Thursday, February 18, 2010

Ohio’s efforts to create its own WARN Act hit all the wrong notes

Ohio House Bill 434 – which would require employers to give advanced notice of mass layoffs, worksite closings, and transfers of operation – is currently pending in the House Commerce and Labor Committee. The bill would create a maxi-WARN for Ohio employers, and goes above and beyond the requirements of the federal WARN statute:

  • Where WARN requires 60 days notice of mass layoffs of plant closures, HB 434 requires 90.

  • HB 434 requires 120 days notice for employment losses of 250 or more employees.

  • HB 434 defines “affected employee” and “employment loss” more broadly than the federal WARN Act.

  • HB 434 expands the depth of information require in the written notice, including  to the written notice required by the federal WARN Act.

The killer provisions in the bill, however, are the damages and penalties, which are severe:

  • Double back pay for each calendar day of the violation, plus

  • The value of benefits from the employer’s employee benefit plan for the entire advance notification period, including the cost of medical expenses that the employee incurred during the employment loss that would have been covered under the employee benefit plan if the employment loss had not occurred, plus

  • Other economic damages and exemplary damages suffered by the affected employee and caused by the violation, plus

  • Reasonable attorney’s fees and costs, plus

  • Civil penalties of $500 for each calendar day of the violation multiplied by the number of employees who suffered an employment loss, increased to $1,000 if the employer acted in bad faith through intentional, willful, or reckless conduct.

Moreover, under the federal WARN Act, an employer can pay in lieu of giving notice. In other words, instead of giving 60 days notice, the employer can simply pay the affected employees 60 days of severance pay, and effectively avoid liability. HB 434 limits an employer’s ability to pay in lieu. An employer cannot pay in lieu (and avoid liability) if:

  1. The payments were voluntary and unconditionally paid in an amount that is less than the value of the wages and benefits to which the affected employee was entitled during the notice period; or

  2. The payments were made pursuant to contractual obligations of the employer.

If passed, this bill would be disastrous for Ohio’s efforts to recover economically. As the last 18 months have shown us, businesses sometimes have to layoff employees or close their doors. Because this law will make it impossible for businesses to do so without a severe economic penalty, it will act as a strong disincentive for businesses to open in, expand in, or relocate to our state.

Everyone feels badly about good people losing jobs because of the economy. The answer, though, is to create an environment to fosters job growth, not one that erects a fence at our border to keep businesses – and jobs – out.

Presented by Kohrman Jackson & Krantz, with offices in Cleveland and Columbus. For more information, contact Jon Hyman, a partner in our Labor & Employment group, at (216) 736-7226 or