Wisconsin Business Closing and Mass Layoff Law: Wisconsin’s Warn Act

May 4, 2009

Every business closing and reduction-in-force checklist must include a review of your notice obligations under the federal Worker Adjustment and Retraining Notification Act (WARN Act) as well as the Wisconsin Business Closing and Mass Layoff Law. Wisconsin’s counterpart to the federal WARN Act requires covered employers to give 60 days’ written notice in the event of a business closing or mass layoff. The law is enforced by the Wisconsin Department of Workforce Development (DWD) Labor Standards Bureau.

Who is covered under the Wisconsin law? 
Covered employers include businesses employing 50 or more “persons” in the state of Wisconsin. “Persons” do not include “new or low-hour employees” (i.e., workers employed for fewer than six of the 12 months preceding the date on which a notice is required or employees averaging fewer than 20 hours per workweek). The definition of “employer” excludes federal and state governmental entities as well as any political subdivisions. Also excluded are charitable and tax-exempt institutions and organizations.

Independent contractors and wholly or partially owned subsidiaries that are independent from the parent corporation are considered separate employers for purposes of the state law. There is no Wisconsin court case or interpretive guidance about which subsidiaries are considered independent from the parent corporation. In the absence of an interpretation under state law, the federal WARN Act provides guidance to help answer the question.

Federal regulations provide a list of factors to consider when determining whether subsidiaries should be treated as separate employers or as a part of the parent corporation. Those factors include:

  • Common ownership;
  • Common directors or officers;
  • De facto exercise of control;
  • Unity of personnel policies emanating from a common source; and
  • Dependency of operations.

No one factor is determinative in answering the question.

The employee count to determine employer coverage under Wisconsin law is made when the first notice is required. If that snapshot of your workforce isn’t representative of ordinary or average employment levels over the previous 90 days, the DWD has discretion to use what it determines is a more representative number.

‘Business closing’ and ‘mass layoff’ defined
A “business closing” is defined as a permanent or temporary shutdown of an employment site within a single municipality that affects 25 or more employees, not including new or low-hour employees.

A “mass layoff” is a reduction in an employer’s workforce that affects (1) at least 25 percent of the workforce or 25 employees, whichever is greater, or (2) at least 500 employees at an employment site or within a single municipality, not including new or low-hour employees. The reduction may not be the result of a business closing.

Who is an ‘affected employee’? 
“Affected employees” are defined as employees who suffer a loss of employment as a result of termination, a layoff lasting longer than six months, or a reduction in hours of more than 50 percent during each month of any six-month period.

Who can be excluded from the count of “affected employees”? 
In addition to new or low-hour employees, the following categories of individuals may be excluded from the count for purposes of determining whether the thresholds triggering notice obligations are met:

  • Employees terminated for cause or employees who terminate their employment as a result of retirement or voluntary departure;
  • Business partners, consultants, and contract employees who are paid by another employer or who are self-employed;
  • Officers or directors of a corporation, members or managers of a limited liability corporation, or partners of a partnership or joint venture; and
  • Persons employed in a managerial, executive, or commissioned sales capacity or in a capacity in which the person is privy to confidential matters involving the employer-employee relationship.

When must notice be given? 
Notice must be provided no later than 60 calendar days before the business closing or mass layoff occurs. Determining the notice date is a more straightforward process when the closing or layoff results in meeting the affected employee threshold on a particular date. Determining the notice date becomes a bigger challenge when there are successive layoffs or reductions in the workforce as a business winds down in preparation for closing.

If two or more groups of employees are affected during a 90-day period, the groups may be considered in the aggregate to determine whether the threshold for a closing or layoff has been met — unless the loss of employment in the different groups is the result of “separate and distinct actions and causes.” Successive layoffs that are the result of different events are “separate and distinct actions and causes.”

Significantly, successive layoffs or reductions in force that are caused by ongoing unfavorable business conditions are separate and distinctonly if you had a reasonable basis for believing that the subsequent reduction wouldn’t follow the earlier reduction. The Labor Standards Bureau takes a narrow view when analyzing whether there are separate and distinct actions and causes. In the bureau’s eyes, the current economic downturn is considered only one cause, despite its ongoing effect on employers that are often faced with having to conduct a series of mini-layoffs to address continuing economic struggles.

To rely on the “separate and distinct cause” language, you must experience another event, such as the unanticipated loss of a contract for work, which results in the need for another set of layoffs. A series of layoffs that are related and conducted in an attempt to evade the notice requirements will be considered failure to give timely notice by the bureau.

To whom must you provide notice? 
If the notice requirement is triggered, written notice must be provided to the following:

  1. The DWD Dislocated Workers Unit;
  2. Affected employees who may reasonably be expected to lose employment as a result of the closing or layoff;
  3. The collective bargaining representative of the affected employees; and
  4. The highest official of the municipality in which the affected employment site is located (e.g., the mayor, town board chairman, or village president).

The business closing and mass-layoff law also defines the specific content of the notice that must be provided to each entity that must receive notice.

Are there any circumstances in which notice is not required?
The following situations are exceptions to the notice requirement under the Wisconsin law:

  • If, at the time notice is required, the employer was seeking capital or business to enable it to avoid or postpone the business closing or mass layoff and the employer reasonably and in good faith believed that giving notice of the closing or layoff would have impeded those efforts;
  • The employer sold its business and the buyer agreed to hire “substantially all” of the affected employees with no more than a six-month break in service, making the total number of affected employees less than the thresholds for a business closing or mass layoff;
  • The employer relocated its business within a “reasonable commuting distance” (generally, less than 50 miles) and offered to transfer substantially all of the affected employees with no more than a six-month break in service;
  • The project or work was temporary in nature and the employees were hired with that understanding;
  • Business circumstances occurred that were unforeseeable at the time notice would otherwise have been required;
  • A natural or man-made disaster occurred that was not within the employer’s control; or
  • The cessation of business operations was only temporary and the employees were returned to work on or before the 60th day after the cessation began.

What are the consequences for failing to provide notice?
Failure to provide timely notice results in penalties. Each affected employee can recover (1) up to 60 days of back pay and (2) the value of any benefit he would have received under an employee benefit plan during those 60 days, including the cost of medical treatment that would have been covered under the employee benefit plan.

In addition, for failure to give timely notice to the highest official of a municipality, the DWD will assess a surcharge of no more than $500 for each day in the period beginning on the day that you were required to give notice and ending on the earlier of the day that you actually gave notice or the day that the business closing or layoff occurred. If a lawsuit is filed, a successful employee may recover costs and reasonable attorneys’ fees.

Bottom line
Business closings, layoffs, and reductions in force bring with them a host of legal issues that need to be addressed. Don’t let the notice requirements imposed under federal and state laws governing closings and layoffs get past you. Involve legal counsel early to ensure that notice is timely and that the specific content of the notices to each entity meets the legal requirements.

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For more information about "Wisconsin Business Closing and Mass Layoff Law: Wisconsin’s Warn Act," contact Leslie A. Sammon at lsammon@axley.com or 608.283.6798.