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Amendments to the New York State Adjustment and Retraining Notification Act (“WARN Act”) adopted in June 2023 are now in effect. The amendments expand the scope of the WARN Act. 

The WARN Act requires covered businesses to provide 90 days’ notice prior to mass layoffs or closures to all affected employees and employee representatives, as well as to the Commissioner of Labor and Local Workforce Development Boards. The WARN Act currently applies to private businesses with 50 or more full-time employees in New York. Currently, the Act covers:

• Closings affecting 25 or more employees,
• Mass layoffs involving 25 or more full-time employees, as long as the 25 or more employees make up at least one-third of all employees at the place of employment, and
• Mass layoffs involving 250 or more full-time employees.

The amendments expand the WARN Act in large part as follows:

• Employers covered include any business that employs 50 or more employees, whether or not they are full-time.
• The scope of employees that counts toward the 20-employee threshold for a “mass layoff” is expanded to include remote employees (in comparison to currently only including the employees “at” the site of employment), both part-time and full-time employees, employees who resign in anticipation of a facility closing, and employees placed on furloughs lasting more than three months (currently only applies to furlough that is for more than six months).
• New process by which employers seek an exception from the 90-day notice period requirement. The employer must submit certain required documentation demonstrating eligibility for the exception to the Commissioner of Labor, who will then decide whether an exception is warranted.
• The “unforeseeable business circumstances” exception to the notice requirement has been amended to include public health emergencies, such as a pandemic “that results in a sudden and unexpected closure” as an additional situation that may excuse full compliance with WARN.
• Notices can be provided electronically.

In addition to the governmental entities that already must receive notice, the employer must also notify (1) the chief elected official of the unit of local government, (2) the school district[s] where the site of employment is located, and (3) the locality that provides police, firefighters, and other emergency services where the employment site is located.

Moreover, employers are now required to give notice even when:

• The employer’s actions were due to a physical disaster or an act of terrorism,
• The employer was actively seeking capital or business at the time notice was required,
• The need for notice was not reasonably foreseeable, and
• The closure or mass layoff was due to a natural disaster.

In lieu of notice, severance may be paid to employees, subject to a number of conditions:

• There must be an employment agreement or a uniformly applied company policy that requires that the employer give the employee a definite period of notice before a layoff or separation.
• The employee must be laid off or separated without the required notice.
• The employer must pay the employee a sum equal to the employee’s regular wages and the value of the costs of any benefits, or an amount computed in accordance with a formula based on the employee’s past earnings and benefits costs, for the required period of the notice.

Please contact our office with any questions about labor and employment matters.

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As CMM’s legal blog has previously explored, last fall the U.S. Department of Labor proposed an independent contractor rule under the Fair Labor Standards Act (“FLSA”), which would undo the current rule put in place by the Trump administration in 2021 (the “Proposed Rule”). After conducting a notice and comment period, the Department of Labor is currently finalizing the Proposed Rule. What does this mean for your business? Read on for what employers need to know about the new rule.

1. What is the current test to determine what constitutes an independent contractor under the FLSA?

The distinction between independent contractors and employees is important because under the FLSA, employees are entitled to minimum wage, overtime pay, and other benefits, while independent contractors are not.[1]

Under the current rule, there is a five-factor test for determining whether an individual is an independent contractor or employee. The test evaluates:

• the nature and degree of control over the work;
• the worker’s opportunity for profit or risk of loss;
• the amount of skill required for the work;
• the degree of permanence of the working relationship; and
• whether the work is an integral part of the purported employer’s business.

This test considers the first two factors to be the most important, while the remaining three factors are considered less important. In other words, if an individual exercises substantial control over the work, or has a substantial opportunity for profit, or risk of loss, the individual will likely be classified as an independent contractor, without considering the other factors. This is significant because the current test makes it easier for employers to classify workers as independent contractors.

2. What is the test to determine what constitutes an independent contractor under the Department of Labor’s Proposed Rule?

According to the Proposed Rule, the test for determining whether an individual is an independent contractor or employee would consist of six factors. Unlike the current rule, rather than any factor(s) weighing more than the others, the Proposed Rule looks at the totality of the circumstances. This test evaluates:

• the nature and degree of the potential employer’s control;
• the permanency of the worker’s relationship with the potential employer;
• the amount of the worker’s investment in facilities, equipment, or helpers;
• the amount of skill, initiative, judgment, or foresight required for the worker’s services;
• the worker’s opportunities for profit or loss; and
• the extent of integration of the worker’s services into the potential employer’s business.

Most notably, the Proposed Rule adds an additional factor which considers the amount of the worker’s investment in facilities, equipment, or helpers, the lack of which makes it is more likely to be considered an employee. As a result, this new test would make it more difficult for workers to be classified as independent contractors. For example, even if an individual exercises substantial control over the work, or has a substantial opportunity for profit, or risk of loss, the individual may still be considered an employee, depending on the other four factors.

3. The Takeaway

Although the Proposed Rule may be subject to change prior to a final decision, business owners should remain aware of the new distinctions to avoid investigations by the Department of Labor should their independent contractors be reclassified as employees. Business owners should conduct an annual internal audit to make sure that all workers are properly classified. Please note that New York State law may have more stringent tests than the test proposed by U.S. Department of Labor.

Please contact our office to discuss your specific business situation.

Thank you to Michael Nadeau for his research and writing assistance.

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[1] Allen Smith, DOL Will Issue New Independent-Contractor Proposed Rule, SHRM, June 6, 2022, https://www.shrm.org/resourcesandtools/legal-and-compliance/employment-law/pages/dol-will-issue-new-independent-contractor-proposed-rule.aspx.