The Maryland legislature substantially increased the breadth and scope of the state’s so-called “mini” Worker Adjustment and Retraining Notification (WARN) Act to, among other things, impose mandatory notice requirements and stringent penalties on employers who fail to comply with the new law. The new law, known as the Economic Stabilization Act (Act), took effect on October 1, 2020.
The Act applies to employers with 50 or more employees that operate an industrial, commercial, or business enterprise in Maryland. It is patterned loosely after the federal Worker Adjustment and Retraining Notification Act (Federal WARN). The new law defines an employee as an individual who works for an employer for an hourly or salaried wage or in a managerial and supervisory capacity. The term “employee” does not include individuals who work less than an average of 20 hours per week or have worked for an employer for less than six months in the immediately preceding 12 months.
Scope and Notice Requirements
Unlike the prior iteration of the law, which had voluntary notice provisions, the Act imposes mandatory notice requirements upon covered employers. They must provide 60 days written notice before they initiate a “reduction in operations” which the law defines as (i) the relocation of a part of an employer’s operation from one workplace to another existing or proposed site or (ii) the shutting down of a workplace or a portion of the operations of a workplace that reduces the number of employees by at least 25 percent or 15 employees, whichever is greater, over any 3-month period.
The scope of the Act is broader than its federal counterpart. Unlike the Federal WARN, which applies to employers with 100 or more employees, the Act, as noted, applies to employers with 50 or more employees. Another significant difference is that the statutory triggers are significantly lower under the new Maryland law – 25% or 15 employees – in comparison to Federal WARN which contains thresholds of 33% of the workforce or 50 employees.
The written notice must be provided to affected individuals or entities 60 days before initiating a reduction in operations. The notice must be given to the following:
- All employees at the workplace that is subject to the reduction in operations;
- Each exclusive representative or bargaining agency, (i.e., a union of the impacted employees);
- Maryland’s Dislocated Worker Unit; and
- All elected local officials in the area of the impacted workplace.
The notice must include the following:
- The name and address of the workplace where the reduction will occur;
- Contact information for the supervisor (name, telephone number, email address) for those seeking further information;
- A statement explaining whether the reduction in operations is temporary or permanent and whether the workplace is expected to shut down; and
- The expected date when the reduction in operations will begin.
The new law directs the Maryland Secretary of Labor (Secretary) to establish regulations for the appropriate continuation of benefits such as health, severance, and pension that an employer should provide to employees who will be terminated due to a reduction in operations.
Unlike its predecessor, the new law carries very stiff penalties for violators. The Act authorizes the imposition of a civil penalty of up to $10,000 per day to be assessed by the Secretary for failure to provide the required notices to all required individuals and entities. The factors to be considered by the Secretary in assessing a penalty include the gravity of the violation; the size of the employer’s business; the good faith of the employer; and the employer’s history of violations of the Act.
Open Issues; Next Steps
Significantly, the Act leaves unaddressed the geographic length of a relocation that is required to trigger the employer’s notice obligations. The Act also does not contain some of the exceptions that exist under Federal WARN, including exceptions for (i) a faltering company; (ii) unforeseen business circumstances; and (iii) a natural disaster. Because of the differences in the Federal WARN and the Act, compliance with the federal statute may not constitute compliance with the Act.
Employers considering a relocation of jobs and/or a reduction in staff in Maryland should consult with experienced counsel before doing so.