BUSINESS CLOSINGS
After advocating such measures for fifteen years,
proponents of mandatory plant closing notification
secured federal legislation in August 1988
with the Worker Adjustment and Retraining
Notification Act, 100 P.L. 379. The measures
were initially part of the Omnibus Trade and
Competitiveness Act of 1988, P.L. 100-418, 102
Stat. 1159, which President RONALD REAGAN
had vetoed.After failing to garner the two-thirds
majority required for an override, Congress
chose to make the plant closing notification provisions
into a separate act. In July, the Senate
approved the plant closing legislation by a vote
of 72 to 23, and the House of Representatives
passed it by a vote of 286 to 136. On August 2,
1988, perhaps sensing the popularity of the bill,
President Reagan announced his intent to permit
the bill to become law without his signature.
The bill became automatically effective at midnight,
August 3, 1988.
The law requires employers with one hundred
or more employees to provide their workers
with sixty days’ layoff notice when fifty or
more workers at a single site will lose their jobs
and when affected workers will constitute at
least one-third of that site’s work force. If 500 or
more employees are laid off, however, such
notice is required regardless of the percentage of
site workers involved. Companies failing to provide
the requisite warning face penalties of compensating
each dismissed employee for wages
and fringe benefits for every day the notice
should have been given. Additionally, a $500 payment per day, up to a maximum of $30,000,
must be made to local communities when the
act’s provisions have not been met.
Analogous requirements exist in thirty-eight
other countries and in five states. At least twenty
other states have proposed such legislation.
According to the federal government’s GENERAL
ACCOUNTING OFFICE (GAO) survey, prior to
this legislation, the national median length of
advance notice for the closing of large establishments
was seven days. White collar and union
blue collar workers averaged as much as fourteen
days’ termination notice while non-union
blue collar workers only received two days’
notice. Since 1981 more than five million Americans
have lost their jobs because plants were
shut down or their positions were eliminated.
Along lines similar to President Reagan’s
reservations, NATIONAL ASSOCIATION OF MANUFACTURERS
president Alexander B. Trowbridge
maintained that the legislation “damages the
flexibility essential to run a successful business.”
Moreover, Trowbridge noted that advance
notice was not always possible as financially
troubled businesses may not be able to predict
their status with the precision that the legislation
required. To salvage their troubled businesses,
these companies might find themselves
in the midst of difficult debt financing, merging
with another company, selling off assets, or bidding
on a major contract, all of which could be
hampered by the new law’s requirements. He
claimed that the required closing notices would
discourage customers and jeopardize credit
arrangements. A report compiled by the Congressional
Office of Technology Assessment
titled “Plant Closing: Advance Notice and Rapid
Response” (DTA-ITE-321) found contentions
such as Trowbridge’s to be highly exaggerated
because financial emergencies are rarely a factor
in plant closings.
Other critics of the legislation cited an R.
Nathan Associates study which claimed that the
total annual costs for notification would run as
high as $1.8 billion, due to lost profits, penalties,
and additional administrative costs. The Nathan
study found further that about 460,000 lost jobs
would be triggered by unnecessary closings as a
direct result of the act.
The GAO, however, seriously questioned the
Nathan report on the basis of what it claimed
was inadequate and flawed analysis and
methodology. The DEPARTMENT OF LABOR also
stated in 1986 that “many of the fears regarding
advance notification have not been realized in
practice.” The National Science Foundation
claimed to have found proof that, in most labor
groups, advance notice significantly shortens
joblessness, which in turn translates into better
earnings for displaced workers and substantial
savings in unemployment insurance. LABOR
UNIONS, such as the AFL-CIO, uniformly
acclaimed the Worker Adjustment and Retraining
Notification Act, 29 U.S.C.A. § 2101 et seq.,
claiming that when advance notice is combined
with severance pay, it improves morale and
actually increases worker productivity.
CROSS-REFERENCES
Corporations; Employment Law; Labor Law; Unemployment
Compensation.
