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Valuing Payments in Lieu of WARN Notice

By John D. Shyer and Austin Ozawa
July 29, 2010

The Worker Adjustment and Retraining Notification Act (the WARN Act) generally requires an employer with 100 or more full-time workers to provide 60 days' notice to employees who will be affected by a mass layoff or plant closing at a single site of employment. If an employer violates the notice requirement, each terminated employee is entitled to damages equal to: 1) back pay; and 2) benefits under employee benefit plans subject to the Employee Retirement Income Security Act of 1974 (ERISA), for the period of such violation up to 60 days (which, according to a majority of courts, is calculated based on the number of working days in such period). The WARN Act's notice requirement does not, however, mandate that employers continue to employ employees during the notice period, and the regulations promulgated by the U.S. Dept. of Labor (the DOL) explicitly state that the WARN Act does not dictate the nature of work to be performed ' or whether work must be performed ' after notice is provided. Further, the DOL has recognized that providing employees with full pay and benefits in respect of the 60-day notice period effectively precludes any damages under the WARN Act.

As a result, in lieu of providing notice of termination, many employers pay employees an amount equal to base salary and benefits for 60 days, and terminate them immediately. As a technical matter, this approach is not impermissible; nonetheless, employers often fail to take into account all elements of compensation and benefits when valuing payments in lieu of notice. This article addresses certain elements of such payments that are often overlooked by employers.

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