Damages an Employer Owes for a Short Notice
Liability is measured per employee and per day of violation, capped at sixty days and at half the employee's tenure. Wages and voluntary payments made for that period come off the total, and a separate daily penalty runs to the local government unless employees are paid within three weeks.
The rule in short
An employer ordering a covered closing or mass layoff in violation of the notice requirement is liable to each aggrieved employee for back pay at the higher of the average rate over the last three years or the final rate, plus benefits including medical costs that would have been covered. Liability runs for the period of the violation up to sixty days, and never beyond half the days the employee worked. A separate penalty of up to five hundred dollars a day runs to a local government.
The federal statute does not fine an employer for a defective notice in the abstract. It creates a liability to each employee who did not get the notice they were owed, measured in days, and it caps that liability twice. Understanding the exposure is largely a matter of understanding what a day of violation is worth and how many of them there were.
Back pay and benefits, per employee
An employer that orders a plant closing or mass layoff in violation of the notice requirement is liable to each aggrieved employee who suffers an employment loss as a result for back pay for each day of violation, at a rate of compensation not less than the higher of the average regular rate received during the last three years of employment or the final regular rate received. The employer is also liable for benefits under an employee benefit plan, including the cost of medical expenses incurred during the employment loss that would have been covered had the loss not occurred.
Two features of that formula raise the figure above what an employer might assume. The rate is the higher of two measures, not the current one, so an employee whose pay was reduced before the action is compensated at the older rate. And the benefits component is not a notional premium but the cost of medical expenses actually incurred during the period, which is unpredictable and can exceed the wage element for a single employee.
Sixty days, or half a tenure
Liability is calculated for the period of the violation, up to a maximum of sixty days, but in no event for more than one half the number of days the employee was employed by the employer. The first cap follows the length of the notice that should have been given. The second is a proportional limit that only affects short-tenured employees, and for them it can be decisive: an employee of ninety days' standing is exposed to no more than forty-five days of liability regardless of how little notice was given.
The period of the violation is the gap between the notice that was owed and the notice that was given. Where an employer served notice thirty days before the action, the violation period is thirty days rather than sixty, and every day of notice actually served reduces the exposure by one. That arithmetic is the reason a defective or late notice is always better than none, a point made in giving as much notice as possible when an exception applies.
Whether there is a violation at all is a separate question from how large it is, and it is answered by the exception analysis rather than by the arithmetic. Where an exception is made out, the notice period was lawfully reduced and the days not given are not days of violation. Where it fails, those days count in full. Because the employer carries the burden on the exception, a case in which the evidence is thin produces the maximum period rather than a proportionate one.
| Component | Measure | Limit or reduction |
|---|---|---|
| Back pay | Higher of the three-year average rate or the final rate | Period of the violation, maximum sixty days |
| Benefits | Plan benefits plus medical expenses actually incurred | Same period as back pay |
| Tenure limit | One half the days the employee was employed | Applies instead of sixty days where it is lower |
| Wages paid | Any wages paid for the violation period | Deducted from the amount owed |
| Voluntary payments | Voluntary and unconditional, not legally required | Deducted from the amount owed |
| Civil penalty | Up to five hundred dollars for each day of violation | Owed to a unit of local government, avoidable in three weeks |
What comes off the total
Three categories of payment reduce the amount for which an employer is liable. Any wages paid by the employer to the employee for the period of the violation. Any voluntary and unconditional payment by the employer to the employee that is not required by any legal obligation. And any payment by the employer to a third party or trustee, such as premiums for health benefits or payments to a defined contribution pension plan, made on behalf of and attributable to the employee for the violation period. Liability with respect to a defined benefit pension plan may also be reduced by crediting the employee with service for all purposes under the plan for the violation period.
The second category is the one that turns on drafting. A payment is deductible if it is voluntary and unconditional and not required by any legal obligation. Severance owed under a plan or a contract is a legal obligation and does not reduce the liability; a payment made without any pre-existing entitlement may. Where a payment is conditioned on a release, the conditional element is the difficulty, and the characterization has to be worked out before the money moves rather than argued about afterwards.
The first category has a narrower reach than it looks. Wages paid for the period of the violation reduce the liability, so an employer that keeps people on the payroll without work during the notice period has effectively performed. Wages paid for work done before the action do not reduce anything, because they were not paid for the violation period. The distinction is temporal rather than substantive, and it decides whether a large payroll figure appears in the calculation at all.
An employer that violates the notice requirement with respect to a unit of local government is subject to a civil penalty of not more than five hundred dollars for each day of the violation. The penalty does not apply if the employer pays to each aggrieved employee the amount for which it is liable to that employee within three weeks from the date it orders the shutdown or layoff. Prompt payment therefore extinguishes an obligation owed to a third party, which is an unusual structure and a reason to resolve employee amounts quickly.
Good faith, fees and the forum
A court has a discretion to soften the result. If an employer that has violated the statute proves to the court's satisfaction that the act or omission was in good faith and that it had reasonable grounds for believing the act or omission was not a violation, the court may in its discretion reduce the amount of the liability or the penalty. Both limbs must be proved, and both are about the employer's state of knowledge at the time, which is why the contemporaneous record supporting a threshold decision or an exception matters as much as the decision itself. Those records are the same ones described in the three exceptions and how narrowly they are read.
On procedure, a person seeking to enforce the liability, including a representative of employees or a unit of local government aggrieved under the statute, may sue on their own behalf or for others similarly situated in any district court where the violation is alleged to have occurred or where the employer transacts business. The court may in its discretion allow the prevailing party a reasonable attorney's fee as part of the costs. And the remedies provided are exclusive, with no authority to enjoin the closing or layoff itself. Where the violation arises because separate reductions were combined, the exposure is calculated the same way, on the aggregated group described in aggregating reductions over a rolling period. State penalties run alongside rather than instead of these amounts, as set out in state statutes that demand more.
Points to carry away
- Back pay is calculated at the higher of the average rate over the last three years of employment or the final rate.
- Benefit liability includes the cost of medical expenses that would have been covered had the loss not occurred.
- The period of the violation is capped at sixty days and at one half the days the employee was employed.
- Liability is reduced by wages paid for the violation period and by voluntary unconditional payments.
- Payments to a third party or trustee on the employee's behalf also reduce the amount.
- A court may reduce liability where the employer proves good faith and reasonable grounds for believing there was no violation.
Questions readers ask
Can a court order the layoff stopped?
No. The statute states that the remedies it provides are the exclusive remedies for any violation, and adds that a federal court has no authority to enjoin a plant closing or mass layoff. That is unusual among notice statutes and it shapes how disputes proceed: the question is never whether the action goes ahead, only what is owed afterwards. A suit may be brought by a person seeking to enforce the liability, including a representative of employees or an aggrieved unit of local government, individually or on behalf of others similarly situated.
Who is an aggrieved employee?
The statute defines the term for the liability provision. An aggrieved employee is one who has worked for the employer ordering the closing or mass layoff and who, as a result of the employer's failure to comply, did not receive timely notice either directly or through a representative. Two elements are contained in that: the employee must have been employed by the ordering employer, and the notice failure must be the reason the employee did not receive timely notice. An employee who received a full and timely notice is not aggrieved even if others were not.
How does the tenure cap work?
Liability is calculated for the period of the violation up to a maximum of sixty days, but in no event for more than one half the number of days the employee was employed by the employer. For a long-serving employee the sixty-day cap governs. For a short-serving one the tenure cap bites first: an employee of ninety days is exposed to at most forty-five days of liability, and one of forty days to at most twenty. The two caps are applied together and the lower of them controls.
Sources
- 29 U.S.C. 2104 — Administration and enforcement of requirementsSets back pay, benefits, the two caps, the reductions, the civil penalty, the fee provision and the exclusivity of remedies.
- 29 U.S.C. 2102 — Notice required before plant closings and mass layoffsEstablishes the obligation whose breach the liability provision measures, including the reduced notice conditions.
- 20 CFR 639.9 — When may notice be given less than sixty days in advancePlaces the burden of proving an exception on the employer, which determines whether a violation exists at all.
- 29 U.S.C. 2101 — DefinitionsDefines employment loss and the transfer exclusions that determine who suffered a loss in the first place.
- California Labor Code section 1403A state penalty of up to five hundred dollars a day, avoidable by paying the amounts owed within three weeks.
- 20 CFR 639.7 — What must the notice containProvides that minor inadvertent errors and changes caused by later events are not intended to be the basis for a violation.
Rapid Response Law is a publication, not a law firm. This article states general rules and cites its sources; it is not advice about any particular case, and the law differs by state and changes over time.
More in Layoff Notice
Giving as Much Notice as Possible When an Exception Applies
Where a statutory exception applies, the employer must give as much notice as is practicable to the union, non-represented employees, the state dislocated worker unit and the unit of local government, and the regulation acknowledges that in some circumstances this may be notice after the fact. At the time notice is actually given, the employer must also provide a brief statement of the reason for reducing the notice period, in addition to the ordinary content elements.
What Counts as a Single Site of Employment
A single site of employment can be one location or a group of contiguous locations, and a campus or industrial park may be one site. Separate buildings not in immediate proximity may still be one site where they are reasonably close, used for the same purpose and share staff and equipment. Contiguous buildings with separate management, different products and separate workforces are separate sites. Mobile and outstationed workers belong to the home base from which their work is assigned.
State Statutes That Demand More
State notice statutes depart from the federal model in four directions. California sets coverage at a seventy-five person establishment and counts a mass layoff at fifty separations without any percentage test. New York halves the employer threshold, sets closings at twenty-five and requires ninety days. Maine requires ninety days to a state official before a closing or relocation and imposes severance pay of one week per year of service.