Legal Bulletins

Maryland has joined approximately 20 states that mandate advance written notice to employees of certain workforce reductions. These state laws are known as “mini-WARN Acts,” a reference to the federal Worker Adjustment and Retraining Notification (WARN) Act.

Maryland’s mini-WARN law — formally known as the Economic Stabilization Act — previously contained only voluntary guidelines for employers faced with a reduction in operations. An employer’s failure to comply with the voluntary guidelines would not result in any penalties.

The General Assembly amended the Maryland mini-WARN law to make the notice requirements mandatory and to create civil penalties for violators. As described below, the mandatory notice requirement imposes a significant new burden on Maryland employers.

Which Employers Are Covered?

The new Maryland law applies to all employers with 50 or more employees, except employers that have been doing business in Maryland for less than one year. By contrast, the federal WARN Act applies only to employers with 100 or more employees. As a result, many Maryland employers not previously subject to the federal WARN Act requirements will be subject to this new legal requirement.

Which Employees Are Counted?

For the purposes of determining whether an employer has 50 or more employees, all employees are counted except individuals who:

• Work less than an average of 20 hours per week; or
• Have worked for the employer for less than six months in the preceding 12 months.

What Is a Reduction in Operations?

A “reduction in operations” is defined as either:

• The shutting down of a workplace that reduces the number of employees by at least 25%, or 15 employees, whichever is greater, over any three-month period (not counting employees working less than 20 hours on average each week and those who have worked less than six months); or
• The relocation of part of an employer’s operation from one workplace to another existing or proposed site. (The law does not specify whether the 25%, or 15-employee, threshold applies to relocations nor does it provide whether the relocation must exceed a specified distance to trigger the notice requirement).

A workplace includes a factory, plant, office or other facility where employees produce goods or provide services. Workplaces do not include a construction site or other temporary workplace.

The notice requirement under the federal WARN Act, by contrast, is triggered by a “plant closing” or a “mass layoff,” terms that have specific meanings under that law and differ significantly from a reduction in operations under the Maryland law.

When and to Whom Must Notice Be Given?

A covered employer must provide at least 60 days’ advance written notice when the employer expects to terminate employees due to a reduction in operations. The notice must be provided to:

• All employees at the workplace subject to the reduction in operations, including part-time employees working less than 20 hours on average each week and those who have worked less than six months;
• Each exclusive representative or bargaining agency that represents employees at the workplace;
• The state’s Division of Employment and Training’s Dislocated Worker Unit; and
• All elected officials in the jurisdiction where the workplace subject to the reduction in operations is located.

What Information Must the Notice Contain?

The notice must include:

• The name and address of the affected workplace;
• The name, telephone number and e-mail address of a workplace supervisory employee as a contact;
• A statement that explains whether the reduction in operations is expected to be permanent or temporary and whether the workplace is expected to shut down; and
• The expected date when the reduction in operations will begin.

Are There any Exceptions to the Notice Requirement?

The law does not apply if the reduction:

• Results solely from labor disputes;
• Occurs in a commercial, industrial or agricultural enterprise operated by the state or its political subdivisions;
• Occurs at a construction sites or other temporary workplaces;
• Results from seasonal factors determined by the Maryland Department of Labor to be customary in the industry; or
• Results when an employer files for bankruptcy under federal bankruptcy laws.

Significantly, the Maryland law does not have exceptions similar to those in the federal WARN Act for “unforeseeable business circumstances” or “natural disasters.” Especially in light of the circumstances behind the present economic downturn, this is a critical distinction.

What Are the Penalties for Noncompliance?

If the Maryland Secretary of Labor determines that a violation has occurred, the secretary must issue an order compelling compliance. Moreover, unlike the prior “voluntary” version of the law, employers who fail to abide by the new law may face significant civil penalties. The secretary has the discretion to assess a civil penalty of up to $10,000 per day for each day an employer violates the notice requirement.

In determining the amount of the civil penalty, the secretary will consider the gravity of the violation, the size of the employer’s business, the employer’s good faith and the employer’s history of violations under the law. The assessment of a penalty under the law is subject to Maryland’s administrative hearing process.

Notably, the civil penalties are in addition to any damages and penalties for which a covered employer might be liable under the federal WARN Act. Unlike the federal WARN Act, however, Maryland’s mini-WARN law does not expressly provide employees with a private right of action.

When Are Guidelines Being Issued and Will Employers be Required to Continue Benefits or Pay Severance?

The law directs the Maryland Secretary of Labor and the Workforce Development Board to issue mandatory guidelines regarding the required written notice as well as the continuation of benefits, such as health, severance and pension, that employers should provide to employees who have been terminated. The secretary does not have a deadline for issuing these guidelines; however, the mention of severance is of concern. Earlier this year, New Jersey became the first state to mandate the payment of severance in circumstances covered by that state’s mini-WARN law.

When Does the New Law Go into Effect?

The effective date of the new law is October 1, 2020.

Takeaways for Employers

Maryland employers must exercise additional caution when planning and implementing reductions in operations or workforce relocations that will take place on or after October 1, 2020. Employers with 50 or more employees must comply with the new Maryland mini-WARN law, and those with 100 or more employees must comply with the Maryland law and the federal WARN Act.

Large employers familiar with the complex scheme of regulations under the federal WARN Act cannot assume that compliance with the federal act will ensure compliance with the new Maryland law. Significant differences between the two laws include the type of events that trigger the notice requirement.

An employer that believes it may be taking an employment action that will trigger the requirements of either the federal WARN Act or state mini-WARN law should consult with legal counsel as far in advance of the potential triggering event as possible.

If you have any questions, please contact Charles R. Bacharach or Robert C. Kellner.

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Charles R. Bacharach
410-576-4169 • cbacharach@gfrlaw.com

Robert C. Kellner
410-576-4239 • rkellner@gfrlaw.com