reasonable attorney’s fee. The Illinois WARN Act fails to make any specific reference to attorney’s fees.

In The Future

The Illinois WARN Act will go into effect this January. While its provisions are by no means dramatically different from the current federal law, they are different enough to require employers to take note of them. Employers concerned with imminent plant closings or major reductions in their staffs should review the statutory notice requirements to ensure compliance and avoid any costly penalties.

Funkhouser Vegosen Liebman & Dunn Ltd. publishes updates on legal issues and summaries of legal topics for its clients and friends solely for general informational purposes. They do not constitute legal advice, nor are they intended as a substitute for obtaining legal or other professional advice based upon specific factual circumstances or issues. If we can be of assistance, please call or write Jon Vegosen, 312.701.6860, or Neil Rosenbaum, 312.701.6824, , or consult with your regular FVLD contact.