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Remember the WARN Act

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A few years ago, cash-strapped states (and their eager vendors) found a way to get the state equivalent of money from the sofa cushions by going after life insurers that had not done a good job of getting benefits out to hard-to-find beneficiaries.

The states scooped up the unclaimed property, and the interest earnings on all of that unclaimed property.

Frank Scruggs, a former Florida labor secretary who now represents employers in labor disputes as a lawyer at Berger Singerman, said in an interview that he thinks local governments may notice a possible moneymaker of their own: Going after employers that fail to send the right Worker Adjustment and Retaining Notification Act notices.

The WARN Act requires most employers with 100 or more employees to send notices 60 days ahead of time when they are closing plants and organizing mass layoffs.

The law requires the affected employers to send the notices to managers, supervisors, workers’ union officials, the chief elected official in the employer’s town, and the dislocated worker unit for the employer’s state as well as to rank-and-file workers.

Workers, the workers’ unions — and units of local government — can all bring either individual or class-action suits.

Even if the potential plaintiffs are not all that interested in filing a WARN Act suit, the law gives lawyers a financial incentive to get the plaintiffs interested in suing, by allowing a court to include reasonable attorney’s fees in a judgment.

If a laid-off employee who has not received the right notices incurs large medical bills, the former employer may end up having to use its own cash to pay the bills, Scruggs said.

The WARN Act has no direct relationship with the Patient Protection and Affordable Care Act, but the employee counting rules are similar. Local governments, and lawyers for local governments, that are thinking hard about PPACA full-time equivalent counting rules could start to notice references to the WARN Act.

The improving economy could lead to a boom in the kinds of layoffs that trigger WARN notice requirements, by encouraging employers to engage in mergers, acquisitions and other strategic moves, Scruggs said.

Employers may think meeting COBRA notice requirements will free them from the fear of having to pay any former employees’ medical bills.

“No,” Scruggs said. “It doesn’t get you out of the woods. It’s nice, but it doesn’t suffice.”

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