The Trump administration’s push to downsize the federal workforce has entered a new phase, marked by rounds of layoffs, the deferred-resignation plan, and other voluntary departure programs. As the federal government shutdown enters its second week, the administration has escalated its response by threatening sweeping program cuts and workforce reductions.
As the administration continues its focus on reducing federal spending, many federal contractors are bracing for a wave of contract and grant reviews, reductions, and terminations. These changes, often sudden and sweeping, can force federal contractors and grant recipients into difficult decisions about workforce reductions. For recipients of federal funds, these decisions are not just operational or financial—they also carry significant legal obligations under the federal Worker Adjustment and Retraining Notification (WARN) Act, and in some cases, under state “mini-WARN” laws that can be even more stringent.
Navigating the complexities of the WARN Act and its state counterparts is essential to avoid costly damages, including back pay and benefits to each affected employee for the period of violation up to 60 days and attorneys’ fees. Below, we break down what federal contractors and grant recipients need to know about WARN Act compliance when implementing layoffs in response to government shutdown and federal contract terminations.
The WARN Act Overview
The WARN Act is a federal statute requiring covered employers to provide employees with 60 days’ advance notice before a mass layoff or a plant closing. The goal is to provide employees with advance notice to ensure they have plenty of time to prepare for a transition to new employment.
Covered Employers
Understanding which employers are covered by the WARN Act is critical. Generally, a covered employer, subject to the WARN Act, is an employer that has 100 or more employees (excluding part-time employees), or 100 or more employees (including part-time employees) who collectively work at least 4,000 hours each week, excluding overtime.
Triggering Events
The WARN Act is triggered by either a “mass layoff” or a “plant closing”:
- A “mass layoff” is a reduction in force that is not the result of a plant closing and results in an employment loss at a single site of employment during any 30-day period for either: (1) 50 employees who comprise at least 33% of active employees, or (2) at least 500 employees.
- A “plant closing” is a permanent or temporary shutdown that results in an employment loss for at least 50 employees during a 30-day period of either: (1) a single site of employment, or (2) facilities or operating units within a single site of employment. “Plant closings” are interpreted more liberally than one might initially think. The site in question does not have to be a manufacturing plant or factory; rather, it must only be a single site of employment, or facilities or operating units within a single site of employment.
What constitutes a “single site of employment” can be crucial for determining whether the WARN Act will be triggered. While this can be straightforward—a single building or campus—it can also include groups of adjacent facilities or even separate buildings that are reasonably close, share staff and equipment, and serve the same purpose. For federal contractors with operations spread across multiple buildings or locations owned by the contractors or onsite at federal facilities, this analysis can be nuanced.
Remote workers add another layer of complexity. For employees who do not have a regular, fixed work location, their “single site of employment” for WARN purposes may be considered: (1) the location designated as their home base, (2) the place from which their work assignments originate, or (3) the site to which they report. In other words, remote workers in different cities or states may be assigned to one single site for purposes of determining whether a mass layoff or a plant closing is large enough to trigger the WARN Act notice requirements. This is particularly relevant as remote work remains common in the federal service contracting space.
Further, the closing of an “operating unit” within a “single site of employment” may be considered a plant closing under the WARN Act. An “operating unit” is defined as “an organizationally or operationally distinct product, operation, or specific work function within or across facilities at the single site.” An operating unit closely represents an independently functioning sector of a business. This could mean that a federal contract project that is “organizationally or operationally distinct”—i.e., with a separate operating budget and cost center, a distinct physical location, and separate workforce and separate management for that project—may qualify as an “operating unit” within a single site. Thus, if the cancellation of such federal contract leads to more than 50 employment terminations within 30 days, it may constitute a plant closing under the WARN Act.
For example, in Roberts v. Genting New York LLC, 68 F.4th 81 (2d Cir. 2023), the Second Circuit addressed whether a buffet that serves meals as part of the casino’s overall suite of amenities qualified as an “operating unit” under the WARN Act. The court emphasized that determining whether an entity is an operating unit requires a fact-intensive analysis based on the totality of available evidence. The Second Circuit noted that the buffet had its own managers, cost center, and distinct operational features, such as unique menu items and staffing arrangements. However, the buffet also relied on the casino’s centralized services such as human resources, warehousing, and cleaning. The Second Circuit ultimately vacated the district court’s grant of summary judgment, finding that a reasonable fact-finder could conclude the buffet was an operating unit.
Employment Loss
For the WARN Act to be triggered, there must be an employment loss of the requisite number of employees. An employment loss under the WARN Act is defined as: (1) an employment termination other than a discharge for cause, a voluntary departure, or a retirement; (2) a layoff exceeding six months; or (3) a reduction in work hours of more than 50% during each month of a six-month period. This definition is particularly relevant to federal service contractors, where the cessation of certain federal contracts may result in extended layoffs or furloughs—often spanning multiple months—when the employer has no alternative positions to reassign workers who were previously engaged on the federal contract project.
There is also a 90-day aggregation rule that is important for WARN Act purposes. Under this aggregation rule, employers must look ahead 90 days and look back 90 days from each employment loss to consider both planned and completed employment losses. This rule eliminates the possibility of employers using a series of small layoffs to escape the WARN Act notice requirements. This 90-day aggregation rule applies unless the employer can show that the separate employment losses are the result of separate and distinct actions and causes and were not an attempt to evade the requirements of the WARN Act. Thus, federal contractors may need to track the magnitude of layoffs resulting from contract reductions and note the rationale for each layoff decision. Given the nature and timing of the administration’s federal contract and grant terminations and future reactions to a prolonged government shutdown, the 90-day aggregation rule may be problematic to apply, and counsel should be consulted.
Additionally, employers should be aware that if a mass layoff or a plant closing triggers the WARN Act, all employment losses within a 30-day window of the triggering event are aggregated with it. This can mean that WARN notices could be required for employment losses that are not directly related to the loss of a federal contract or grant or the resulting mass layoff or plant closing.
Exceptions
There are three exceptions to the 60-day advance notice requirement under the WARN Act. The “unforeseeable business circumstances” exception is most applicable to a situation where federal contracts are terminated or reduced by government agencies unexpectedly. Unforeseeable business circumstances may include a principal client’s sudden and unexpected termination of a major contract, or an unanticipated and dramatic major economic downturn.
For example, in Butler v. Fluor Corp., 511 F. Supp. 3d 688 (D.S.C. 2021), the principal client of the nuclear power plant construction project abruptly terminated the project, forcing the subcontractor to conduct a mass layoff of the subcontractor’s own employees. The court concluded that the “unforeseeable business circumstances” exception excused the subcontractor from complying with the WARN Act’s advance notice requirements because the principal client’s closure of nuclear power plant construction project was not reasonably foreseeable to the subcontractor, the client never informed the subcontractor that the project’s closure was being seriously considered, the abrupt closure of such a large-scale job site was unprecedented in the nuclear construction industry, and numerous witnesses indicated the project’s total closure was the least likely option going forward.
However, even if an exception applies, employers must still provide notice as soon as the triggering event, e.g., a contract termination or reduction, is reasonably foreseeable.
State Mini-WARN Acts
Alongside the WARN Act, dozens of individual states have enacted their own “mini-WARN Acts.”[1] These state laws can impose stricter standards, lower thresholds, different triggering events, or additional notice obligations. Additionally, some states’ mini-WARN Acts only apply to certain business situations.
What This Means to You
As the government grapples with a shutdown and funding uncertainty, federal contractors and grant recipients are facing disrupted workflows, contract terminations, and/or funding reductions. Impacted contractors and grant recipients should remain aware of the notice requirements imposed by the WARN Act and any applicable state or local mini-WARN laws. It is important to carefully monitor government announcements to determine when contract terminations or reductions are sufficiently foreseeable to trigger WARN Act notice obligations. It is also important to track all layoffs and reductions in work hours over the relevant 30- and 90-day periods, as aggregated actions within these windows may collectively meet the thresholds for WARN Act compliance. The definition of “single site of employment,” including the assignment of remote workers to a specific site, plays a critical role in this analysis and may affect whether WARN Act notice obligations are triggered. Given the uncertainties involved in the scope and duration of this particular federal government shutdown, it would be prudent for contractors and grant recipients to work with experienced counsel on potential WARN issues (as well as any claims for contract or grant termination costs) as soon as such issues become apparent.
This post was written with the assistance of Brett Mordecai, a summer associate in Husch Blackwell’s Kansas City office.
[1] For example, the following states have enacted their individual “mini-WARN Acts”: California, Delaware, Hawaii, Illinois, Iowa, Maine, Maryland, New Hampshire, New Jersey, New York, Ohio, Tennessee, Vermont, Washington, and Wisconsin.
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