WARN Act Exceptions: Faltering Company, Disasters, and Strikes

The WARN Act allows three exceptions that shorten the required 60-day advance notice and two situations that fall outside the law entirely. The three shortened-notice exceptions are the faltering company exception, the unforeseeable business circumstances exception, and the natural disaster exception. The two full exemptions cover temporary facilities or specific projects and strikes or lockouts. In every reduced-notice case, the employer still must give as much notice as possible, deliver a written explanation of why 60 days wasn’t provided, and carry the burden of proving the exception applies.¹

These exceptions only matter once an employer is covered in the first place. WARN reaches businesses with 100 or more full-time employees (or 100 or more employees working a combined 4,000 hours a week, excluding overtime), and the notice duty is triggered by a plant closing eliminating 50 or more full-time jobs at a single site within 30 days, or a mass layoff hitting 500 full-time workers, or 50 workers if they make up at least a third of the site’s full-time workforce.²

The Faltering Company Exception

This is the narrowest of the three. It applies only to plant closings, never to mass layoffs, and the regulations direct that it be read strictly.¹ To use it, the employer has to show four things were true at the point full notice would otherwise have been due:

The company was actively seeking capital or new business through commercially reasonable methods. Not hoping. Specific actions like loan applications, stock offerings, or documented negotiations with identified investors or customers.
There was a realistic chance of getting it. Wishful thinking doesn’t clear this bar.
The money or business, if obtained, would have been enough to keep the facility open for a reasonable period.
The employer had an objective, good-faith belief that giving notice would have scared off the financing source or the potential customer.

The fourth element is where larger companies usually lose. Regulators and courts look at the whole enterprise, not the single facility. A parent with cash reserves or access to capital markets cannot isolate one struggling site’s numbers and claim distress on that basis.¹

Unforeseeable Business Circumstances

This exception covers both plant closings and mass layoffs. The employer has to show the action was caused by business circumstances that weren’t reasonably foreseeable 60 days before the closing or layoff took effect.³ The measuring stick is whether a reasonable employer in the same industry, working from the same information, would have seen it coming.

Courts want a specific triggering event. A major client abruptly canceling a contract, a government-ordered shutdown arriving without warning, the sudden loss of a sole-source supplier — these fit. A slow slide in orders over several quarters does not, because a competent business should have anticipated it. Sudden means sudden. If a client representing 40 percent of revenue cancels on a Monday, that is unforeseeable; if orders have been slipping 5 percent a quarter for two years, it isn’t.

The exception got heavy use during COVID-19. Courts largely accepted that pandemic-related government shutdowns and the initial economic shock qualified. Some judges found the pandemic’s indirect economic effects fit here more naturally than under the natural disaster provision, particularly for employers whose facilities weren’t physically damaged.

Natural Disaster

The statute says no notice “shall be required” when a plant closing or mass layoff results from a natural disaster such as a flood, earthquake, or drought.³ The regulations tighten that language: even when a disaster makes advance notice impossible, the employer still owes as much notice as practicable, and that notice can be given after the fact if necessary, with whatever information is then available.¹

The causal link has to be direct. A hurricane that destroys the warehouse and forces the layoff of the warehouse crew is a clean fit. A hurricane 200 miles away that disrupts supply chains and produces layoffs three months later is not; that employer is more likely to end up arguing unforeseeable business circumstances, which carries its own proof requirements.

Temporary Facilities and Specific Projects

WARN does not apply at all to the closing of a temporary facility, or to a closing or layoff at the completion of a specific project, when the affected workers were hired with the understanding that the job would last only as long as the facility or the project.⁴ Construction crews, film production staff, seasonal harvest workers, and similar project-based hires fall into this category.

The statute requires an “understanding” between employer and worker. It doesn’t say the understanding must be in writing, but proving an unwritten one in court is difficult. Employers who rely on this exemption almost always put the temporary nature of the job in the hiring paperwork.

Strikes and Lockouts

Strikes and lockouts are also exempt, provided the employer isn’t using them to duck WARN.⁴ Under the National Labor Relations Act, an employer that permanently replaces economic strikers owes those strikers no WARN notice.

The exemption gets narrower for everyone else on site. Non-striking employees who lose their jobs because of the strike are still entitled to notice, though the employer may try to invoke the unforeseeable business circumstances exception to shorten it.⁵ Workers at other company facilities laid off as an indirect consequence of the strike get no benefit from the strike exemption at all.

What Reduced Notice Must Still Include

Using one of the three shortened-notice exceptions does not mean skipping notice. The employer must give as much notice as is possible under the circumstances and must include a written statement explaining why the full 60 days couldn’t be provided.⁶ The employer, not the worker, carries the burden of proving the exception fits.¹

That means an employer can invoke, for example, unforeseeable business circumstances and still end up liable if it can’t document what happened, when it learned of it, and why it couldn’t have foreseen it 60 days out. The written explanation attached to the shortened notice is often the first piece of evidence a court examines.

What Happens If an Exception Doesn’t Hold Up

If a court finds the exception doesn’t apply, the employer owes each affected employee back pay for every day of the violation, up to 60 days. The daily rate is the higher of the employee’s average regular pay over the last three years of employment or the final regular rate. On top of that, the employer owes the cost of benefits the employee would have received during the violation period, including medical expenses that the employer’s health plan would have covered.⁷

Total liability to any one employee is capped at half the number of days that person actually worked for the employer. A worker on the job for 40 days can recover no more than 20 days of back pay; long-tenured employees can reach the full 60-day maximum. Courts have split on whether “days of violation” means calendar days or work days, and most have gone with work days.

Failing to give notice to the local government carries a separate civil penalty of up to $500 per day of violation. The employer can avoid that penalty by paying every affected employee everything owed within three weeks of ordering the shutdown or layoff.⁷ Courts also have discretion to award reasonable attorney’s fees to the prevailing party.⁸

The Department of Labor does not enforce WARN. The regulations say so directly, and the agency will not issue advisory opinions on specific cases.⁵ Employees, unions, and local governments enforce the law by filing private civil suits in federal court. Waiting to talk to an attorney is costly: WARN has no built-in statute of limitations, so federal courts borrow the closest analogous deadline from state law, and that deadline varies by state.

1
eCFR. 20 CFR 639.9 – When May Notice Be Given Less Than 60 Days in Advance
2
Office of the Law Revision Counsel. 29 USC 2101 – Definitions
3
Office of the Law Revision Counsel. 29 USC 2102 – Notice Required Before Plant Closings and Mass Layoffs
4
Office of the Law Revision Counsel. 29 USC 2103 – Exemptions
5
eCFR. 20 CFR Part 639 – Worker Adjustment and Retraining Notification
6
Office of the Law Revision Counsel. 29 USC 2102 – Notice Required Before Plant Closings and Mass Layoffs
7
Office of the Law Revision Counsel. 29 USC 2104 – Liability
8
U.S. Department of Labor. WARN Advisor – Frequently Asked Questions