Plant Closing Law Now in Effect, but the Debate Goes On
A controversial law requiring America’s large companies to give workers 60 days’ notice of plant closings or mass layoffs takes effect today, with organized labor praising it and business decrying it.
“I hope companies will view this law as the beginning of a new era of cooperation and good will between employers and their workers,” said Sen. Howard M. Metzenbaum (D-Ohio), the principal author of the law. “Companies that believe in treating their employees fairly will not have trouble complying with this law,” he added.
But a lawyer for one of the nation’s most prominent pro-management law firms predicted that the law will have a negative impact on U.S. businesses. “It will severely interfere with management flexibility,” said Michael Lotito of Jackson, Lewis Schnitzler & Krupman in San Francisco. “This is like taking Agent Orange to cure a little patch of poison ivy.”
But Lorrie McHugh, an AFL-CIO spokeswoman, said, “Fairness and decency were the overriding concerns in getting this law passed. Sixty days’ notice became a matter of fairness, so workers and their communities could plan.”
The sharply differing reactions Friday reflected that the long battle over the measure may not be over even though it has become law of the land. Legislation requiring advance notice of plant closings and layoffs has been advocated for years by the AFL-CIO, but bills persistently died in Congress.
Then, last year, such notice was mandated as part of an omnibus trade bill. But President Reagan vetoed the bill, citing the plant-closing notice provisions as a primary reason for the veto. Subsequently, as the result of a compromise, a separate notice bill was introduced and passed. It went into effect without Reagan signing it, the only time this happened during his Administration, McHugh noted.
The new law, called the Worker Adjustment and Retraining Notification Act of 1988, or WARN, requires companies with 100 or more employees to provide at least 60 days’ written notice if they:
- Close a plant or discontinue an operating unit with 50 or more workers.
- Lay off 50 to 499 workers if these employees constitute a third of the total work force at a single site.
- Lay off 500 or more workers at a single site.
There are some exemptions to the law for faltering companies, such as when the closing or layoff constitutes a strike, or when the action occurs amid unforeseeable business circumstances.
Average of 14 Days’ Notice
Remedies for violation of the law include back pay and related fringe benefits for employees up to a maximum of 60 days and fines of up to $500 a day to a maximum total of $30,000. However, the law does not give the Labor Department a way to enforce the law, so suits would have to be filed by individuals or communities.
Studies by the General Accounting Office, cited by Metzenbaum, reported that the average white-collar worker in the United States receives only 14 days’ notice of a layoff and that the typical blue-collar worker gets only seven days’ notice.
Additionally, a recently published study by two University of Nebraska professors found that nearly 4 million person-weeks without work could have been avoided in the United States had the law been in effect between 1979 and 1984.
The study by the two management professors, Douglas O. Love and William D. Torrence, was based on Labor Department statistics and indicates that the new law could have a significant positive impact on the national economy. They estimated that the cost of lost work time during the 5-year study period was $1.33 billion.
Virtually all of the United States’ major trading partners--including Japan and West Germany--have had advance notice laws for some years.
