Economic downturns are nerve-wracking for those of us in affected industries (just about everything except government). If you are living paycheck to paycheck, the prospect of suddenly being out on the street can be pretty frightening - desperately needing a job when there are none to be had.

The worst of all possible worlds is when your company has a massive layoff, flooding the market with others who presumably share your skill set and are just as hungry for a job. In order to give workers some relief from this angst, the Reagan administration passed the WARN Act, which requires large employers to give employees 60-day notice of mass layoffs.

Problem solved right?

A No-WARN Layoff

If you think the WARN Act is working, you might want to zip out to Richmond, Virginia and chat with some of the 1,500 employees of Qimonda North America who were unceremoniously canned without notice as the plant closed in February of this year.  To add to the indignity, a week or two later the company reneged on severance, final paychecks, and additional benefits payments.

In addition to the hardships imposed by the sudden cutoff of their pay, breaking the 60-day rule left workers on H1-B visas with literally no time at all to get a new job. (The popular notion that there is a 10-day grace period seems to be a common misconception.) These employees were ushered out the door with the mandatory return airfare to their country of origin, and presumably a hearty handshake.

There are exceptions to the WARN Act, but Qimonda clearly doesn't come close to meeting any of them. For example, a company that is actively trying to sell its business can avoid the 60-day notice if it can be shown that this notice would spook potential buyers, who presumably think everything is going well. But Qimonda's DRAM business had been tanking for the last year along with the rest of the industry, and any buyer interested in the company surely already knew how dismal things were. What's more, the company had just shut down its 200 mm fab line months earlier, surely tipping its hand as to the viability of its business.

Just Desserts

Given that Qimonda blatantly gave these employees the shaft, it should be a simple matter to get them to face the music, right?

Wrong.  

Ronald Reagan fought hard against the WARN Act, and he was successful in making it amazingly ineffective.  The Department of Labor has no provisions for enforcement of the act, and employees who feel they have been wronged under the act can do nothing but sue for their back wages - and 60-days of back pay will be long gone by the time lawyer's bills are paid.

The Moral

The important take away from this story of the toothless WARN Act is that citizens need to scrutinize legislation of any kind for two important factors: funding and enforcement.  Without funding, new laws will never get off the ground. And without adequate enforcement mechanisms, large corporations will simply treat lack of compliance as a bottom line issue.

And one other thing to think about the next time your local government tosses around millions of dollars in incentives to attract a new employer: what kind of commitment does that employer make to the workers it is hiring? Virginia and Henrico County provided incentives totaling well over $100M  to Qimonda, and may now be feeling a bit bitter about the end result.

As we all should.