[Senate Hearing 110-945]
[From the U.S. Government Publishing Office]
S. Hrg. 110-945
PLANT CLOSINGS, WORKERS' RIGHTS, AND THE WARN ACT'S 20TH ANNIVERSARY
=======================================================================
HEARING
OF THE
COMMITTEE ON HEALTH, EDUCATION,
LABOR, AND PENSIONS
UNITED STATES SENATE
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
ON
EXAMINING PLANT CLOSINGS, FOCUSING ON WORKERS' RIGHTS AND THE WORKER
ADJUSTMENT AND RETRAINING NOTIFICATION (WARN) (PUBLIC LAW 100-379)
ACT'S 20TH ANNIVERSARY
__________
MAY 20, 2008
__________
Printed for the use of the Committee on Health, Education, Labor, and
Pensions
Available via the World Wide Web: http://www.gpoaccess.gov/congress/
senate
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COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS
EDWARD M. KENNEDY, Massachusetts, Chairman
CHRISTOPHER J. DODD, Connecticut MICHAEL B. ENZI, Wyoming,
TOM HARKIN, Iowa JUDD GREGG, New Hampshire
BARBARA A. MIKULSKI, Maryland LAMAR ALEXANDER, Tennessee
JEFF BINGAMAN, New Mexico RICHARD BURR, North Carolina
PATTY MURRAY, Washington JOHNNY ISAKSON, Georgia
JACK REED, Rhode Island LISA MURKOWSKI, Alaska
HILLARY RODHAM CLINTON, New York ORRIN G. HATCH, Utah
BARACK OBAMA, Illinois PAT ROBERTS, Kansas
BERNARD SANDERS (I), Vermont WAYNE ALLARD, Colorado
SHERROD BROWN, Ohio TOM COBURN, M.D., Oklahoma
J. Michael Myers, Staff Director and Chief Counsel
Ilyse Schuman, Minority Staff Director
(ii)
C O N T E N T S
__________
STATEMENTS
TUESDAY, MAY 20, 2008
Page
Brown, Hon. Sherrod, a U.S. Senator from the State of Ohio,
opening statement.............................................. 1
Trumka, Richard L., Secretary-Treasurer, AFL-CIO, Washington, DC. 3
Prepared statement........................................... 5
Aguiar, Joe, Laid-off Worker, Fall River, MA..................... 8
Prepared statement........................................... 9
Philo, John C., Esq., Legal Director, Sugar Law Center for
Economic and Social Justice, Detroit, MI....................... 12
Prepared statement........................................... 14
Marculewicz, Stefan Jan, Esq., Principal, Miles & Stockbridge,
P.C., Baltimore, MD............................................ 23
Prepared statement........................................... 26
ADDITIONAL MATERIAL
Statements, articles, publications, letters, etc.:
Clinton, Hon. Hillary Rodham, a U.S. Senator from the State
of New York................................................ 39
Obama, Hon. Barack, a U.S. Senator from the State of Illinois 39
(iii)
PLANT CLOSINGS, WORKERS' RIGHTS, AND THE WARN ACT'S 20TH ANNIVERSARY
----------
TUESDAY, MAY 20, 2008
U.S. Senate,
Committee on Health, Education, Labor, and Pensions,
Washington, DC.
The committee met, pursuant to notice, at 10:06 a.m. in
room SDC-430, Dirksen Senate Office Building, Hon. Sherrod
Brown, presiding.
Present: Senator Brown.
Opening Statement of Senator Brown
Senator Brown. The Health, Education, Labor, and Pensions
Committee will come to order. Thank you very much for joining
us today.
I want to thank Senator Kennedy for holding this important
and timely hearing. The Chairman is in our thoughts. I hope he
will soon be back wielding this gavel.
I would add that I did my part after Senator Kennedy went
to the hospital. My Cleveland Cavaliers laid down for the
Celtics in game seven so that Senator Kennedy could enjoy that
his first evening in the hospital. Then he got to watch a no-
hitter last night. So I think he is doing OK.
I want to thank all four of our witnesses for coming this
morning and sharing your experience and expertise on this very
important issue of plant closings and the success and the
failures of the WARN Act, which Congress saw fit to pass some
20 years ago. The WARN statute, as we know, was a product of
compromise. The origins of this law go back to the 1970s and
the 1980s with the closings of several large steel mills and
the stress that followed in communities like Youngstown, Toledo
and Pittsburgh.
Residents of these communities began to explore ideas about
how to deal with the human and social consequences of these
employer decisions. It gave way to a debate about the
relationship between a company and its community.
Lawmakers proposed bills to address these issues. Along
with Senator Kennedy, Senator Howard Metzenbaum of Ohio, in
whose seat I sit, raised the issue and fought tirelessly for a
Federal response. He and his colleagues had broader ambitions
for what eventually became the WARN Act.
Earlier proposals required businesses to give notice up to
180 days before a plant closing or mass layoff, depending on
the number of employees affected and to consult with employee
representatives and local officials about ways to prevent the
loss of jobs. Senator Metzenbaum and other proponents conceded
much of what they sought in order to get some protections on
the books.
WARN then became part of the Omnibus Trade and
Competitiveness Act of 1988. As revised, the bill required 60
days' advance notice of plant closings or mass layoffs.
Employers with 100 or more employees were covered. Most
employee losses affecting 50 or more employees were subject to
the notice requirement. There were exemptions and exceptions
for sales of businesses, for unforeseen business circumstances,
for faltering businesses seeking capital or new customers.
The trade bill was then vetoed by President Reagan because
of the plant closings provisions. Anti-WARN lobbyists argued
that advance notice could increase economic inefficiency due to
possible loss of customers, credit, and employees as well as to
increase friction in labor and management relations.
Two decades of experience with WARN, however, have not
produced the devastating results that industry and business
feared. In addition, WARN has not played a significant role in
labor law litigation and has survived a constitutional
challenge when the 5th Circuit held that WARN was rationally
related to congressional concern over the economic harm caused
by plant closings.
Shortly after the veto, Senator Metzenbaum introduced the
measure on its own. He said that this is an indication of the
American people's fairness and their concern and their
compassion and their willingness to treat workers, who have
given of their bodies and themselves over a period of years, to
at least give them notice when the plant is closing. After
several days of debate, the Senate approved the bill on July
6--20 years ago--1988. The House passed it a week later. The
WARN Act became law on August 4, 1988, without the President's
signature.
Over the past two decades, we have seen evidence that WARN
does not cover enough layoffs as intended and that due to the
enforcement only by the courts, employers have too often failed
to provide notice. Rather than the employers' fear of too much,
we have seen too little.
The Government Accountability Office found that less than
one-third of mass layoffs are even covered by the WARN Act
because of the act's many loopholes. Most employers who are
covered fail to comply with the law either out of ignorance or
because the penalties and enforcement are so weak that they
can, in fact, be ignored.
With these shortfalls in the plant closings law, we have
also seen our manufacturing base decline in the last 20 years.
With the passage of NAFTA and other trade deals and an increase
in the number of jobs off-shored, there is now hardly any
sector of the economy immune from the effects of globalization.
With these realities, I have seen inadequacies of WARN play out
in Ohio and elsewhere over the past 20 years.
About 15 years ago, a sheet metal manufacturer in Delphos,
OH, gave workers 30-minute notice. Many of these workers had
been with the company for more than 10 years. Workers at
National Machinery in Tiffin, also in northwest Ohio, filed a
WARN lawsuit after employers announced mass layoffs with no
notice. The company claimed it was seeking new financing when
it laid off hundreds of workers.
Workers filed a lawsuit. Eventually, a judge approved a
settlement that paid $375 to each worker for the violation.
That kind of settlement hardly deters that kind of corporate
behavior.
The Toledo Blade examined some 226 WARN lawsuits filed
since 1989 by workers and found Federal judges dismissed 118 of
the cases because of loopholes. This is a disturbing trend that
illustrates problems with the law and suggests that it needs a
fix. Employers simply choose not to comply with the law, and
the majority of violations go unenforced. I look forward to
hearing discussion about these inadequacies of the WARN Act.
Last July, along with Senator Obama and Senator Clinton, I
introduced the Forewarn Act, which makes modest adjustments to
the existing statute. Forewarn lengthens the notification
period from 60 to 90 days. It covers plant closings affecting
25 workers and mass layoffs of 100 workers or more. Finally, it
authorizes the Labor Department and the State attorneys general
to investigate violations and file WARN cases on behalf of
workers in those jurisdictions.
Even since last July, downward trends in the economy have
accelerated. Most recent Labor Department figures show 20,000
more jobs eliminated in April, 260,000 this year already. With
major changes in the U.S. economy over the last two decades,
sudden plant closings and major layoffs have spread from
manufacturing and factories to office parks and service sector
jobs.
I am hopeful this discussion today will serve as a
springboard for action on WARN and other policies. The public
demands it.
Again, I want to thank all four of our witnesses for
joining us. I will introduce each of you before you speak and
look forward to your testimony. Keep your statements within 5
to 7 minutes, if you can.
Mr. Aguiar, Senator Kerry was going to be here to introduce
you but got stuck back in Boston today. So he isn't going to
make it but sends his regards and wanted to be here with you.
I will start with Richard Trumka, who was elected to a
fourth term as secretary-treasurer of the AFL-CIO in July 2005.
First elected in 1995, he was the youngest secretary-treasurer
in AFL history. He served three terms as president of the Mine
Workers, of which he has been a member since he was 19 years
old. He is a graduate of Penn State University, holds a law
degree from Villa Nova law school.
Mr. Trumka.
STATEMENT OF RICHARD L. TRUMKA, SECRETARY-TREASURER, AFL-CIO,
WASHINGTON, DC
Mr. Trumka. Thanks, Senator. Thank you for inviting me to
testify this morning on behalf of the 10 million working men
and women of the AFL-CIO. I also want to thank you personally
for your deep commitment to the issues that are important to
America's working families.
A little more than 2 months from now, on August 4, 2008, we
will celebrate the 20th anniversary of the WARN Act. So this is
a very appropriate time to reflect on its successes and
failures in dealing with the human tragedy of plant closures
and mass layoffs and, specifically, the issue of advance notice
for workers.
As you have noted, the WARN Act was born out of the
cataclysmic loss of manufacturing jobs in the 1980s. Since
then, the wave of plant closings and off-shoring buffeting our
economy has not subsided but has only gotten worse. Now the
plague of mass layoffs has spread to the service sector as
well.
Unless you have lived through one of these experiences, you
really can't understand how traumatic and how often life-
changing they can be for working families and their
communities. As I have testified previously, the AFL-CIO
believes a fundamental rethinking of our economic policies is
essential to create an environment where fewer plant closures
and mass layoffs occur.
With regard to the WARN Act, there is no question that it
has resulted in more workers getting advance notice before
losing their jobs. In addition, I think we can all agree that
WARN has not had the dire consequences predicted by its
opponents in 1988 and has not resulted in a flood of
litigation.
But by any fair assessment, WARN has not lived up to its
promises. It has certainly not lived up to the hopes of those
of us in the labor movement who, beginning in the 1970s, fought
to develop a more comprehensive and coherent strategy for
dealing with plant closings and mass layoffs.
The compromise legislation passed by Congress in 1988 was
by no means a comprehensive strategy. It was a relatively
modest measure, requiring certain employers to give only 2
months' notice before plant closings and mass layoffs. Many of
the WARN Act's flaws were readily apparent on its day of
enactment, as you noted, since they were the result of numerous
concessions necessary to get it passed.
Mr. Chairman, the shortcomings of WARN can boil down to
this. The act requires too few employers to give too little
notice to too few workers, and it allows too many employers to
flout the law with impunity. While WARN has not been
substantively amended in 20 years, several bills have been
introduced by Congress to correct some of the most widely
recognized defects.
One of those you mentioned just now, the Forewarn Act by
yourself, Senator Obama, and Senator Clinton. Another is the
Early Warning and Healthcare for Workers Affected by
Globalization Act, introduced last October by Representative
George Miller and approved by the House on October 31, 2007.
The AFL-CIO strongly supports both of those bills. Both
bills would do the following. They would require businesses to
provide 3 months' advance notice instead of 2, subject more
businesses to WARN Act notice requirements, subject more mass
layoffs to WARN notice requirements, subject more plant
closings to the notice requirements, increase penalties to
deter employer noncompliance with the notice requirements,
authorize the Department of Labor to bring enforcement suits on
behalf of workers, and close various loopholes that allow
employers to avoid giving advance notice.
Now, while these bills represent tremendous progress, we
truly believe that they could be improved by requiring 6 months
of advance notice instead of 3. You see, the AFL-CIO has long
believed that a longer notice period would better serve the
purposes of the act. One purpose of the advance notice is to
give State and local governments time to prepare effective
services for displaced workers and to develop strategies for
responding to sudden loss of jobs and tax revenue.
Another purpose of early warning is to give workers time to
prepare themselves financially, to pursue education and
retraining opportunity, and to search for other employment.
The third purpose of early warning is to give workers and
local governments an opportunity to actually avoid job losses
in situations where they can be avoided.
While WARN Act reform is urgently needed, it should be
accompanied by a greater commitment at the State and Federal
level to taking advantage of the advance notice period to
organize early intervention and job loss avoidance initiatives.
Several States have already implemented effective early warning
and early intervention programs that have saved thousands of
jobs and helped maintain employment at manufacturing firms. The
leadership by the Federal Government is desperately needed to
support and encourage these programs.
Advance notice and early intervention are ultimately about
maintaining the living standards of America's middle class.
Despite large numbers of laid-off workers--dumping large
numbers of laid-off workers into flooded job markets without
any warning is a recipe for declining living standards and
desperate workers to compete to secure bad-paying jobs.
Advance notice, on the other hand, can allow governments to
put in place effective assistance programs that make it more
likely that workers will find relatively good-paying jobs more
quickly without suffering unemployment. In some instances,
advance notice may allow enough time for workers and their
communities to actually develop strategies to avoid the loss of
good-paying jobs in the first place.
We see advance notice and early intervention programs as
complementary parts of a much-needed comprehensive strategy to
save good jobs and maintain the living standards of the
American middle class.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Trumka follows:]
Prepared Statement of Richard L. Trumka
Thank you, Senator Brown and members of the committee, for inviting
me to testify this morning on ``Plant Closings, Workers' Rights, and
the 20th Anniversary of the Worker Adjustment and Retraining
Notification (WARN) Act of 1988.''
On behalf of the 10 million working men and women of the AFL-CIO, I
also want to thank you personally, Senator Brown, for your deep
commitment to this and many other issues important to America's working
families.
A little more than 2 months from now--on August 4, 2008--we will
celebrate the 20th anniversary of the WARN Act. This is an appropriate
time to reflect on our successes and failures in dealing with the human
tragedy of plant closures and mass layoffs, and specifically the issue
of advance notification for workers.
The WARN Act was born out of the cataclysmic loss of manufacturing
jobs in the 1980s. Since then, the wave of plant closings and off-
shoring buffeting our economy has not subsided, but has only gotten
worse. Since 1998, America has lost 3.6 million manufacturing jobs, and
since 2000 more than 40,000 manufacturing establishments have closed
their doors. Now the plague of mass layoffs has spread to the service
sector as well.
Mass layoffs continue at a pace of a million-and-a-half impacted
workers every year, and almost half a million workers have been idled
by mass layoffs already in the first 3 months of 2008. Long-term
unemployment is far higher today than at the beginning of previous
recessions, and has persisted at high levels throughout the most recent
economic recovery. And we know that displaced workers suffer an average
income loss of about 16 percent when they find a new job.
Unless you have lived through one of these experiences, you really
cannot understand how traumatic--and often life-changing--they can be
for working families and their communities. As I have testified
previously, the AFL-CIO believes a fundamental rethinking of our
economic policies is essential to create an environment where fewer
plant closures and mass layoffs occur.
With regard to the WARN Act, there is no question that it has
resulted in more workers getting advance notice before losing their
jobs. In addition, I think we can all agree that WARN has not had the
dire consequences predicted by its opponents in 1988, and has not
resulted in a flood of litigation.
But by any fair assessment, WARN has not lived up to its promise.
It has certainly not lived up to the hopes of those of us in the labor
movement who, beginning in the 1970s, fought to develop a more
comprehensive and coherent strategy for dealing with plant closings and
mass layoffs.
The compromise legislation passed by Congress in 1988 was by no
means a comprehensive strategy. It was a relatively modest measure
requiring certain employers to give only 2 months' notice before plant
closings and mass layoffs. Many of the WARN Act's flaws were readily
apparent on the day of its enactment, since they were the result of
concessions necessary to secure its enactment.
Those flaws were recognized in reports issued by the General
Accounting Office (GAO) in 1993 and 2003, and they were detailed by the
AFL-CIO in testimony to Congress in March 2003. The shortcomings of
WARN boil down to this: the act requires too few employers to give too
little notice to too few workers, and it allows too many employers to
flout the law with impunity.
In its first appraisal of the new law in 1993, GAO concluded that
workers were more likely to get advance notice of plant closings and
mass layoffs thanks to passage of the WARN Act. About half of all
covered businesses that shut down plants or had mass layoffs were not
required to give WARN notices, however, and only about half of those
required to give notice actually did so.
On March 5, 1993, the AFL-CIO took note of GAO's findings in a
statement submitted to the Senate Labor Subcommittee. The AFL-CIO
proposed lengthening the WARN Act's advance notification period;
subjecting more mass layoffs to WARN Act notice requirements;
subjecting more employers to notice requirements; strengthening
penalties to discourage employer non-compliance; giving the Department
of Labor (DOL) an enforcement role similar to its authority under the
Fair Labor Standards Act; and closing various loopholes.
In 2003, GAO issued a second report further documenting the
shortcomings of WARN. GAO found that only about a quarter of plant
closures and layoffs were subject to WARN Act notice requirements in
2001, leaving over a million laid-off workers unprotected by the
statute, and employers gave notice for only about a third of the plant
closures and mass layoffs subject to WARN.
Then in July 2007, the Toledo Blade newspaper published a four-part
investigation into the WARN Act, and concluded:
A Federal law that requires companies to give notice to
workers losing their jobs is so full of loopholes and flaws
that employers repeatedly skirt it with little or no penalty, a
Blade investigation has found.
The Blade reviewed all of the lawsuits filed under the WARN Act
since 1989, and concluded:
A Blade analysis of 226 lawsuits filed in Federal courts
across the country since 1989 revealed that judges threw out
more than half the cases. In the majority of those decisions,
judges cited loopholes in the law, ranging from companies that
said they tried their best to give notice to employees to firms
that claimed they could not predict bad financial times. In 108
cases, WARN Act lawsuits resulted in settlements or with the
courts siding with the displaced workers. But in dozens of
those cases, workers received only pennies on the dollar of
what they felt they were owed.
While the WARN Act has not been substantively amended in 20 years,
several bills have been introduced in this Congress to correct some of
its most widely recognized defects. One of those bills is the FOREWARN
Act (S. 1792), introduced last July by Senators Brown, Obama, and
Clinton. Another is the ``Early Warning and Health Care for Workers
Affected by Globalization Act'' (H.R. 3796), introduced last October by
Rep. George Miller and approved by the House of Representatives on
October 31, 2007. The AFL-CIO strongly supports both bills.
The Brown and Miller bills would both do the following: (1) require
businesses to provide 3 months' advance notice instead of 2; (2)
subject more businesses to WARN Act notice requirements; (3) subject
more mass layoffs to WARN Act notice requirements; (4) subject more
plant closings to the notice requirements; (5) increase penalties to
deter employer non-compliance with the notice requirements; (6)
authorize the Labor Department to bring enforcement suits on behalf of
workers; and (7) close various loopholes that allow employers to avoid
giving advance notice.
While both these bills represent tremendous progress, we believe
they could be improved by requiring 6 months of advance notice instead
of 3. At minimum, a 6-month notice period should be required for plant
closures and mass layoffs that affect larger numbers of workers.
The AFL-CIO has long believed that a longer notice period would
better serve the purposes of the act. One of the principal purposes of
early warning is to give State and local governments time to prepare
effective services for displaced workers and develop strategies for
responding to the sudden loss of jobs and tax revenue. The earlier that
notice is given, the more effective assistance programs can be in
getting workers back to work more quickly at better wages.
Another purpose of early warning is to give workers time to prepare
themselves financially, to pursue education and retraining
opportunities, and to search for other employment. Dislocated workers
who receive advance notice and early adjustment assistance are more
likely to be successfully retrained, and they get new jobs sooner and
earn more than they would have without early intervention. Early
warning increases the likelihood that employees can find work prior to
being laid off, thus avoiding unemployment spells.
The legislative compromise that resulted in only 2 months' advance
notice detracted from the purposes of early warning. Two months is
generally not enough time to ensure that government assistance and
resources are available to workers before they lose their jobs. Two
months is often not enough time for workers to make the preparations
necessary to be successfully retrained, or find good jobs quickly and
avoid unemployment. Two months is definitely not enough time to serve
the third purpose of early warning: to give workers and local
governments an opportunity to avoid job losses in situations where they
can be avoided.
We should remember that early plant closure legislation prescribed
more comprehensive strategies that gave workers and communities an
opportunity to avoid job loss in the first place. These early proposals
required employers to consult in advance with local governments and
employee representatives. They required employers to provide relevant
financial information (such as financial statements and relocation
plans) to local governments and employee representatives seeking
alternatives to plant closures and layoffs. They provided for technical
and financial assistance to troubled firms and affected communities.
They required 6 months' (or more) advance notice so that these efforts
would have time to bear fruit.
While extending the WARN Act's notice requirement to 6 months would
allow the necessary time for early intervention and job loss avoidance
initiatives, reform of the WARN Act should also be accompanied by a
greater commitment at the State and Federal level to taking advantage
of the advance notice period to organize these initiatives.
Several States have already implemented effective early warning and
early intervention programs that have saved thousands of jobs and
helped maintain employment at manufacturing firms. In Pennsylvania, for
example, the Strategic Early Warning Network of the Steel Valley
Authority has worked with more than 450 companies to save millions of
dollars in wages and taxes that otherwise would have been lost to plant
closings.
Leadership by the Federal Government is desperately needed to
support early warning and early intervention programs. The dire fiscal
situation of many States precludes adequate funding on the necessary
scale at the State level. We believe the Federal Government could play
a critical role in coordinating and encouraging these programs.
Advance notice and early intervention are ultimately about
maintaining the living standards of the American middle class. Dumping
large numbers of laid-off workers into flooded job markets without any
warning is a recipe for declining living standards, as desperate
workers compete to secure bad-paying jobs that may actually harm their
long-term earnings potential.
Advance notice, on the other hand, can allow governments to put in
place effective assistance programs that make it more likely that
workers will find relatively good-paying jobs more quickly without
suffering unemployment. In some instances, advance notice may allow
enough time for workers and their communities to develop strategies to
avoid the loss of good jobs in the first place.
Obviously, good jobs cannot be saved in every instance. But in
those instances where they can be saved, it can hardly be argued that
the Federal Government is doing everything it can to save them.
We see advance notice and early intervention programs as
complementary parts of a much-needed comprehensive strategy to save
good jobs and maintain the living standards of the American middle
class. I thank you for your attention, and I look forward to your
questions.
Senator Brown. Thank you, Mr. Trumka.
Joe Aguiar is from Fall River, MA. He worked in the fabrics
and textile industry for nearly 30 years. His first job was
cutting fabrics for a curtain manufacturer. In 1980, he went to
work for Quaker Fabrics, at that time the largest employer in
Fall River and one of the largest fabric manufacturers in the
world.
Mr. Aguiar began as a production worker and eventually
worked in maintenance. He met his first wife at Quaker Fabrics,
and they have a 25-year-old son. He and his second wife have
three more sons, age 18, 14, and 8. Mr. Aguiar became a U.S.
citizen in 1986, owns his home, and is the youngest of five
siblings all living in Fall River.
After almost 27 years of employment with Quaker, the
company without notice terminated Mr. Aguiar and all 900 of his
fellow employees on July 2, 2007.
Mr. Aguiar, welcome and thank you for being here.
STATEMENT OF JOE AGUIAR, LAID-OFF WORKER,
FALL RIVER, MA
Mr. Aguiar. Thank you very much, and I want to thank you
and all the members for inviting me to be here today.
That is all true what you just said and--OK, I am sorry. I
am not used to these things. All right? Now you can hear me.
All right, I will start all over again.
When I was 17 years old, I came to this country. Three
years later, I start working for Quaker Fabrics, one of the
biggest companies in Fall River, MA, and worked there for 27
years. Like you said, I married first time, met my wife there,
second wife there. I have got three kids now. One of them is
here, the 18-year-old back here.
What happened is that on June 29, we went on shutdown. The
company shut down, and everybody goes on shutdown, but us
maintenance work those 2 weeks. What happened is, I went to
work that Monday morning, worked all day, went home at 3
o'clock. At a quarter of six, I get a phone call from my
supervisor telling me, ``Joe, don't come back to work
tomorrow.''
That is what happened to me and about 900 other employees.
At that time, the company used to--about 3,000 people used to
work for that company. Through all these years, that number
started coming down, down, down. At that time, there was about
900 people there.
I am a little bit nervous, but I will be all right. This is
my first time doing these things. So, to tell you the truth,
most of those people that went on shutdown, some of them went
to Portugal. Some of them went to Florida, Canada, or wherever,
and they didn't know anything until they came back.
The other ones that were here heard on the radio or
newspaper and some of them I called because my boss told me to.
If I knew any phone numbers, yes, I called some of them.
Like I said, they didn't tell us anything about that they
were going to close. We noticed that they were not doing too
good. They keep saying that we lost so much this quarter, that
quarter. But especially me, I never thought that place was
going to close, and I was shocked. It was a big shock for me.
Here I am now, almost 1 year later, still without a job.
Good thing that we have this company over there that is called
TRA that gave us some training, that we can go to school for
like 1 year, and we get pay and get free insurance. But when
that is done, we have got to find a job.
I will tell you right now, the school that I am at, we have
over 300 people and all the same way as I am, you know? After
this is over, we don't know what is going to happen.
I think that we deserve to get something from the company
or whoever owns that, the bankruptcy or whatever, because they
were supposed to give us at least 60 days' notice before they
were going to do anything like that, and nothing like that
happened.
Right now, I am collecting some money, not much. But I have
got this part-time job at that company. Because some company in
Massachusetts bought all the junk, steel, all the machines, and
is making money out of that. We are working there part-time.
When I got there the first day, like 4 weeks ago, that I know
how that place was and I look at that, it is like a dump.
All the machinery is all in skids, most of them have
already been shipped to China, India, South Carolina, you name
it. They are shipping everything overseas, and it is bad.
Me and my wife, who used to work there, my wife worked
there for 18 years. I worked there for 27. Now my wife is sick.
She has filed a disability. She has got problems with her back.
Here I am living on 300-some dollars a week. Me and her, we
used to make around $65,000 annually. I will be making around
$18,000 now. How can you live with something like that?
I go everywhere. I put applications everywhere in
Massachusetts. There is not much jobs over there. So it is very
bad. So I am just hoping that at least we get some help, me and
all the other 900 co-workers, see what they can do to help us.
Thank you very much.
[The prepared statement of Mr. Aguiar follows:]
Prepared Statement of Joe Aguiar
Chairman Brown and members of the committee, thank you for this
opportunity to testify today about the shutdown of what was once the
largest employer in Fall River, MA, Quaker Fabric. I worked for the
company for nearly 27 years. Last year, over the July 4 holiday, Quaker
Fabric shut its doors, terminating me and my 900 fellow employees
without giving us any prior notice.
My name is Joe Aguiar and I was born in 1960 in the Azores islands
of Portugal to a family of farmers. I remained in school through the
fifth grade and came to the United States at the age of 17 to live with
my older sister in Fall River, MA, where I still reside today. My first
job in Fall River was cutting fabric for a curtain manufacturer. In
1980, I went to work for Quaker Fabric Corporation. At one time, Quaker
Fabric was one of the largest manufacturers of Jacquard upholstery
fabric in the world. I began at Quaker as a production worker and
eventually moved to the maintenance department, where I worked until I
was let go last year.
I met my first wife at Quaker Fabric and we have a son who is now
25 years old. I re-married and am raising three more sons, ages 18, 14
and 8, all of whom are students and live at home. My 18-year-old son is
here with me today.
I am the youngest of five siblings. We all live in Fall River. My
wife and I own our own home. I became a U.S. citizen in 1986.
When I began working for Quaker Fabric in 1980 the company had only
a few hundred employees. I met my wife at the factory, and she worked
there for nearly 18 years. In many other families, both the husband and
wife met at Quaker Fabric and worked there for many years. Many Quaker
employees worked there more than 20 years, like I did.
When I went to work on Monday, July 2, 2007, I had no idea it was
to be my final day at work. I was one of the few on site that day.
Quaker always closed the first 2 weeks of July for vacation. Most of my
fellow co-workers were away in Portugal, Florida, Canada and elsewhere.
Because my job was maintenance, I worked through the vacation period.
That Monday, I worked my regular shift from 7 a.m. to 3 p.m., then went
home. That evening, I received a call from my supervisor. He told me
not to return to work the next day; the company had closed. I was
shocked. My supervisor asked if I had the phone numbers of other
maintenance employees and if so, would I contact them that evening and
tell them the company had closed and that they should not report to
work the next day. I phoned several of my co-workers and told them what
little I knew. They were in disbelief, as was I. Of course, I could not
tell them why the company had closed because I did not know myself, nor
apparently did my supervisor. Many of the employees who were in Fall
River learned of the shutdown from the television and local AM radio
station the next day, or from word of mouth from family or friends. But
most of my co-workers, who were away, first found out days later when
they came back from their vacations that they had no job.
When I woke up the next day, on July 3, I still could not believe
what I had heard. I had to see it with my own eyes. I thought someone
would reopen the company. I drove to the building where I worked and
saw the factory gates were padlocked with chains. Still, I did not give
up hope.
About a week after the company closed, my former co-workers and I
received a letter in the mail telling us what we already knew, that we
had been terminated effective the prior week. The Worker Adjustment and
Retraining Act, the WARN Act, was mentioned in that letter, but I had
never heard of the law and was unaware that there was any law that
protected employees like me who are terminated as part of a mass layoff
or plant closing. Certainly, had I known 60 days prior that I would
lose my job, I would have prepared myself for both the financial and
emotional impact. I would have had a head start looking for a new job.
I could have applied for the jobs that were advertised during those 60
days. I would have set money aside for my and my wife's unemployment. I
would imagine most of my co-workers would have appreciated knowing
before they spent lots of money visiting Portugal and other places for
the holiday that their jobs were gone.
After the company closed, I spent the next several weeks firmly
believing that it would re-open and I would be called back to work. I
drove past the plant where I had reported for the last 17 of my 27
years at Quaker, looking for some signs of activity, but saw only the
padlocked gate.
As my hopes vanished, I began actively looking for other
employment. I have submitted applications to various factories in Fall
River, but because so many of us are competing for the few jobs
available I have not received a single job offer. Presently, I receive
extended unemployment benefits and attend pre-GED classes provided by
the Trade Adjustment Assistance program for dislocated workers. My wife
attended these classes as well and received these benefits.
Unfortunately, she suffered injuries while working at Quaker as an
equipment operator lifting and carrying 15 lb. spools of yarn. She can
not sit in class for the 5 hours a day required. She had to stop
attending class and thereby lost her unemployment check and health
benefits--extended unemployment income and medical coverage are tied to
class attendance. Now she has mounting medical bills, and has applied
for disability, but we are told the process is a long one.
What does a sudden job loss do to a family like mine? At this time
last year, my family of five enjoyed a combined annual household income
of $65,000. Now we are living on my check of $344 per week, less than
$18,000 a year. My 18-year-old son works part-time while going to
school, and contributes to the household expenses. We are just getting
by.
I work a few hours a week to earn an additional $100 at the old
Quaker Fabric factory buildings. I heard the company was sold for about
$27 million and is now owned by a Canadian company called Victor
Innovatex, Inc. Many of the factory buildings were sold and are still
closed. I throw out the junk and debris left in buildings where I spent
27 years working. Not long ago, I saw that several older looms had been
packed up and were being shipped out to a buyer in India. Recently, I
saw many of the newer looms packed up and also being shipped away,
perhaps to foreign countries, as well. Over the last few years that
Quaker was in business, it imported a lot of the fabric it sold from
China. The Chinese fabric came in through receiving and went out
through shipping. We did not have to manufacture it. Roughly at the
same time, Quaker Fabrics reduced the number of workers it employed
from 3,000 to 900 mostly through layoffs. Then, on July 3, it went to
zero.
Shortly after Quaker closed down, the employees were called to a
meeting with a company official. She did not tell us why the company
closed and did not say why we were provided no notice. We were told
that our health insurance had been cancelled as of July 5, the day
after the company shut down. And, because the company was no longer
operating, we had to find medical insurance on our own. Without
government retraining benefits I receive, my family and I would have no
medical coverage. I expect my benefits will expire this October.
I reluctantly took on the role of the lead plaintiff, and later
class representative, in a WARN Act lawsuit filed in the Delaware
bankruptcy court on behalf of myself and the other former employees of
Quaker Fabric. Our lawsuit was filed against the Quaker Fabric estate
in September of last year. It took me a long time to find out anything
about the WARN Act. I was not given any guidance about the WARN Act by
the company or governmental officials. Months after the company closed,
I learned that there is such a law that should have provided us advance
notice of our job loss. I learned that in order to pursue my WARN
rights I had to retain a private attorney, that there was no government
agency that would enforce those rights on behalf of the employees. The
law firm I retained is Outten & Golden in New York City. After the
lawsuit was filed, members of the Outten & Golden firm came to Fall
River. We held a meeting in a banquet hall. Almost 700 of the 900
terminated employees attended and learned about their rights under the
WARN Act. Of course, all of us are most concerned about whether we will
get any money from the company now that it is bankrupt.
At the meeting, my former co-workers expressed their gratitude to
me for stepping forward and starting the lawsuit. Still, it has been a
slow process and the outcome remains uncertain. In the end, the most we
can hope to recover is 60 days wages and benefits. For many of us who
spent 20 or more years of dedicated service to Quaker Fabrics, that is
not much but it is something that will help us to live until we find
jobs and can support ourselves again.
I, and many of the Quaker workers in Fall River, are unfamiliar
with the laws such as the WARN Act. We now know that there are laws
that can protect us. But the problem is who is going to explain them to
us and fight for us? It is hard to find anyone. If the WARN Act were
stronger, I think it would protect us better. There would be more help.
And employers would know they have to give employees notice. So I am
here today to tell you how much we appreciate the work that you are
doing in the Congress to make the WARN Act stronger. We hope you
succeed, so that we, and others like us, will be given more time to
prepare before we lose our jobs. Employees should not be treated like
the trash that I take from the empty Quaker factories and put out on
the street.
Again, I, along with the 900 men and women who lost their jobs at
Quaker Fabric, thank you for your interest in this issue.
Senator Brown. I appreciate very much your being here, Mr.
Aguiar, and speaking out. Thank you.
You didn't seem nervous. Thanks.
Mr. Aguiar. I am nervous. You don't know me.
Senator Brown. John Philo is an attorney with over 15
years' experience representing and advocating for workers and
disenfran-
chised people. He has counseled and represented hundreds of
workers in WARN Act matters and litigated in courts throughout
the country on behalf of injured persons in employment,
personal injury, and product liability matters.
Mr. Philo is also a former deputy director of Detroit city
council's legal and policy staff, a graduate of St. Louis
University School of Law and the McGill University Faculty of
Law.
Mr. Philo, welcome.
STATEMENT OF JOHN C. PHILO, ESQ., LEGAL DIRECTOR,
SUGAR LAW CENTER FOR ECONOMIC AND SOCIAL JUSTICE, DETROIT, MI
Mr. Philo. Thank you.
I want to thank Chairman Kennedy, all the members of the
committee, for convening this hearing and particularly thank
you, Senator Sherrod Brown, and your office for inviting us to
speak and being at the forefront of this issue.
I almost feel as though anything I am going to say pales in
comparison to the real-world experience of workers like Mr.
Aguiar. We see them too often, and we hope and trust that the
work of the committee here can give some meaning to what we say
here today.
I am the legal director of the Maurice and Jane Sugar Law
Center for Economic and Social Justice. Sugar Law Center is a
national nonprofit in Detroit. The central focus of our work is
to provide support to workers concerning their WARN Act rights.
Through that work, our center has become a national
clearinghouse and resource center on WARN Act issues. We
believe that WARN Act reform is long overdue as a faltering
economy results in mass job loss in more and more communities.
Our economic system provides virtually unlimited
flexibility for employers to increase profits, limit losses,
and plan a future for their companies by laying off workers.
Our Government has structured this economic system to enhance
this flexibility through trade laws that allow employers to
relocate worksites with unprecedented global mobility, through
tax systems that permit very tough competition for jobs among
our Nation's States and cities, and through deregulation that
has permitted business creativity but also allowed rampant
corporate opportunism, and through a host of other measures.
While such measures have benefited some in our Nation,
there are many others who directly bear the burden. There are
hundreds of thousands of workers who are laid off each year in
mass layoffs and worksite closings. Over the past year, our
Nation has seen severely increased economic instability. In the
first quarter of 2008, there were over 1,100 extended mass
layoffs that resulted in job loss for approximately 190,000
workers.
Mass layoffs and worksite closures, however, are not a
phenomena occurring only during recessions, but rather have
become an inherent characteristic of our economy. Since 1996,
we have seen well over 1,100 extended mass layoff events in
nearly every quarter of every year. To ensure a fair future for
our Nation's workers, we recommend the following actions.
First, the WARN Act should be amended to provide earlier
notice to workers and State and local officials. Longer advance
notice provides greater opportunities for workers to avoid
unemployment and for government officials in local communities
to explore opportunities for keeping worksites open and for
developing stabilization plans.
When the WARN Act became law in the late 1980s, it took
laid-off workers an average of 12 weeks to find a new job. At
present, finding new employment takes approximately 5 months.
So more advance notice is needed to prevent the consequences of
sudden and devastating job loss.
The act should be amended to provide a minimum notification
period of 16 weeks, but it should also be amended to further
provide tiered notification that we see in other countries of
up to 6 months, particularly when job losses result from long-
planned business decisions such as the relocation of worksites.
In addition to expanding the notification period, the WARN
Act's immediate goals are most effectively advanced by
expanding the pool of workers entitled to the act's
protections. In its 2003 report, the GAO found that over three
quarters of mass layoffs and worksite closures were exempted
from the act's notice requirements. The GAO statistics
ultimately showed that more than 90 percent of America's
workers who experience a mass layoff or worksite closing are
unlikely to receive WARN Act notice for their job loss. This
defeats the purpose of the existing legislation.
The pool of covered workers can be expanded by reform to
reduce various thresholds that exist in the act. Most notably,
the 100 full-time employee threshold should be reduced to 50 or
amended to include part-time and contingent workers, which have
become prevalent in American society and American business.
An advance notice should be required whenever a layoff of
25 or more workers occurs at a single site. The threshold issue
is a critical issue for expanding coverage, and there are other
important threshold reforms that we have detailed further in
our written statement.
In addition to increasing the notification time and
expanding coverage to more workers, the act should be reformed
to close compliance gaps. The GAO's report found that employers
only provided advance notice in approximately one-third of mass
layoffs and worksite closings where notice was required. Even
when advance notice was provided, many notices are untimely.
In workers' private lawsuits, very low allowable damages
hinder courts' ability to provide an effective remedy to
workers and to provide effective deterrence to bad faith
employers. Compliance gaps can be closed by permitting recovery
of a full range of compensatory damages or requiring violators
to pay double back pay and benefits and to allow punitive
damages against employers who intentionally violate the act or
recklessly disregard the workers' rights under the act.
To protect the interests of both affected workers and
larger communities, the act should be strengthened to allow the
Department of Labor and State officials to bring suit on behalf
of workers, to enforce civil penalties, and to seek injunctive
relief to prevent a mass layoff or worksite closing when
advance notice was not provided and has particularly
devastating effects on that local community.
The act should be further amended to close massive
loopholes that permit employers to compel employees to sign
blanket release forms at the time of their job loss in exchange
for a nominal severance package. These employer practices are
unconscionable, and we see them regularly in our work. The act
should be amended to render such releases void and without
legal effect.
Other reform measures no less important than the ones I
have spoken of are set forth further in our written statement.
In closing, on behalf of the Sugar Law Center and the
workers we represent, I would again like to thank the committee
and you, Senator Brown, for the opportunity to speak.
Fundamentally, the WARN Act is about fair play for workers in
an ever-changing economy.
Opening our economy to global competition, inherent
business cycles, periods of widespread corporate wrongdoing,
and other factors create an ongoing risk of mass job loss at
worksites in every industry and in all regions of the country.
A debt of fundamental fairness is long overdue to these workers
who bear that risk, and WARN Act reform is one measure to begin
to repay that debt.
Thank you.
[The prepared statement of Mr. Philo follows:]
Prepared Statement of John C. Philo, Esq.
i. introduction
Thank you committee Chairman Hon. Edward M. Kennedy, Ranking Member
Hon. Michael B. Enzi and all members of this committee for convening
this hearing and for allowing me the opportunity to testify on behalf
of the Maurice and Jane Sugar Law Center for Economic and Social
Justice (Sugar Law Center).
My name is John Philo and I am the Legal Director of the Maurice
and Jane Sugar Law Center.\1\ Our organization is a national nonprofit
public interest law center located in Detroit, MI. Founded on the
belief that economic and social rights are civil rights and ultimately
human rights, we have focused our work on economic and social justice
issues. One of our first acts when we opened our doors on February 1,
1991, was to establish a Plant Closing Project in support of workers
and communities struggling to survive the effects of mass job loss
during times of economic instability. A central focus of the project is
to provide support to workers concerning their rights under the WARN
Act.
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\1\ I would like to thank Tova Perlmutter, Executive Director of
the Sugar Law Center and Tony Paris, a Staff Attorney at the Law
Center, for their contributions and feedback in the preparation of this
testimony.
---------------------------------------------------------------------------
Since establishing the Plant Closing Project, the Sugar Law Center
has represented thousands of dislocated workers in WARN Act matters
throughout the country. We provide information and advice to workers
and their representatives and we litigate lawsuits on their behalf. The
Center also provides technical assistance to lawyers and rapid response
workers in State government and we publish the only comprehensive
practitioner's manual exclusively focused on WARN Act issues.
As a result of these efforts, the Sugar Law Center has become the
national clearinghouse and resource center for WARN Act related
litigation. We have been able to develop a practical ability to
recognize fact patterns that give rise to WARN Act issues. Through such
work, we have experience in analyzing fact patterns for their viability
as legal cases under the act and have experience in analyzing fact
patterns to recognize those circumstances where the act provides no
protections to workers. Our experience provides us with a unique
position to observe the devastating impact of gaps in protection,
ambiguities, and loopholes within the current WARN Act statute.
The Sugar Law Center's experience with the WARN Act has been
extensive and our commitment to protecting and assisting dislocated
workers throughout the country runs deep. For these reasons, I am
pleased to have the opportunity to provide our comments on how and why
WARN Act reform is necessary to make the act as effective as it can and
should be.
On behalf of the Sugar Law Center and those dislocated workers whom
we represent, I wish to thank all of you again for convening today's
hearing.
ii. economic & social concerns affecting local communities
The impact of job loss is far reaching. Loss of employment from
mass layoffs and worksite closings can have devastating impact not only
on individual workers, but also their families and local communities.
The most immediate impact is loss of income to the worker and family
dependents. The loss of income and related financial and personal
stress leads to very real increases in personal bankruptcies, declines
of individual's and family members' physical and mental health, and the
breakup of families. The impact also extends to businesses frequented
by affected workers leading to a ripple effect of potential closings.
Likewise, local communities face potentially crippling reductions in
their tax base at a time when government social services are most
needed.
Over the past several years, our Nation has seen increased economic
instability. Unemployment rates are again reaching levels last seen
during the economic recession of 2001 and 2002. Since 2004, we have
seen well over 1,100 mass layoff \2\ events in nearly every quarter of
the calendar year. In the last quarter of 2007, there were 1,814 mass
layoff events. In the first quarter of 2008, the country experienced
1,111 mass layoff events resulting in job loss for approximately
190,000 workers.\3\ On average, 170 workers lost their jobs in each of
these layoffs and 12 percent of these events were attributed to the
permanent closure of a worksite. Mass layoffs and worksite closures
appear to have become a recurring institutional characteristic of the
Nation's economy.
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\2\ The U.S. Department of Labor defines ``mass layoffs events'' as
those involving 50 or more workers and includes both mass layoffs and
worksite closures.
\3\ USDOL, Bureau of Labor Statistics, Extended Mass Layoffs in the
First Quarter of 2008 (Released May 15, 2008).
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Our economic system is structured to provide virtually unlimited
flexibility to employers to plan for the future of their companies and
to limit financial losses by laying off workers and closing worksites.
The workers who have provided the foundation upon which such companies
will reap benefits into the future and who suffer the most direct
consequences of uncertain economic times deserve nothing less than a
fair opportunity to plan a future for their families and to avoid
catastrophic financial losses when faced with job loss. Under such
circumstances, fair play for workers is not only good policy but is a
moral imperative.
iii. the warn act's goals & history
The protections of the WARN Act find its roots in the fundamental
human rights of all persons. In an effort to avoid the political,
economic, and social instability that led to the devastation and
destruction of two world wars, the United States and the world
community founded the United Nations and other regional bodies to
affirm and advance the basic human rights of all peoples. A worker's
right to social security and protections in the event of unemployment
is one such right recognized by all democratic societies.\4\ Along with
unemployment insurance and trade adjustment assistance, the WARN Act is
one component of a web of measures through which workers have struggled
to meaningfully realize their human rights within our legal system.
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\4\ See International Covenant on Economic, Social and Cultural
Rights, 16 December 1966 G.A. Res. 2200A (XXI), 21 U.N.GAOR, 21st
Sess., Supp. No. 16, at 49, U.N. Doc. A/6316 (1966), 993 U.N.T.S. 3
(entered into force 3 January 1976) at Art. 9 and American Declaration
of the Rights and Duties of Man, O.A.S. Res. XXX (adopted by the Ninth
International Conference of American States 1948), reprinted in Basic
Documents Pertaining to Human Rights in the Inter-American System, OEA/
Ser.L.V/II.82 doc.6 rev.1 (1992) at Art. XVI.
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Advance notification for workers facing a permanent layoff had been
sought for many years by workers and communities. Initiatives in the
1970s and early 1980s failed to pass Congress; however by the mid-1980s
the effects of large scale worker dislocations could no longer be
ignored. In 1985, after a hearing before the U.S. House of
Representatives Education and Labor Committee, President Reagan's Labor
Secretary William E. Brock established a task force to study worksite
closings and worker dislocation.
The task force reviewed advance notification and worker
readjustment programs in Europe and Canada and studied the issue of
worker dislocation for approximately 1 year before issuing its report.
The task force concluded that advance notice is an essential element of
a meaningful adjustment program for dislocated workers.
In 1987, versions of the WARN Act were introduced before the U.S.
House and Senate. The legislation was supported by many organizations
including the National Conference of Mayors, the National League of
Cities, the AFL-CIO, and individual labor unions.
The goals of the bills were articulated by Sen. Kennedy, during
Senate debates:
First, advance notice is essential to the successful
adjustment of the workers to the job loss caused by changing
economic conditions. Times have changed for American workers.
The person who will stay with one employer for 30 years is
becoming more the exception and less the rule. Frequent changes
are becoming more common. An advance notice provision insures
that large numbers of workers will not be displaced without
warning and without planning. . . .
Second, advance notice saves the Government money. The Office
of Technology Assessment estimated that advance notice could
help save between $257 million and $386 million in unemployment
compensation benefits each year. . . .
Third, advance notice makes each dollar that we appropriate
for adjustment efforts to go further. We know that with advance
notice, adjustment programs are more effective in getting
employees back to work more quickly, and at better wages.
Fourth, and perhaps most important, an advance notice
requirement assures fair play for American workers.\5\
(Emphasis Added).
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\5\ Remarks of Senator Kennedy, 134 Cong. Rec. S. 8376 (June 22,
1988), Legislative History, 184.
The bills passed out of committee in both the House and Senate and
provided for between 90 and 180 days advance notice of mass layoffs and
worksite closings. In an effort to ensure passage, the notification
period was shortened to 60 days and after an initial veto by the
President, the WARN Act became law on August 4, 1988 and remains in its
original form today.
By the early 1990s however, workers advocates and legislators were
beginning to recognize that the goals of the WARN Act were not being
fully realized by the existing statute. On February 23, 1993 and again
on July 26, 1994, the Sugar Law Center appeared before this committee,
at the request of then-Sen. Howard Metzenbaum, to discuss areas of the
WARN Act that needed revision. Former Executive Directors Julie Hurwitz
and Kary Moss, speaking on behalf of the Sugar Law Center both
testified that while the passage of the WARN Act was a significant and
laudable event for the Nation's workers, the act had fallen far short
of its goals.
In February 1993, the U.S. General Accounting Office (GAO)
published a report detailing its findings concerning the law's reach
and limits.\6\ The GAO found that as a result of the act's passage,
employers were more likely to give workers advance notice of mass
layoffs and worksite closings.\7\ The GAO however found that only about
half of employers conducting a mass layoff or worksite closing were
required to provide advance notice.\8\ Of the closures where advance
notice was required, advance notice was only provided 50 percent of the
time and when notice was provided, 25 percent of the notices were
untimely.\9\ Despite such stark findings, efforts to reform the act
stalled.
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\6\ Dislocated Workers: Worker Adjustment and Retraining
Notification Act Not Meeting Its Goals (GAO/HRD-93-18, February 23,
1993).
\7\ Id. at 3.
\8\ Id. at 4.
*ERR14**ERR14*\9\ Id.
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A decade later, the GAO reported further findings concerning the
act's limited coverage of our Nation's workers and employers'
compliance with the statute. The GAO's updated study suggests that
coverage and compliance has worsened rather than improved in the
intervening years. In 2003, the GAO reported that only 24 percent of
all mass layoffs and worksite closures were subject to the WARN Acts
advance notice requirements.\10\ Furthermore, the report found that
employers provided advance notice in only 26 percent of the mass
layoffs and 46 percent of the worksite closures where WARN Act
notification was required.\11\ Even when advance notice was provided,
32 percent of the notices were untimely.\12\
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\10\ The Worker Adjustment and Retraining Notification Act (GAO-03-
1003, September 2003) at p. 7.
\11\ Id. at p. 10.
\12\ Id. at p. 11.
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As a result, timely advance notification is only being provided in
6 percent of all mass layoffs and worksite closures. In mass layoffs
and worksite closures covered by the act, timely advance notice is only
provided to workers 25 percent of the time. These numbers reveal
serious problems with the number of worksites covered by the act's
protections and with employers' compliance. Coverage and compliance can
and must be improved by amendments to the statute.
As confirmed by the findings of the GAO reports, WARN Act reform is
necessary and long overdue. Fundamentally, the WARN Act is about fair
play for workers in an ever-changing economy. Opening our economy to
global competition, inherent business cycles, periods of widespread
corporate malfeasance, and other factors create an ongoing and semi-
permanent risk of mass job loss at large worksites in all industries
and in all regions of our country. A debt of fundamental fairness is
long overdue to the workers, families, and communities who bear the
risk and most directly suffer the devastating consequences of mass
layoffs and worksite closures. WARN Act reform is one measure to begin
to repay that debt.
iv. gaps in protection and overdue reform
The WARN Act's advance notice requirements mitigate the effects of
worker dislocation in three principal ways. First, advance notice gives
workers time to financially plan for an impending job loss and gives
workers time to learn of and pursue other job and retraining
opportunities while still employed. Advance notice thereby minimizes
the time workers are unemployed and not enrolled in educational and
skills development programs. This reduces employers' unemployment
insurance costs and eases the burden on government service providers
who assist unemployed workers.
Second, advance notice allows social service providers time to
prepare and implement effective services for displaced workers.
Significant lead time is necessary for State rapid response workers and
others to develop and implement informational outreach to workers
regarding transition programs and benefits. The advance time also
assists service providers in developing and structuring retraining
services that are tailored to the needs of laid off workers and that
are ready for worker enrollment at the time that layoffs occur.
Finally, advance notice gives local governments, communities, and
workers representatives time to develop strategies in response to job
losses and lost revenues. With advance notification, these groups can
work cooperatively with employers to retain employment through
incentives, new ownership and operating structures, and/or workplace
concessions. Furthermore, if job and revenue loss is to occur,
government and community groups can develop and implement economic and
service plans that minimize the adverse effects of mass job loss on
local communities and affected neighborhoods.
Despite the significant strides made by the passage of the WARN
Act, there are gaps in protection, ambiguities, and loopholes that
prevent the act from serving the intended purposes of advance
notification. Reform now can close loopholes and clarify ambiguities to
increase the number of worksites covered by the act and to increase
compliance by employers.
1. Provide Earlier Notice to Workers
Most experts agree that longer advance notice periods result in
better outcomes for dislocated workers and the communities in which
they live. The WARN Act's 60-day advance notice is important but far
too short in time for workers to successfully transition to new
employment and for communities to explore options for keeping a
worksite open.
Longer advance notice provides greater opportunities for workers to
avoid unemployment. The statute presently provides 8 weeks of advance
notice. Eight weeks is an unduly short timeframe given data showing
steady historical increases in the time that it takes for workers to
transition from one job to another and given data showing that it will
take current workers over twice the time of the advance notice period
to find new work.
When the WARN Act became law in the late 1980s, it took laid off
workers an average of 12 weeks to secure new employment.\13\ Over the
past 20 years, the length of time required to locate new employment has
steadily increased.\14\ Since the turn of the century, the average
duration has ranged between approximately 14 and 18 weeks.\15\ At
present, the average duration is 18.3 weeks and it is not until 26
weeks have passed when 80 percent of workers will be re-employed.\16\
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\13\ See Toshihiko Mukoyama and Ayseul Sahin, Why Did the Average
Duration of Unemployment Become So Much Longer, Staff Report No. 194
(Federal Reserve Bank of New York, Sept. 2004) at 1-2.
\14\ Id.
\15\ Id.
\16\ USDOL, Bureau of Labor Statistics, The Employment Situation:
April 2008 (USDL 08-0588) at Table A-9.
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In other words, when the act was initially passed the advance
notice period provided continued employment during 66 percent of the
time that it would take an average worker to find new work. Today, the
advance notice period accounts for 44 percent of the time that an
average worker will require to secure a new job. As a result, more
workers are spending longer periods unemployed creating greater risks
of catastrophic financial distress.
Longer advance notice also provides government officials and local
communities meaningful opportunities to explore options for keeping a
worksite open. Along with notification to workers, the WARN Act
requires advance notice to union representatives and State and local
officials. The purpose of such notification is to provide opportunities
for cooperative initiatives to assist in a business turnaround,
restructuring, or change in ownership of a facility to avert job loss.
Initiatives to effect such outcomes include the provision of government
grants and loans, tax and investment incentives, solicitation of new
ownership groups, employee stock ownership plans, and stakeholder
involvement in reorganizing operations.
To begin such processes however, a pre-feasibility study is
necessary. The pre-
feasibility study evaluates the likelihood of success of potential
restructurings, buyouts and other initiatives. Experts generally find
that once a decision is made to explore options for keeping a worksite
open and funding is secured for a pre-feasibility study, 4 to 6 weeks
is necessary for the study to be completed.\17\ If viable, 6 months or
more is required to complete a restructuring or buyout. Where
alternative plans for keeping a worksite open are not viable,
communities require similar periods of time to develop plans to adjust
to the loss of revenue and to develop strategies to stabilize the local
economy.
---------------------------------------------------------------------------
\17\ See Steel Valley Authority, Rapid Response: Layoff Aversion
Guide (2006) at pp. 51-54.
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To provide meaningful opportunities to attain such goals, advance
notification periods must be extended. The experiences of other nations
may provide a model for tiered notification periods to maximize
opportunities to keep worksites open and develop stabilization plans.
Other nations with competitive market economies provide for
significantly longer advance notification periods without unduly
burdening business interests.\18\ In Canada, Federal law requires 16
weeks of advance notice and the establishment of a joint planning
committee consisting of workers and employer representatives.\19\ The
joint planning committee's objectives are to examine strategies to
avoid the layoffs, to plan the transition, and to assist in locating
new employment for dislocated workers.
---------------------------------------------------------------------------
\18\ See Geoffrey England, Unjust Dismissal and Other Termination-
Related Provisions: Report to the Task Force on Part 111 of the Canada
Labour Code Regarding the Termination of Employment Provisions of the
Canada Labour Code (May 16, 2006) at p. 67-68 (noting the varying
statutes providing up to 18 weeks advance notice within the Federal and
provincial laws of Canada).
\19\ See Canada Labour Code, amended 1992 at 212.
---------------------------------------------------------------------------
Canadian provinces also have advance notice laws that often provide
tiered notification periods. Tiered notification periods typically
provide advance notification periods ranging from 8 to 16 weeks,
depending upon the particular circumstances of the layoff. The United
Kingdom also provides for tiered notification ranging from 4 to 12
weeks and provides for mandatory consultations between workers and
employers before layoffs can occur.\20\
---------------------------------------------------------------------------
\20\ See Trade Union and Labour Relations (Consolidation) Act, 1992
(TULRCA) at 193 &1881.
---------------------------------------------------------------------------
The tiered notification periods of other nations provide models for
more effective WARN Act notification. To meaningfully explore
opportunities for worksites to remain open and for communities to
develop stabilization strategies, decisionmakers need longer
notification periods. Longer notification periods may be impractical
under certain conditions that result in mass layoffs and worksite
closing. Where job loss occurs within the context of long planned
business decisions such as relocating operations to new locations or as
the result of a plant or product's obsolescence, longer notification
periods are most appropriate.
The WARN Act should be amended to provide advance notice of 120
days to allow fair opportunities for workers to successfully plan for
and transition to new employment and should provide longer tiered
notification periods based on the underlying business reasons for the
job losses to allow communities fair opportunities to keep worksites
open and to develop stabilization strategies.
2. Close Coverage Gaps By Reducing The Threshold For Covered Worksites
And Reducing Thresholds That Determine Which Workers Are
Entitled To Advance Notice
In addition to expanding the notification period, the WARN Act's
immediate goals are most effectively advanced by amending the act to
expand the pool of workers entitled to the act's protections. The GAO's
reports in 1993 and 2003 clearly find that the majority of our Nation's
workers do not receive advance notification when a worksite closing or
mass layoff occurs.
The GAO's initial report found that 64 percent of mass layoffs and
worksite closures were exempt from the WARN Act's advance notification
requirements.\21\ In its 2003 report, the GAO found that 76 percent of
mass layoffs and worksite closures were exempted from the act.\22\
---------------------------------------------------------------------------
\21\ GAO/HRD-93-18 at 17, Fig. 2.1. (analyzing data from calendar
year 1990).
\22\ GAO-03-1003 at p. 8, Fig. 2 (analyzing data from calendar year
2001).
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The principal reason that workers do not receive advance
notification is because the act's thresholds too frequently exempt
employers from the acts requirements. The pool of covered workers can
be readily expanded by lowering thresholds that determine which
employers are required to give advance notice and that determine which
workers are entitled to advance notice during a mass layoff or worksite
closing.
Presently, the WARN Act only applies to businesses employing 100 or
more full-time workers. The WARN Act then sets additional thresholds.
No advance notification is required if a worksite closing or mass
layoff does not result in the loss of at least 50 full-time workers at
a single worksite. Moreover, if less than 500 full-time workers are
laid off and the worksite does not close, then the number of laid off
employees must equal or exceed 33 percent of the total workforce at the
site before advance notification is required.
These thresholds artificially exclude many workers and communities
from receiving notice despite their suffering and the effects of a
large scale loss of employment at a single worksite. Worker and
community need for advance notification under such circumstances
however remains identical to those covered by the act.
The thresholds are too often blind to the realities of the modern
workplace where many large employers have sought the flexibility of
creative governance structures and alternative staffing arrangements.
The 100 full-time employees, 50 affected workers, and 33 percent of the
workforce requirements do not serve intended purposes to exempt small
employers or exempt small workforce reductions. Corporate subsidiary
and contracting structures, part-time staffing, contingent worker
staffing, and other strategies allow multinational corporations and
other large employers to avoid the requirements of the WARN Act.
The experience of workers at Raydon Corporation in Daytona Beach,
FL, at Bock USA in Connecticut, and at Mortgage IT locations in Ohio
and Texas illustrate the injustices of the present thresholds.
Raydon Corporation provides simulation training products to private
industry, governments, the U.S. military, and other employers
throughout the country. In August 2007, the company began a
restructuring program by suddenly and without notice calling employees
into meetings. At the group meetings, workers were informed that they
had a matter of hours to clear out their desks and vacate the property.
Ninety-five employees lost their jobs in the mass layoff. The company,
however, escaped WARN Act advance notification requirements by laying
off approximately 32 percent of the site's workforce and thereby did
not meet the 33 percent threshold. Within 2 months of the layoffs,
Raydon approached local government officials seeking tax abatements to
construct a new facility in the city along with the uncertain promise
of adding new jobs sometime in the future.
Bock USA is a subsidiary of a German multinational corporation that
once operated a manufacturing facility in Monroe, CT. In August 2007,
Bock USA finalized purchase of another company operating in Canada and
made the decision to close the Monroe facility and relocate operations
to Canada. Despite the company's purchase and relocation plans
necessarily requiring substantial advance planning, 70 workers at the
Monroe facility were given less than a month's notice of their
facilities' closing and State officials may also have not received
appropriate notice. Unfortunately, the subsidiary did not appear to
have 100 full-time workers and even if threshold requirements could be
met, a lawsuit by the workers would face substantial obstacles to
obtaining representation from the private bar due the limited
availability of potential damages.
Mortgage IT is a subsidiary of the multinational banking concern,
Duestche Bank. At the beginning of October 2007, Mortgage IT operated
from approximately 40 locations throughout the United States. On
October 2, 2007, the company slashed approximately 580 jobs at
locations across the country. In January 2008, the company continued to
lay off workers and our Law Center was contacted by workers at
locations in Ohio and Texas whose worksites had been closed. The
worksites however employed less than 50 employees at each location and
so while between 28 and 38 workers lost their employment at each site,
the WARN Act did not provide any protection to these workers.
The act's coverage deficiencies are reduced and the goals of the
act are better served by reform that would: (1) eliminate the 100 full-
time employee threshold, reduce the number to 50, or include part-time
and contingent workers in the number of employees to be counted to meet
the threshold; (2) reducing the number of affected employees threshold
in mass layoffs and worksite closures to 25 workers; (3) aggregate the
number of affected employees to include not only those at the principal
site but also those at other sites whose jobs are lost as a foreseeable
result of downsizing at the principal site; (4) eliminate the mass
layoff threshold requirement that the number of affected employees
equal or exceed 33 percent of the full-time workforce at the site; (5)
increase from 90 to 180 days the time period for aggregating the number
of affected workers in a series of smaller layoffs; and (6) define loss
of employment to have occurred after an employee has been laid off for
over 2 months rather than the 6 months presently required by the
statute.
3. Close Compliance Gaps by Providing Fair Damage Awards to Workers
When Their Right to Notice is Violated and by Permitting
Enforcement Actions by the U.S. Department of Labor and State
Officials
The WARN Act is enforced through private lawsuits brought by
workers whose rights have been violated. A cardinal principle of
effective regulation is that the person or group whose rights have been
violated should have direct access to courts to obtain a remedy. While
the WARN Act laudably vests workers with a right to a private lawsuit,
the act fails to provide effective remedies and further fails to
provide an avenue for enforcement by other constituencies whose rights
are violated when advance notification is not provided.
Tightly limited available damages under the WARN Act hinders
courts' ability to provide an effective remedy to workers who do not
receive advance notice. The act provides for awards based on a
calculation of the employees back pay and the value of any benefits for
each day that the employer violated the act.\23\ At most, employers
will be liable in the amount of 60 days pay and benefits. Judicial
decisions have struggled to determine whether back pay awards should be
calculated on a calendar day basis or a work day basis.\24\ The GAO
notes that a work day calculation can reduce awards by 30 percent.\25\
In addition, the act allows courts further discretion to arbitrarily
reduce any damage award for ``good faith'' failures to provide advance
notice to workers.
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\23\ In theory, the act allows for awards of attorney's fees and
for civil penalties of up to $500 per day that the employer is in
violation of the act. In practice, attorney's fees are at the
discretion of the court and are rarely awarded. Likewise, few if any
suits by local governments have been initiated and result in an award
of civil penalties. No civil penalties can be awarded if the employer
mitigates damages within 3 weeks of the layoffs or worksite closure.
The common practice of employers requiring employees to sign a generic
waiver of all rights and claims against the employer at the time of
discharge in exchange for a week or two of severance pay, a good job
recommendation, or even quick release of final paychecks effectively
pre-empts the likelihood of actions for civil penalties.
\24\ See Burns v. Stone Forest Industries, Inc., 147 F.3d 1182 (9th
Cir. 1998) and Ciarlante v. Brown & Williamson Tobacco Corp., 143 F.3d
139 (3d Cir. 1997).
\25\ GAO-03-1003 at p. 17.
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The value of potential awards under the statute is inadequate to
effectively regulate the conduct of recalcitrant employers. Damage
awards in private lawsuits serve the dual and equally important
functions of compensating the injured party and deterring socially
irresponsible conduct. Under the WARN Act, awards are limited to
compensation for back pay and benefits. However, workers suffer
additional injuries and damages as the result of violations of the act
and should be afforded a full range of ``make whole'' remedies. In the
absence of such remedies, the value of damages resulting from the
employer's violation of the act is shifted from the violator to the
employee.
The chance of workers recovering damage awards are further
undermined by corporate structures and bankruptcy procedures that
insulate responsible parties from liability. When subsidiaries become
insolvent and viable parent corporations remain, those corporations
should bear liability for debts owed to workers. Likewise, corporate
officers and managers who, in bad faith, have violated workers rights
to advance notification should bear personal liability for such
decisions.
Moreover, the value of potential awards under the statute is too
low to deter future wrongdoing. Potential awards are essentially
limited to an amount that the employer would otherwise have paid if the
employer had complied with the statute. Bad-actor employers can fail to
give notice knowing that the dollar value of their potential liability
is very likely no more than if they had complied. Such employers can
wait to see if any employees eventually file suit. The employer then
gains a financial benefit from violating the act if less than all
employees file suit. Such employers obtain a further financial benefit
by delaying payment until the end of any employee lawsuits. These
employers thus gain a financial advantage over good faith employers who
comply with the act.
While workers rights are most directly implicated, community rights
are also violated when WARN Act notice is not provided. The act
requires notice to be provided not only to workers but also to State
and local government officials. Developed in partnership with the U.S.
Department of Labor, State rapid response programs are charged with
assisting dislocated workers. Rapid response workers require advance
notification to establish programs and outreach not only to individual
workers but also to mitigate the effects of large scale job loss on the
larger community.
Notice is often not provided to State and local government
officials through loopholes in the act which allow employers to simply
provide workers with 60 days pay in lieu of notice and which allow
employers to often compel workers to sign release forms at the time of
discharge. When this occurs, State workers and local officials are
compromised in their ability to implement and provide effective
transition strategies for the entire community of persons affected by a
mass layoff or worksite closing. The act should be strengthened by
allowing the U.S. Department of Labor and State officials to bring suit
on behalf of affected workers.
Permitting suit by Federal and State attorneys on behalf of workers
whose rights are violated serves a number of additional important
functions. First, such suits send a strong message to recalcitrant
employers that the government itself has an interest in and the will to
act to protect workers rights. Second, government lawsuits attract
heightened media exposure that is rarely duplicated by private
lawsuits. Both functions create additional deterrent effects which
private lawsuits alone have difficulty achieving.
Third, government attorneys can often bring lawsuits in cases where
the economics of the case may prohibit obtaining representation through
the private bar. In a WARN Act case, a private law firm must generate
awards large enough to compensate the injured workers and pay for the
attorney's costs and for their time spent prosecuting the case.
Circumstances often prevent the involvement of private attorneys, even
in cases where WARN Act rights have clearly been violated. A worksite
closing in Georgia provides an example.
Late last year, our offices were contacted by workers from a health
care facility in Macon, GA. The facility closed facilities affecting
180 workers; however approximately 30 workers received late notice,
while the remaining workers received timely notice. Despite the
violation of the 30 workers' right to advance notification, the
potential damages award, reduced by the amount of notice the workers
received, is unlikely to cover the time and expense of a private
attorney and still result in a meaningful award to the workers.
Amendments to the WARN Act to provide increased damage awards and to
provide for lawsuits by State officials could provide a remedy to
future workers who find themselves in similar circumstances.
The WARN Act should be reformed to provide fair compensation to
injured workers and to provide an effective deterrence to bad faith
employers. In this way, the act's compliance deficits can be addressed
by amendments that: (1) permit a full range of compensatory damages to
workers; (2) provide for parent corporation liability; (3) that provide
personal liability for directors, officers, or corporate managers who
acted intentionally or in reckless disregard of employee's rights; (4)
require violators to pay double back pay and benefits; (5) eliminate
the discretion of courts to reduce awards for ``good faith''
violations; (6) require that attorneys' fees shall be awarded to
prevailing workers; (7) provide for punitive damages against employers
who intentionally or recklessly violate the act; (8) permit the U.S.
Department of Labor and State officials to bring suit on behalf of
affected workers; and (9) allow the U.S. Department of Labor and State
and local officials to seek injunctive relief to prevent a mass layoff
or worksite closure when advance notification was not provided and when
the action will have significant detrimental impact on the local
economy and the provision of government services.
4. Eliminate Compelled Waiver of Employer's Right to Advance Notice
The compliance gap is further explained by employer practices such
as requiring employees to sign waivers of claims forms at the time of
job separation and by offsetting severance payments against potential
damage awards.
Workers who did not receive advance notification and are facing a
sudden loss of employment are often confronted with an employer's
express or implied offer to immediately pay their last paycheck,
promise to act as a reference on future job applications, and/or a
small severance. In exchange, the worker is required to sign a release
of claims forms at the time they are laid off or within a couple days
thereafter. Our Law Center has received innumerable inquiries where
employees have been informed of their layoff and, at the same meeting,
are presented with and directed to sign a release of claims form.
Under such circumstances, the release is signed under the duress of
sudden job loss and the need for immediate income and is signed long
before workers become aware of their rights under the act.
The act should be amended to provide that: (1) workers' WARN Act
rights cannot be waived before or during the advance notification
period that was required unless they receive payment that meets or
exceeds the amount of damages to which the worker was otherwise
entitled; (2) a worker's acceptance of severance payments for less than
the value of the employer's liability for violating the WARN Act cannot
be used to offset any portion of a WARN Act damages award; (3) an
employee's waiver of claims or acceptance of any severance payment does
not absolve or mitigate an employer's obligation to provide notice to
government officials; and (4) an employee's waiver of claims or
acceptance of any severance payment does not absolve or mitigate an
employer's liability in an action brought by government officials for
injunctive relief or civil penalties.
5. Establish a Uniform Statutes of Limitations Period
Uncertainty also exists under the act regarding the time
limitations for workers to bring suit and regarding the calculation of
damages. Presently, the act does not contain a statute of limitations
clause stating the time by which workers must bring suit. As a result
of this omission, the Supreme Court in North Star Steel v. Thomas, 515
U.S. 29, 115 S. Ct. 1927 (1995) held that the applicable statutes of
limitation in a WARN Act lawsuit is calculated on a case-by-case basis.
In each case, the court where the case was filed applies the statute of
limitations of the most closely analogous State law claims existing in
the State where the lawsuit was filed. This results in significant
uncertainty for workers in determining the time by which WARN Act
rights must be asserted.
For example, workers asserting WARN Act claims in Vermont have been
found subject to a 6-year statute of limitations period \26\ and
workers in Colorado have been found subject to a 3-year statute of
limitation period \27\ while workers in Mississippi have been found
subject to a 1-year statute of limitation.\28\ Notably, workers and
advocates in most jurisdictions have no case law from which to
determine a limitations period and as a result, must evaluate and
assert claims uninformed what limitations period will apply. This
uncertainty could be eliminated by a simple provision providing for a
3-year statute of limitations.
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\26\ United Paperworkers Intern. Union and Its Local 340 v.
Specialty Paperboard, Inc., 999 F.2d 51 (1993)
\27\ Frymire v. Apex, 61 F.3d 757 (1995).
\28\ Brewer v. American Power Source, Inc., 517 F. Supp.2d 881
(2007).
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v. conclusion
Large scale job loss exacts potentially devastating effects upon
workers, their families and their communities. Mass layoffs and
worksite closings can result in lost income, incredible personal
stress, and the breakup of families. The effects also extend beyond
workers and their families and can lead to a ripple effect of business
closings and deteriorating neighborhoods. Effective government
regulation is needed to prevent these results. The WARN Act is one
component of a web of protection guaranteeing our citizen's human right
to social security and social protection when job loss occurs.
WARN Act reform however is long overdue. Gaps in protection,
ambiguities in the statute's text, and sometimes massive loopholes
result in too few workers being covered by the act's protections and
result in too little compliance by employers. Advance notification is
not required in 75 percent of the Nation's annual mass layoffs and
worksite closings and even when advance notification is required, 64
percent of employers do not provide such notice.
In the face of economic instability, workers deserve a fair
opportunity to plan a future for their families and to avoid financial
catastrophe. WARN Act coverage and compliance deficiencies can and must
be improved by amendments to the statute. The Sugar Law Center
recommends and proposes amendments that will close these deficiencies
and that will further the intended goals of the statute. We recommend
amendments to:
1. Provide advance notice of 120 days and to provide longer tiered-
notification periods when mass layoffs occur or worksites close as the
result of worksite relocations and reasons related to facility or
product obsolescence;
2. Eliminate the 100 full-time employee threshold, reduce the
number to 50, or include part-time and contingent workers in the number
of employees to be counted to meet the threshold;
3. Reducing the number of affected employees threshold to 25
workers for both mass layoffs and worksite closures;
4. Aggregate the number of affected employees to include not only
those at the principal site but also those at other sites whose jobs
are lost as a foreseeable result of the downsizing at the principal
site;
5. Eliminate the mass layoff threshold requirement that the number
of affected employees equal or exceed 33 percent of the full-time
workforce at the site;
6. Increase from 90 to 180 days the time period for aggregating the
number of affected workers in a series of smaller layoffs;
7. Define loss of employment to have occurred after an employee has
been laid off for over 2 months rather than the 6 months presently
required by the statute;
8. Permit for a full range of compensatory damages to workers;
9. Provide for parent corporation liability when subsidiaries
become insolvent;
10. Provide for personal liability of directors, officers, or
corporate managers who are found to have acted intentionally or in
reckless disregard of employee's rights;
11. Require violators to pay double back pay and benefits;
12. Eliminate the discretion of courts to reduce awards for ``good
faith'' violation of the act;
13. Require that attorneys' fees shall be awarded to prevailing
workers;
14. Provide for punitive damages against employers who
intentionally or recklessly violate the act;
15. Permit the U.S. Department of Labor and State officials to
bring suit on behalf of affected workers;
16. Allow the U.S. Department of labor and State and local
officials to seek injunctive relief to prevent a mass layoff or
worksite closure when advance notification was not provided and when
the action will have significant detrimental impact on the local
economy and the provision of government services;
17. State that WARN Act rights cannot be waived before or during
the advance notification period that was required unless workers
receive payment that meets or exceeds the amount of damages to which
the worker was entitled under the act;
18. Provide that a workers' acceptance of severance payments for
less than the value of the employer's liability for violating the WARN
Act cannot be used to offset any portion of a WARN Act damages award;
19. Provide that an employee's waiver of claims or acceptance of
any severance payment does not absolve or mitigate an employer's
obligation to provide notice to government officials;
20. Provide that an employee's waiver of claims or acceptance of
any severance payment does not absolve or mitigate an employer's
liability in an action brought by government officials for injunctive
relief or civil penalties; and
21. Provide a uniform 3-year statute of limitations for claims by
workers and government officials.
Senator Brown. Thank you very much, Mr. Philo.
Stefan Jan Marculewicz is a principal in the firm's
Baltimore office. Mr. Marculewicz's experience covers the
representation of management and employers in all areas of
labor and employment law.
Through his national and international practice, he helps
large and small businesses resolve employment issues ranging
from traditional labor law and collective bargaining, employee
benefits litigation, international labor law, and labor and
employment litigation, including claims currently resulting
from the cessation of operations which arise under the WARN
Act.
Mr. Marculewicz is currently a co-chair of the U.S. Chamber
of Commerce International Labor Law Policy Subcommittee and an
active member of the U.S. Council for International Business's
Labor Policy Committee.
Welcome, Mr. Marculewicz.
STATEMENT OF STEFAN JAN MARCULEWICZ, ESQ., PRINCIPAL, MILES &
STOCKBRIDGE, P.C., BALTIMORE, MD
Mr. Marculewicz. Thank you, Senator.
On behalf of the employer community, I truly appreciate
having this opportunity to testify before you on this important
piece of legislation.
As you indicated, I am a principal in the law firm of Miles
& Stockbridge in Baltimore, MD. We have offices throughout the
State of Maryland as well as in Virginia. I represent a client
base that is diverse. It is diverse both in industry, by size,
and for many of these clients that operate in different
geographic parts of the country as well as internationally.
In addition to large multinational companies, I represent
many small and mid-sized employers. The companies in these
latter sectors serve important roles in the economy and provide
a lot of jobs to a lot of people.
Over the nearly 15 years that I have practiced law, I have
frequently been called upon to advise my clients about their
obligations and responsibilities when they have had to reduce
the size of their workforce, have made decisions to relocate a
facility, or have been forced to cease operations altogether.
Many of these situations require notification of workers, labor
organizations, and government officials under the Worker
Adjustment Retraining and Notification Act, the statute that is
the subject of the proposed amendments you are considering
today.
During the years of my practice of law, I have advised
employers on virtually every aspect of the WARN Act and have
represented companies in litigation when they have been sued
for allegedly violating the statute as well. Throughout my
representation of these companies, I have observed several
common and recurring themes that appear when an employer
confronts a situation that will result in the layoff of a large
number of employees or facility closure.
These themes are as follows. First, no employer genuinely
wants to have to lay off a large number of employees or close
down facilities. Employers and employees make significant
investments in the success of their place of employment. No one
likes to see that investment lost, which is the inevitable
result of a closure or significant downsizing. In short, it is
a sign of failure because an employer cannot continue to
operate at its present level or at its present location.
To enhance the punitive aspects of the WARN Act will more
likely serve to add insult to injury than it will serve to
meaningfully help those who are dislocated by the closure or
the downsizing or to prevent job loss in the first place.
Second, employers want to comply with the WARN Act. It has
been my experience that unless circumstances exist that are
beyond control, employers want to provide their employees as
much notification as is practicable prior to a layoff or
facility closure. They want to do this not just because it is
the law, but because it is right and fair.
The proposed amendments to the WARN Act would appear to
seek to remedy a problem that, if it exists, does so only in
the exception and the rare exception at that, at least in my
personal experience.
Third, employers would benefit from having additional
resources available to them to assist those who are soon to
lose their jobs transition to new opportunities. Under the
present scheme, there appears to be little in the way of a
consistent availability of information or resources for
employers to use that would assist their employees' transition
to new opportunities.
Even more importantly, there seems to be little available
to other employers in the community to enable them to readily
take on the challenge and additional costs of hiring and
retaining the dislocated workers. Even where such information
and resources are available, in my experience, rarely are they
taken advantage of, as most employers don't know where to look
for them.
Fourth, both the WARN and the proposed amendments from the
Forewarn Act focus on the effects of plant closing and
relocations, but not on their root causes. There are many root
causes of plant closings and relocations. They include tax
structure, energy and transportation costs, the structure of
State and local corporate employment laws, the availability of
a skilled and educated labor pool, and other costs of doing
business.
The United States in general has high labor costs when
compared with other parts of the world. That said, employers
typically maintain their competitive position in the market
because of innovation, efficiencies, and their skilled
workforce.
To keep companies from closing plants and relocating
operations, the atmosphere where they exist must promote that
innovation, efficiency, and the creation of that skilled
workforce. In short, the atmosphere must be conducive to
sustainability and growth. Ultimately, these employers are who
create and maintain jobs in this country.
If it were to truly fulfill its mission, the WARN Act would
take a proactive approach to preventing the job loss in the
first place. The proposed amendments don't do that.
Finally, expansion of the WARN Act as proposed would place
a significant hardship on small and mid-sized businesses that
often do not have control over the decision to reduce their
workforce or curtail their operations. The WARN Act was
designed in part to soften the impact of a calculated decision
to close or downsize a facility in one place and move that work
elsewhere.
In fact, there are many aspects of WARN that do not neatly
fit into the realities of what happens when an employer is
forced to cut costs quickly or to close down an operation.
Small businesses, which are a cornerstone of the American
economy, confront many obstacles to their success and
longevity. Yet small businesses are less likely to have
available to them the cash reserves or other resources to
sustain a workforce even for the 60 days when business
conditions sour.
The practical impact of the proposed amendments to the WARN
Act creates an obligation that has the potential to be very
harmful to small businesses. In addition to imposing the
complexities of the statute on small businesses that may not
necessarily be equipped with the expertise to comply with its
nuances, the proposed amendments risk the creation of a
punitive legislative scheme for businesses that are often
precariously positioned in the first place.
Not only are they more likely to fail because of their
size, but they are also less likely to have any control over
the timing or the manner of that failure. To impose WARN Act
notification obligations on these small entities while at the
same time increasing the notification period and decreasing the
size of the qualifying event for which notice is required
further punishes failure.
When combined with the double back pay and benefits as
damages, the punishment comes in the form of a costly civil
litigation frequently. In short, the proposed amendments create
the potential for a perfect storm of factors that could serve
to kick a small business when it is down instead of helping
those who are displaced by that business's failure.
The proposed amendments to the WARN Act serve to refocus
the law's original mission from one that strived to help people
adjust to the inevitable realities of our global economy to one
that punishes those employers that are similarly victims of it.
The WARN Act should never be considered a punitive statute.
For anyone who has had to go through the difficulties of having
to close or significantly downsize a facility, the ordeal is
punishment enough. WARN should be about the future and about
how those who are affected by these unfortunate events can
adjust and retrain to move on to new opportunities.
Again, I want to thank you for this opportunity.
[The prepared statement of Mr. Marculewicz follows:]
Prepared Statement of Stefan Jan Marculewicz, Esq.
introduction and background
On behalf of the employer community, I appreciate having this
opportunity to testify before you on this important piece of
legislation. My name is Stefan Marculewicz. I am a labor attorney with
the law firm of Miles & Stockbridge P.C. based in Baltimore, Maryland.
We have offices throughout the State of Maryland and in Virginia. I am
a member of my firm's labor and employment practice group where I
concentrate my law practice on representing employers in their efforts
to comply with the laws and regulations that govern the U.S. workplace.
Given the client base of my firm and its geographic location, I
represent clients in many different industries, of many different
sizes, and that operate in many different geographic regions. In
addition to large multi-national companies, I represent many small and
mid-sized employers. The companies in these latter sectors serve
important roles in the economy and provide a lot of jobs to a lot of
people.
Over the nearly 15 years that I have practiced labor law, I have
frequently been called upon to advise my clients about their
obligations and responsibilities when they have had to reduce the size
of their workforce, have made a decision to relocate a facility, or
have been forced to cease operations altogether. Many of these
situations require notification of workers, labor organizations and
government officials under the Worker Adjustment Retraining and
Notification Act (Sec. ``WARN Act'' )(29 U.S.C. Sec. 2101 et seq.), the
statute that is the subject of the proposed amendments you are
considering today. During the years of my practice of law, I have
advised employers on virtually every aspect of the WARN Act, and have
represented companies that have been sued for allegedly violating the
WARN Act.
Throughout my representation of these companies, I have observed
several common and recurring themes that appear when an employer
confronts a situation that will result in the layoff of a large number
of employees or facility closure.
These themes are as follows:
First, no employer genuinely wants to have to lay off
large numbers of employees or close down facilities. Employers and
employees make significant investments in the success of their place of
employment. No one likes to see that investment lost, which is the
inevitable result of a closure or significant downsizing. In short, it
is a sign of failure because the employer cannot continue to operate at
its present level or at its present location. To enhance the punitive
aspects of the WARN Act will more likely serve to add insult to injury,
than it will serve to meaningfully help those who are dislocated by the
closure or downsizing, or to prevent the job loss in the first place.
Second, employers want to comply with the WARN Act. It has
been my experience, that unless circumstances exist that are beyond
control, employers want to provide their employees as much notification
as is practicable prior to a layoff or facility closure. They want to
do this, not just because it is the law, but because it is right and
fair. The proposed amendments to the WARN Act would appear to seek to
remedy a problem that, if it exists, does so only in the exception, and
a rare exception at that.
Third, employers would benefit from having additional
resources available to them to assist those who are soon to lose their
jobs transition to other opportunities. Under the present scheme, there
appears to be little in the way of a consistent availability of
information or resources for employers to use that would assist their
employees transition to new opportunities. Even more importantly, there
seems to be little available to other employers in the community to
enable them to readily take on the challenge and additional costs of
hiring and retraining the dislocated workers. Even where such
information and resources are available, in my experience, rarely are
they taken advantage of, as most employers don't know where to look.
Fourth, both WARN and the proposed amendments from the
FOREWARN ACT focus on the effects of plant closing and relocations, and
not on their root causes. There are many root causes of plant closings
and relocations. They include tax structure, energy and transportation
costs, the structure of State and local corporate and employment laws,
the availability of a skilled and educated labor pool, and other costs
of doing business. The United States in general has high labor costs
when compared to other parts of the world. That said, employer's
typically maintain their competitive position in the market because of
innovation, efficiencies and their skilled workforce. To keep companies
from closing plants and relocating operations, the atmosphere where
they exist must promote that innovation, efficiency and the creation of
a skilled workforce. In short, the atmosphere must be conducive to
sustainability and growth. Ultimately, these employers are who create
and maintain jobs. If it were to truly fulfill its mission, the WARN
Act would take a proactive approach to preventing the job loss in the
first place. The proposed amendments do not do that.
Finally, expansion of the WARN Act as proposed will place
a significant hardship on small and mid-sized businesses that often do
not have control over a decision to reduce their workforce or curtail
operations. The WARN Act, was designed in part to soften the impact of
a calculated decision to close or downsize a facility in one place and
move the work elsewhere. While this may be an option for larger
employers, it is rarely so for smaller ones. In fact, there are many
aspects of WARN that do not neatly fit into the realities of what
happens when an employer is forced to cut costs quickly or close down
an operation. Small businesses, which are a cornerstone of the American
economy, confront many obstacles to their success and longevity. Yet
small businesses are less likely to have available cash reserves or
other resources to sustain a workforce, even for 60 days, when business
conditions sour.
The practical impact of the proposed amendments to the WARN Act
creates an obligation that has the potential to be very harmful to
small businesses. In addition, to imposing the complexities of this
statute on small businesses that may not necessarily be equipped with
the expertise to comply with its nuances, the proposed amendments risk
the creation of a punitive legislative scheme for businesses that are
often precariously positioned in the first place. Not only are they
more likely to fail, but because of their size, they are less likely to
have any control over the timing and manner of that failure. To impose
WARN Act notification obligations on these small entities, while at the
same time increasing the notification period and decreasing the size of
the qualifying event for which notice is required, further punishes
failure. When combined with double back pay and benefits as damages,
the punishment comes in the form of costly civil litigation. In short,
the proposed amendments create the potential for a perfect storm of
factors that could serve to kick a small business when it is down
instead of helping those who are displaced by that business' failure.
The proposed amendments to the WARN Act serve to refocus the law's
original mission from one that strived to help people adjust to the
inevitable realities of our global economy to one that punishes those
employers that are similarly victims of it. The WARN Act should never
be considered a punitive statute. For anyone who has had to go through
the difficulties of having to close or significantly downsize a
facility, the ordeal is punishment enough. WARN should be about the
future and how those who are affected by these unfortunate events can
adjust and retrain to move on to new opportunities.
We would therefore respectfully request that the WARN Act not be
amended as proposed.
Again, I would like to thank you again for this opportunity.
______
COMMENTS TO PROPOSED AMENDMENTS
Sec. 2. Amendments to the Worker Adjustment and Retraining Act.
(a) Definitions.--Reducing the definition of ``employer'' from 100
employees to 50 employees.
Inclusion of this amendment will impact small to mid-sized
employers in a negative way. Many of the clients I consider to be small
to mid-sized businesses are under 100 employees. Fifty employees is not
a difficult number to reach for many small companies these days. Yet an
employer with a mere 50 employees is still very vulnerable to the
economic forces that determine its future. In many of those cases, they
have not attained a sufficient size to even warrant having a dedicated
human resources function.
One reality of the WARN Act is that once an employer gives notice,
often times employees flee when they learn that the facility is
closing, or that they will be laid off. It is usually the best and most
skilled of the workforce who flee first because they can readily obtain
employment elsewhere. In a situation where a small company is in a
precarious financial position, it does not truly know whether it will
or will not close in 60 days. It will know even less its fate in 90
days.
If a small company is to survive, it needs to retain its best
skilled employees to help it turn the corner and avoid the closure or
layoff at all. True, there are defenses that permit reductions of the
notification period, including the faltering company defense and the
unforeseen business circumstances defense. However, in every situation
I have encountered under the WARN Act where an employer seeks to resort
to either of these defenses, it has had to do so in the courts. This
litigation is usually unnecessary, because the defenses were sound, but
always costly. Small companies should not reasonably be expected to
make such a choice. The law should not prevent employers from trying to
make things work, particularly in the case of small employers. Yet
reducing the jurisdictional size of the employer and what constitutes a
plant closing serves to do just that, and creates the potential for a
vicious downward spiral that could ultimately facilitate the company's
closure, which no legislative scheme should endorse.
Reducing the size of a ``plant closing'' as defined in the WARN Act
from 50 employees to 25
Reducing the size of a plant closing to 25 will negatively impact
small to mid-sized employers for the very same reason that cutting the
jurisdictional size of an employer in half for coverage of the statute
will negatively impact small to mid-sized employers. Twenty-five
employees is not a difficult number to employ in a facility.
One cannot lose sight of the original legislative purpose behind
the WARN Act which was not only to lend retraining and assistance to
the dislocated workers, but also to assist the communities in which
they lived. That is why WARN Notice goes to more than just the
employees and their labor organization, but it also goes to State and
municipal government officials.
Congress originally concluded that a community was impacted by a
job loss of 50 employees. A job loss of half that size, while still
significant, has half the impact on the community. In a large
community, it might go unnoticed to those not directly affected. While
no one should lightly consider the impact of any job loss on a
community, regardless of its size, the impact of a job loss on a
community is necessarily relative to the size of that job loss. To
reduce the size of a plant closing to 25 employees loses sight of the
community-based mission of the statute.
This same reasoning applies to the proposed reduction in the number
of laid off employees that constitutes a ``mass layoff.''
(b) The Expansion of the WARN Notice Period from 60 to 90 Days.
From a practical standpoint, it is often very difficult for an
employer to predict exactly when it is going to cease operations. This
is true even with a 60-day notice period. To expand the notification
period to 90 days augments that uncertainty. WARN should exist to
encourage the issuance of notice so that the affected individuals have
the opportunity to adjust and, if necessary, retrain to re-enter the
workforce with relative ease. The shorter notice period provides that
encouragement because it is consistent with the economic realities that
employers face in their commercial relationships.
The service contractor sector presents a very good example of how
the current notification period already creates significant
uncertainties, and how extending that time period to 90 days would
serve to make things worse.
In our current economy, there are many businesses that provide
services to other businesses pursuant to service contracts. Examples of
such contractors include information technology, transportation,
hospitality, and the like. They have become a very significant sector
of the economy and employ a lot of people at all socio-economic levels.
This sector is also very fertile ground for the development of small
and mid-sized businesses because it is a relatively easy sector to
enter, often requiring limited overhead to get started. However, these
contractors, and in particular, those that one would categorize as
small to mid-sized businesses, frequently find themselves at a
significant negotiating disadvantage with their customer when they
prepare the contract for services. They have little leverage, and often
have to agree to contract terms presented to them. In so many of these
contracts, the customer retains the right to terminate the contract
with little or no notice, and for any reason. Such a right is usually a
term of the contract.
Through my work in this sector, I have experienced a number of
situations where a contractor has lost its contract with little or no
notice, and the loss of that contract has forced the employer to
drastically reduce its workforce, or cease operations altogether. There
are few mechanisms within WARN to address this reality so that an
employer can reduce the notification period when it truly does not know
it will cease operations. This problem would be significantly
compounded if an employer were required to give an additional 30 days
notice.
Sections of the statute that permit a reduction of the notice
period are very narrow on their face, and have been construed very
narrowly by the courts. They include the ``faltering company'' basis to
reduce the notification period [29 U.S.C. Sec. 2102(b)(1)]; the
``unforeseen business circumstances'' basis [29 U.S.C.
Sec. 2102(b)(2)(A)]; and the ``natural disaster'' basis [29 U.S.C.
Sec. 2101(b)(2)(B)]. Indeed, even when one of these bases is clearly
available to an employer, that employer faces the uncertainties of
litigation and its enormous expense. On more than one occasion, I have
been involved in cases where in my personal opinion, the employer
presented facts that squarely permitted the employer to reduce the
notification period using the faltering company or unforeseen business
circumstances basis. Yet in each of these situations, the employer was
sued, and confronted costs and attorneys fees that equaled or exceeded
the underlying penalty. That problem is only compounded when the
statute is expanded to include smaller employers, smaller groups of
employees to require WARN notice and longer notification periods.
For the contractors in the business sector I referred to above, the
available bases to reduce the notice period provide hollow security.
The abrupt cancellation of a contract by a customer is often used as an
example of the typical ``unforeseen business circumstance,'' justifying
a reduction in the notification period. Yet, when there is a term in
the contract that states the contract can be terminated on no notice,
or on notice that is less than 60 days, termination of the contract on
less than 60 days can hardly be considered unforeseen. Similarly, when
an employer has an operating line of credit and the lender concludes
that it is going to cease taking further risk and chooses not to extend
any further credit, the lender's contractual right to cease to extend
credit without notice is often pointed to as a basis for the argument
that the credit cut off was in fact foreseen. Finally, in another
example, I have confronted cases where an employer that is in trouble
is trying to sell itself to a prospective buyer to preserve jobs and
that portion of a distressed business which can be salvaged.
Unfortunately, there is case law in which courts have concluded that
the attempted sale of a distressed business that ultimately ceases
operations does not fit into the definition of a faltering company. 29
U.S.C. Sec. 2102(b)(2)(A).
Reference to Calendar Days
A clarification of the term ``days'' to be deemed to mean
``calendar days'' is a welcome addition to the statute. Although the
debate in the courts on the meaning of the term day has effectively
concluded with the same result as the proposed amendment, the statutory
clarification is important.
(c) Notice to Other Parties and Secretary of Labor.
While the current scheme for notification of persons other than the
affected employees and their representatives would appear to be
sufficiently effective, there is no reason why notification should not
extend to the Secretary of Labor. Such notification may in fact enhance
the ability of displaced workers to take advantage of available funding
for retraining that may not be known to a municipality or state-
dislocated workers unit. The administrative burden imposed upon
employers by the additional notice to the Secretary of Labor is minimal
when compared to the potential benefit of the notification to the
dislocated workers.
While there exists the potential for a significant upside to the
additional notice, the contents of that notice are best left to the
administrative expertise of the Secretary of Labor under 29 U.S.C.
Sec. 2107, and should be identical to the contents presently required
for the notice to the state-dislocated workers unit and highest elected
municipal official.
(d) Penalty--To expand the penalty to double back pay.
Expansion of the WARN penalty converts the statute from its
original intent into one that is punitive. As described above,
employers comply with WARN. Those that do not are the rare exception,
and not the rule. For every case that is published there are many that
are never filed because the notice has been issued in accordance with
the law.
Employers comply with the statute because it is the right thing to
do. Compliance does not occur just because there is a penalty
associated with non-compliance. A perusal of the available State
databases of WARN notices reflects that there is a lot of compliance
with this law. Moreover, I have yet to encounter a situation in my law
practice in which an employer that failed to give the full 60 days
notice did so to intentionally evade their obligations under the
statute. As described above, most of the time the full notice is not
given, it is not given because of circumstances that are out of the
control of the employer.
Closure of an operation or a significant layoff of employees is not
something any employer desires to do. Not only has the employer
invested heavily in the workforce that is to be affected, an investment
that is likely to be lost, but for entities that tout their successes
and hide their failures, it is simply distasteful.
To place an additional layer of punishment upon an employer that
has had to go through the turmoil of ceasing operations or having a
mass layoff would seem to add insult to injury, without any need to do
so.
Enforcement by Secretary of Labor or State Attorney General
Conferring enforcement authority upon the Secretary of Labor under
WARN in general, is not objectionable, particularly as it has been
outlined in the proposed amendment. However, it would appear
unnecessary for several reasons. First, the Department of Labor's
resources are limited for enforcement of the laws it is currently
charged with enforcing. The authority might not have any true meaning
as the private right of action under WARN would probably result in few
if any enforcement actions by the Department of Labor. Second, the
current enforcement scheme through the private right of action does not
appear to be underutilized or out of the reach of the typical affected
employee. The plaintiffs' employment bar is active and WARN Act cases
are not uncommon when the requirements of the statute are not followed.
It would therefore seem unnecessary to expand the authority of the
Federal and State Governments under WARN because under the present
enforcement mechanism, it is adequately enforced.
There are also significant concerns about conferring enforcement
authority to State attorneys general. WARN is a Federal statutory
scheme that should be enforced in a manner that is uniform and
consistent nationwide. To centralize enforcement within the U.S.
Department of Labor under a single Secretary of Labor furthers that
goal.
However, it is a far different story to confer such authority upon
50 State Attorneys General. To disperse enforcement among 50 different
attorneys general creates a recipe for an inconsistent and disparate
government enforcement of a single law. Not only is there a potential
for disparity that would result from where such cases might fall in the
order of prosecutorial priorities, but disparity in enforcement might
also occur as the result of budgetary restraints that may differ from
State to State. Moreover, there may be a question of the constitutional
authority of the States Attorneys General to prosecute violations of
Federal statutes. Accordingly, it would not appear to be prudent to
confer enforcement authority upon anyone other than the U.S. Secretary
of Labor.
(e) Sec. 11. Educational Materials.
The directive to the Secretary of Labor to make educational
materials concerning employee rights and employer responsibilities
under WARN is not objectionable. However, rights and responsibilities
are not the only things on which the Secretary of Labor should focus
attention in terms of providing educational materials. ``Adjustment''
and ``retraining'' were key concepts to be promoted by the original
WARN Act. Those aspects of the statute should be promoted in the same
way as the punitive aspects of the statute.
Senator Brown. Let me start with you, Mr. Aguiar. The day
you got the call from your supervisor and you were told not to
come back to work, did you get any notification or any advice?
Did they tell you anything about the WARN Act at the time?
Mr. Aguiar. No, sir. At that time, me and everybody else
didn't know anything about it. Like I said, I went to work that
morning, worked regular, came back at 3 o'clock, no problem. I
got that call a quarter to six, telling me not to come back. I
thought he was joking. I said, ``Oh, I will just go by there
tomorrow and chill.'' He said, ``Joe, don't go by because they
closed the doors.''
I did run by the next day, and they had this big chain on
the gate with a padlock, and that was it.
Senator Brown. And your wife was notified the same way, or
was she still working there at the time?
Mr. Aguiar. My wife was home, and she was on vacation like
everybody else. Only the maintenance people were working those
2 weeks.
Senator Brown. During that 2-week period?
Mr. Aguiar. Yes, and I was one of them. We didn't know
anything. Like I said, everybody else went on vacation on
Friday, some of them went to Portugal. They went everywhere.
Some of them didn't know this when they came back. I guess the
families didn't want to tell them what was going on so they
could have a good vacation, because if they knew that a week
before, maybe they would have cancelled their plans.
Because these are--where I live, there is about 80 percent
immigration from Portugal--a lot of people from Portugal, the
islands. These people don't have much money, and if they knew
that was going to happen, a lot of them would not have gone
anywhere.
Senator Brown. If you had been given 60 days' or 90 days'
or 120 days' notice, if the company had said we are going to
close the plant 3 months from now, for instance, what would
that have mattered? How would that have mattered to you?
Mr. Aguiar. I would start looking, while still there, to
find another job. This way, I would have an opportunity to go
everywhere to look for a job. I think that is what he should
have done, give us 60 days' notice or a week or 2 weeks or
whatever. Just let us know that you are going to close the
doors, not the way they did it. I don't think that is right.
Senator Brown. Tell me about some of your fellow workers.
Do you know roughly maybe the average age? Or what have you
seen happen to them, or are they finding jobs? Have they left
town? Have they tried to move on? Are most of them unemployed,
or are they earning anything close to what they were earning?
Mr. Aguiar. Yes, the ages are between 20 and 50, and some
of them are 60 years old. Those young ones probably--there is a
lot of work in construction, and that is where all those young
people are. They go to Boston, Cape, wherever, work on
construction.
The other ones, most of them are in school right now. This
school that I am at, it has got about 300 people. Some 50-year-
olds, 55, 60s, and they are there because they want to earn
that check. When it stops, some of them are going to go off and
retire, and some of them just going to stick around, I guess.
At that age, believe me, I am over there, and it is very
hard at that age to learn to get a GED or whatever. There are
people there that are just there for the money while they give
them the check. Once the check is given, it'll be like, ``Have
a good day,'' ``See you later.'' I know that is going to
happen. They told me.
Before I came down yesterday, they said, ``Joe, take a big
case and bring back the money.'' All they want is for me to
bring back the money. I will ask the Senator to give me the
money, but he'll say no.
Senator Brown. Mr. Liebenow, the CEO, did he ever meet with
the workers or talk to the workers or make statements, convened
any meeting of workers or talked individually to supervisors or
workers that you know of ?
Mr. Aguiar. For the past 2, 3 years, I never saw that man
come around. He did come around every day when the union was
trying to get into the place, and he was coming by so the union
couldn't get in. He was coming by everybody saying, ``Hi, Hi,
Hi.'' ``Don't get the union in here.'' The union came in, we
never saw him again. He never came to see us to say anything.
Senator Brown. Your 18-year-old son, you did him proud
today. So, thank you.
Mr. Marculewicz, how should Mr. Liebenow have done that
differently?
Mr. Marculewicz. Well, I don't know the specific facts of
the circumstances----
Senator Brown. Put your microphone on, please, sir.
Mr. Marculewicz. Sorry, Senator. I don't know the specifics
of the circumstances under which this occurred, but I would--if
I recall from Mr. Aguiar's testimony, this was a 900-person
facility? My understanding is, that under those sets of
circumstances, WARN notice should have been given prior to a
layoff, and 60 days' notice should have been given.
My position on that is that this is essentially one of the
exceptions that I occasionally see in the cases and rarely
confront in my day-to-day practice, where somebody actually did
not comply with the notice obligations. As I testified earlier,
I spend a vast majority of my time on this statute, advising
employers on how to comply with the statute and how to do so in
a way that is fair and reasonable to the employees. In the vast
majority of those circumstances, even if there is a question as
to whether the WARN Act applies, the employers are willing to
provide that notice.
Senator Brown. If the penalty was double, would that make
people like Mr. Liebenow more likely to comply, or those
exceptions that you cite?
Mr. Marculewicz. I don't think so. Because if somebody is
not willing to comply with the law on the basis of simply a
flagrant violation, then they are not going to comply with it
whether the penalties are doubled or tripled.
In fact, the responsible employer, which makes up the vast
majority of the companies and the employers in this country,
the 60-day notice and the alternative penalty is certainly
sufficient to ensure compliance, and I don't believe that a
statute should be amended to react to the rare exception.
Senator Brown. Have you ever represented a company that
violated the WARN Act?
Mr. Marculewicz. I have represented companies that have
been accused of violating the WARN Act, yes. But I have not
represented a company that, in my opinion, in fact, violated
the WARN Act.
Senator Brown. Did a court decide that it had?
Mr. Marculewicz. No.
Senator Brown. Are there specific reforms you would support
in this bill and amendments to the statute now that would make
this law work better? That would mean more compliance and more
assistance for workers but not be unduly difficult for
employers?
Mr. Marculewicz. I think I mentioned in a couple of the
themes that I stated to you earlier, Senator, with respect to
retraining and opportunities for the future. One of the things
that I run into when I am confronted with this phone call--you
know, the bank has cut us off. We only have so much time left.
We are going to close. What do we do? We have to give the
notice, and then what can we do for our workers?
Because, again, this is a devastating event for everybody.
This is not something that the big, bad employer is saying,
``Hey, let us lay all these poor workers off.'' It is a
devastating event for everybody because the employer lives in
those communities as well.
One of the things that strikes me as odd in this, in my
day-to-day practice is how little information there is with
respect to availability of resources for retraining. I also
find that it is unusual, and I have yet to run into this.
I had an example in a situation where I remember speaking
to the client and saying, ``You need to reach out to the State
Dislocated Workers Unit.'' Gave them the number. They reached
out to them. Unemployment was basically the only option in
terms of the retraining and such, and I feel that they didn't
know where to go and what else they could do to assist their
workers in addition to giving the notice, the 60-day notice.
Now, one other point that I want to raise is that on the
other end, where you have an employer that is in that community
where there is a group of dislocated workers, there doesn't
appear to be a lot of resources available to those employers to
take on the challenge of retraining someone.
I mean, so much of, Mr. Aguiar mentioned earlier, the
difficulties of a senior employee going and getting a GED, that
is true. But there is so much on-the-job training and things of
that nature that could be facilitated by a statute like the
WARN Act that, if you would, if there was an availability of
resources to help employers in the surrounding communities
retrain those people, I think that would be one way to improve
the WARN Act.
Senator Brown. You made two comments. One in your opening
testimony where you used the word ``failure,'' that if a
company were to close, there is sort of implicit failure
somewhere, understandably. Then you said it is a devastating, I
believe you used the adjective, I think you said ``matter,''
devastating matter to everyone when a plant closes.
Are those the right words to label a decision--in my old
congressional district in Elyria, OH, where York Manufacturing,
an air conditioning assembly company, the most productive
company in the entire York corporation--they acknowledged--shut
down its plant in Elyria, moved some of its production to
Wichita and some of its production to Mexico.
I don't think management probably would have called that a
failure or called it devastating for everyone, management, when
they make a decision like that. Is that a different matter?
Mr. Marculewicz. Again, I don't know the specifics of that.
Senator Brown. Trust me on what I said.
Mr. Marculewicz. I believe you, Senator.
Senator Brown. OK.
Mr. Marculewicz. So I can't speak specifically to that. I
can say this. That it is--perhaps ``failure'' is too strong a
term for that particular situation, but certainly devastating
to the community is an appropriate adjective for it.
Senator Brown. To the community.
Mr. Marculewicz. It is because--but think about the
communities in which these facilities operate. I mean,
everybody is a member of that community--the employer, the
supervisors, the managers, the decisionmakers or the people who
are affected by those decisions--and I think that is
devastating. I think it is the reality of that.
Senator Brown. Mr. Trumka, your thoughts on my conversation
just now with Mr. Marculewicz and the questions of particularly
employer major layoffs or plant shutdowns when they seem to be
related to trade policy.
Mr. Trumka. It is very, very difficult for us to call it a
failure for them. It is a major success for them. They end up
frequently getting major bonuses, things of that sort. It is
the workers and, he is right, the community that is left
behind.
He and I do agree on one thing at the very least, about the
need for a proactive approach, and that is why we have called
for an extension, a lengthening of time of the notice so that
people actually have time. People like Joe Aguiar have a chance
to spend more time training and looking for a job, but the
community--the State and the local community has more time to
plan for the layoff, and then they have more time to work to
prevent the layoff. That is what we think this should be all
about, preventing it.
I found it somewhat amusing when Stefan portrayed some of
these companies as victims of globalization. The one that you
just talked about, there are literally thousands, hundreds of
thousands of others. We have closed 40,000 manufacturing plants
in this country since the year 2000, many of which have been
relocated in China and other places. I don't think they have
been victims. I think they are the person that creates the
victims.
Senator Brown. Yes, I talk to several, in my old
congressional district, manufacturers who would say that they
are just playing under the rules of globalization. They have no
choice. But some of those same CEOs were walking the halls of
Congress, lobbying for PNTR when it passed and other trade
agreements that would write these rules under which they had to
live. An interesting thought that way.
Mr. Trumka. Senator, there is a twofold approach there,
just as it is here. First, the trade laws are also weak, but
then our country doesn't enforce those trade laws either. So,
countries like China get to walk away with currency
manipulation and all kinds of other advantages that close
plants here.
The same thing with the WARN Act. It is a weak law that has
no enforcement mechanism. It can't be enforced hardly because
how could Joe Aguiar go out and go after that company when all
he stands to get back is maybe $300, $400?
I also take real issue with my friend Stefan there when he
says that these employers really do want to comply. GAO found
that only 25 percent of the plant closings and mass layoffs
were subject to WARN. Of those, only one-third actually did
comply. That means less than 8 percent of the closures and mass
layoffs in the country actually comply.
If he really believes, and I hope he does, that they want
to comply, we can put a new provision in this act to give some
education to those employers and that gives them a little bit
of advance notice on what they have to do as well. We could
work together on things like that.
Senator Brown. Mr. Philo, do you think that employers
generally know enough about the WARN Act, or do they, as Mr.
Trumka may have suggested--may not, I am not sure--want to
evade the WARN Act? Is the education solid enough? Is the
notification--is the awareness of the law strong enough?
Mr. Philo. That varies. To be honest with you, I mean, I
don't represent employers, and so I am trying to read tea
leaves many times in these cases. I can divide it up. It
reflects society. There is about a third of the people who
don't know and would have done it if they could have, there is
a third that didn't care to know, and there is a third who were
going to do what they were going to do anyway.
We literally have seen cases--what sticks in my mind, a
case we saw last year. Where the employer, when he had fired
the employee on the day without notice, and that person said,
``What about my notice?'' He said, ``I will give notice to who
I want, when I want. It is my damn business.''
I don't mean to suggest that all employers out there are
like that, but there are employers out there like that. I take
issue with the idea that somehow increasing penalties will not
change behavior. It is a fundamental precept of our law, of the
way we regulate, of the way we have criminal law.
Right now, the penalties are roughly the same or cheaper to
not comply. You get back pay and benefits in the law. That is
it. So for the bad faith employer, there is no disincentive to
just not give notice. It defies rational economics. It defies
law. You have to make it more expensive to do the wrong thing,
and that would be not giving notice. Right now, that doesn't
exist.
Senator Brown. The back pay is 60 days?
Mr. Philo. Limited to 60 days, and then if it is calculated
on--the courts have struggled with this idea of calendar days
and work days, with a majority finding that it is work day
damages. So that reduces that 60 days by roughly 30 percent in
most cases. So it is just--I mean, it is an incredibly low
level of recovery. You need masses of people to be able to
financially undertake a case.
You know, one thing that is controversial in our society to
talk about punitive damages. But punitive damages are awarded
for bad behavior, for intentionally knowing and doing the wrong
thing. I think they should be added to the act. I don't think
that is unjust or unfair in any sense.
Senator Brown. Why is he wrong, Mr. Marculewicz, in your
mind?
Mr. Marculewicz. Senator, he is wrong because the
individual claimant by themselves bringing the claim under WARN
is rare. Typically, when you have these flagrant violations of
WARN Act, where you have mass layoffs of 900--facilities of 900
employees who were given no WARN notice--the plaintiff 's
employment bar is very effective and assisted by organizations
similar to Mr. Philo's organization are very capable of
advocating on behalf of the dislocated workers.
Typically, these cases come in the form of class actions or
multiple plaintiffs in these cases where it is, in fact, a
deterrent because not only is it the deterrent of the penalty,
but it is the deterrent of defending the case.
Senator Brown. Why is there only 8 percent compliance then?
Mr. Marculewicz. Why is there 8?
Senator Brown. Why is it only 8, if compliance is the--
citing Mr. Trumka's figures that 25 percent under the WARN Act
and only 8 percent, one-third of those are won, why is that
number so small if the penalties or the threat of penalty is
great enough to the employer potentially?
Mr. Marculewicz. Because there are certain exceptions to
the WARN Act that reduce the amount of time that notice needs
to be given. There is the faltering company defense. There is
the unforeseen business circumstance defense. Those were
designed to account for the uncontrollable cessation of
operations where the bank cuts off the pay, cuts off the line
of credit, a contractor terminates a contract, or things of
that nature.
Those cases often still get litigated, notwithstanding the
fact that the defenses are sound and the positions behind--the
position of the employer in those situations are sound. And for
that reason, that may be why that percentage is what it is.
Again, I haven't studied those numbers. I don't know
specifically. But that is why I would have reason to believe
that that would be the case.
Senator Brown. So those three exceptions--some would say
loopholes, some would say exceptions--that you cited account
for 92 percent of the cases?
Mr. Marculewicz. I wouldn't say that because I don't know
the statistics.
Senator Brown. Mr. Philo, your thoughts?
Mr. Philo. I would find that incredible if they do. First
of all, what they do is they allow them to give late notice or
a complete defense if they do find out at the last minute. In
the unforeseeable business circumstances, that is not an
immediate event. I mean, that does excuse--and what I have seen
in practice, it excuses the employer from giving the full 60
days. Typically, in those situations where they do prevail,
they have given notice, but it is 37 days. It is 20 days.
Faltering company, the same deal. It is not an excuse to
give no notice in most circumstances. It is an excuse that
allows them to give late notice. I couldn't imagine it
accounting for 92 percent of the noncompliance that we are
seeing.
Senator Brown. Mr. Philo, you believe this bill should have
exemptions and exceptions for some of the provisions Mr.
Marculewicz talked about?
Mr. Philo. I wouldn't object to it. I mean, there is the
purist in me that says no. But on the other hand, the faltering
company exception is a fair exception to employers. We have
seen circumstances where that has appeared to be legitimate to
us.
The unforeseeable business circumstances, I think that is
gamed more by employers certainly than the faltering company
exception. As far as the natural disaster exception, I don't
think anyone would have an issue with that.
Senator Brown. Mr. Aguiar, when Quaker Fabrics closed, did
they move operations elsewhere in the United States or
overseas? Did your jobs directly go somewhere that you are
aware of ?
Mr. Aguiar. There is a company called Victor Textiles from
Canada that bought, I heard, $27 million worth of machinery and
moved about 6 miles away from the old factory, and it is doing
production right there. I believe over 150 people already from
the old Quaker Fabrics are working there already at this new
place.
All the other machinery are, like I said, in skids ready to
be shipped to China, India, and everywhere else. But, yes,
there is a factory that bought some of that stuff and is using
the old machines. It is called Airport Road, the place that
they built. There is a big building, 600,000 square feet
building, and they are renting that, this company from Canada.
Senator Brown. Mr. Philo and Mr. Trumka--Mr. Philo, you
have made some reference to laws in other countries. Can both
of you--if you know, if you don't, that is fine--give me some
sort of best practices that comparable industrial democracies
like ours do in plant closing, facing plant closing issues like
this and their impact on communities and workers?
Mr. Trumka, do you want to take----
Mr. Trumka. First of all, you don't have to go
internationally. There are several States that have already
adopted better and more effective plant closing laws in the
United States that eliminate some of the exceptions. I would
like to just comment on for a second. Those exceptions should
be truly exceptions, narrowly defined, not the rule itself.
Actually, getting WARN notice has become the exception in this
country. So we need to be careful about that.
But we have several States that have done that--Illinois,
California, and two others have reduced the number of people
there. They have lengthened out the time that you get. They
also became more proactive. They have State teams in place that
move into action as soon as there is a WARN or they get
anything, any kind of indication, and they move in to do a
couple of things.
One, to set up a safety net to help the workers and then,
two, to actually move in to try to save the plant. Either to
get a buyer or financing or some other mechanism to see if that
plant can be stopped from closing so that the tax base can be
saved. Other countries do the same thing.
Senator Brown. Mr. Philo, your thoughts on that?
Mr. Philo. I would agree with what Mr. Trumka said. I would
add it is a little difficult comparing other countries, and
this is a new area for a lot of jurisdictions. So I think the
best practice is to look at what they are doing and take the
better portions of it.
Something that is interesting, which we see in Canada and
we see in the United Kingdom, which are closer in comparison to
the United States, they have mandatory committees that are
required to be set up as soon as that is announced, that there
is going to be a mass layoff or worksite closing at some point
in the future.
That committee is made up of all the stakeholders--
government officials, workers, and the employers'
representatives. It is mandatory that they negotiate and see
ways to avoid the layoffs if possible. If it can't happen, then
to bring State workers into the plant and to help people
transition.
Particularly in the United Kingdom, you can't do the mass
layoff unless you go through that procedure. Canada has
government officials monitor the process to see that it is in
good faith. I think those are important things. I don't know if
that is within the reach at this point in the United States,
but it is critically important to workers to get that sort of
help if the layoff is going to occur.
I think Illinois, New Jersey, they have done a good job of
putting that right into their legislation, a much more
proactive effort to help workers transition.
Senator Brown. Mr. Trumka, you had one more comment?
Mr. Trumka. Yes. New York is actually considering such a
bill this week. They will vote on it this week. That will be
the fifth State.
Senator Brown. Thank you all very much. Mr. Trumka, thank
you. Mr. Aguiar, thank you very much for coming from
Massachusetts. Mr. Philo, thank you, and Mr. Marculewicz, thank
you very much.
Your comments are, of course, on the record and will be
used accordingly, and we hope to move forward on legislation
quickly.
So the committee is adjourned. Thank you.
[Additional material follows.]
ADDITIONAL MATERIAL
Prepared Statement of Senator Clinton
I would like to thank Senator Brown for his leadership on
the WARN Act and for holding this hearing, as well as our
witnesses for joining the committee today to share their
insights into this critical issue.
The WARN Act requires employers to provide 60 days of
advance notice to employees and State and local officials in
the event of a mass layoff or a plant closure. When it was
passed 20 years ago, the act was premised on the idea that
advance notice is essential to providing workers and their
families time to adjust to a loss of employment and seek
alternative jobs and training. By giving workers an opportunity
to plan for a layoff, the act not only promotes fundamental
fairness to U.S. workers, but it also represents smart
governance, reducing the need for unemployment benefits and
enhancing the effectiveness of training programs.
While the WARN Act sought to achieve a laudable goal, the
last two decades have made clear that the statute is in need of
reform. The act fails to cover most layoffs, and the
enforcement provisions are so weak that those employers it does
cover are free to ignore the act with near impunity. The most
recent GAO report found that 24 percent of companies were
subject to the WARN Act at all, and even those companies only
provided notice to their workers in 36 percent of mass layoffs
and plant closures. In 2007, the Toledo Blade published a four-
part investigation into the WARN Act concluding that the WARN
Act ``is so full of loopholes and flaws that employers
repeatedly skirt it with little or no penalty.''
That is why I am proud to have been an original co-sponsor
of the FOREWARN Act, legislation introduced by Senator Brown to
expand and modernize the WARN Act. The act would lengthen the
notification period from 60 to 90 days, lower the threshold for
plant closings to 25 employees and for mass layoffs to 100
employees, allow the DOL and State Attorneys General to
investigate violations and file WARN Act cases on behalf of
workers, increase the penalties for violations of the WARN Act
from back pay to double back pay for each day of notice that is
not provided, and require employers to provide written
notification to the Department of Labor.
Our Nation's economic downturn has taken an enormous toll
on our workers. Since 2000, more than 40,000 manufacturing
facilities have shut down. Almost half a million workers have
been idled by mass lay-offs in the first 3 months of 2008
alone. The losses have spread beyond the manufacturing sector
to the service sector. Now is the time for us to renew our
commitment to the workers struggling with the consequences of
this economic downturn by restoring the promise of this
important legislation.
Prepared Statement of Senator Obama
Mr. Chairman, I started my career on the south side of
Chicago trying to help people in communities devastated by
steel plant closings get back on their feet. One of the things
I learned early on, and have seen over and over again, is that
American workers who have committed themselves to their
employers expect in return to be treated with a modicum of
respect and fairness. Failing to give workers fair warning of
an upcoming plant closing ignores their need to prepare for the
transition and deprives their community of the opportunity to
help prevent the closing.
I know that you have heard the frustration of workers who
are let go by e-mail the day before a plant closes or are told
when they come to work that their services are no longer
necessary. Many of these workers support families that are
living from pay check to pay check, squeezed by the demands of
rising health care costs, the declining value of their homes,
and wages that have been stagnant for decades. It adds insult
to injury to close a plant without warning employees.
There may be no stronger advocate for these workers than
Senator Brown, and I thank you for holding this hearing and
authoring legislation to strengthen the Worker Adjustment and
Retraining and Notification Act (WARN). I fully support your
efforts and look forward to helping you move the legislation
through the process. We must give the WARN Act teeth to ensure
that workers are not chewed up and spit out without a job or a
paycheck.
When I was a member of the Illinois Senate, I worked to
strengthen enforcement of the existing WARN Act by requiring
the Illinois Department of Employment Security to annually
notify employers of their responsibilities under the WARN Act.
But we must act at the Federal level to close the loophole that
allows employers to disregard the WARN Act without penalty.
Congress passed the WARN Act in 1988 to give workers and
communities 2 months' advance notice to adjust to an impending
plant closing or layoff. And where employers have complied with
the law, retraining and other readjustment efforts have a much
greater chance to succeed than when such programs are rushed
into place because there was no advance notice of a plant
closing. But despite the WARN Act, employers have all too often
failed to provide workers with that vital notice. The GAO has
found recently that 24 percent of all lay-offs are subject to
WARN requirements, yet employers provided notice in
approximately one-third of these situations. And courts have
increasingly dismissed lawsuits brought by workers who have
been unfairly denied notice.
Senator Brown's FOREWARN Act would modernize and enhance
the WARN Act's protections. I am proud to be a co-sponsor of
this important legislation. It would reduce the mass layoff
figure from 50 to 25 employees, and reduce the threshold for
coverage of firms from 100 to 50 employees. The FOREWARN Act
would also lengthen the notification period from 60 to 90 days,
require employers to provide written notification to the Labor
Secretary, and increase penalties for violations of the WARN
Act from back pay to double back pay. Finally, the bill
authorizes the Labor Department to enforce the law, and permits
State attorneys general to pursue claims if the Labor Secretary
fails to act within 6 months.
These are long overdue improvements in the law. Workers and
their communities have a right to know when they are facing a
serious risk of a plant closing. Making that information
available before the plant closes can, in the best case
scenario, help communities come together to prevent the loss
and, in the worst case scenario, help workers and communities
prepare for the difficult transition to come. Basic fairness
and respect for working men and women require that we pass the
FOREWARN Act.
[Whereupon, at 11:07 a.m., the hearing was adjourned.]