Managing Workforce Contraction During An Energy Slump: Frequently Asked Questions

Continuing the Q&A series following our previous in-house “Falling Oil Prices and RIFs: A Roundtable Overview of the Most Significant Legal Compliance Obligations” compliance seminar, this week’s discussion centers around the Worker Adjustment and Retraining Notification (WARN) Act, and when your company needs to worry about WARN compliance while conducting a RIF.In general, the WARN Act requires employers to give at least 60 days notice of a “plant closing” or “mass layoff” to affected employees, unions if any, and certain state and local government officials. WARN is an extremely technical statute with specific legal tests that should be carefully reviewed in the layoff planning process. Employers are generally covered by WARN if they employ 100 or more full-time employees (part time employees are also counted if the aggregate hours of all employees is 4,000 hours a week or more). In assessing whether your company’s RIF constitutes a “WARN event,” WARN defines a “plant closing” as a shutdown of a single site of employment or a facility or operating unit that results in an employment loss for 50 or more non-part time employees during any 30-day period. A layoff that is not a plant closing can be a WARN-covered “mass layoff,” but only if the layoff causes job losses during any 30-day period at a single site of employment for (1) at least 50 non-part time employees; and (2) the number amounts to at least 33% of non-part time active employees or 500 employees. But be careful: even though the normal time period in which to evaluate the numbers of job losses is 30 days, in some instances a period of 90 days is used instead.  Also, determining what a “single site of employment” is in the oil and gas industry can be difficult, especially for companies utilizing out-stationed workers.  Generally, however, courts deem a “single site of employment” as the workers’ home base or where the out-stationed workers report (such as a field office). While the WARN Act does contain limited exceptions (one being unforeseeable business circumstances), it is not likely that the oil price drop would constitute the sort of sudden unexpected economic downturn the WARN Act regulations envision. Finally, be advised that some states have their own notice statutes that may track WARN or may use different and sometimes more burdensome requirements.  For this reason, it is important for employers to check the applicable state law at issue at the time of the workforce reduction. The good news is that several states where energy companies commonly do business (such as Texas, Oklahoma, Colorado, Louisiana, Pennsylvania, North Dakota, and West Virginia) do not currently maintain such “mini-WARN’ laws. In many situations, determining whether your company’s RIF is covered by the WARN Act is a complex analysis, and while this series is intended to provide only a general overview of the common RIF-related issues employers must assess, we remain willing to answer any specific questions you or your company may have at any time.  In the meantime, stay tuned for next week, as we will highlight special considerations for nonimmigrant workers affected by a RIF. -Bryan Neal, Thompson & Knight, LLP