What Can Employers Learn from the Signature Room Lawsuit?

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Hancock center

Many Chicagoans were left stunned at the sudden news of the Signature Room’s closing in late September. From its iconic position atop the former John Hancock Center, the Signature Room was a staple of the city’s restaurant scene for decades, popular among both Chicagoans and visitors. Yet there was little hint that the restaurant was on the verge of shuttering operations—or that employees would be out of a job.

Tributes soon poured in from adoring customers, some recalling fond personal memories of special birthdays, engagements, and holiday parties. But the sadness and nostalgia of past patrons quickly gave way to feelings of anger and abandonment among employees. Workers say they were provided no notice of the establishment’s closure, nor any holdover pay after the announcement.

The restaurant’s unionized employees, members of UNITE HERE Local 1, filed a federal lawsuit against the establishment, claiming that it failed to give proper notice of layoffs under the federal Worker Adjustment and Retraining Notification Act, commonly known as the “WARN Act.”

What is the WARN Act?

The WARN Act is a federal law requiring employers to provide at least 60 days’ notice to employees of mass layoffs or the closure of locations. Companies must also notify the labor unions connected with their workplaces, as well as local government heads. On the books since 1988, the act generally applies to businesses with 100 or more workers and to layoffs that will last more than 6 months. The Signature Room employed over 100 employees, and both the closure and layoff are permanent, thus triggering the act’s protections.

In addition to the notice requirement, the federal WARN Act requires businesses to provide workers their usual compensation for the 60-day period, including all benefits. If an employer fails to do so, workers can sue for back pay. Violating employers may also be subject to a civil penalty of up to $500 for each day it fails to notify a unit of local government, and could further be liable for attorneys’ fees. A complete guide for employers published by the U.S. Department of Labor’s Employment and Training Administration (ETA) can be found here.

Some states have their own versions of the federal law. Illinois, for example, has a WARN Act that also requires a notice period of 60 days, but applies to companies with 75 or more full-time employees. Notice of a layoff must be provided if a) at least 25 employees and at least 33% of the full-time workforce are being let go, or b) at least 250 full-time employees will be let go. Similarly, employees, unions, and government officials must all receive notice. Employers must notify the Illinois Department of Commerce and Economic Opportunity, as well as the senior elected officials of any municipality and county of an affected location. Penalties for violations are comparable to the federal law. More information can be found here.

It is good to keep in mind that there are exceptions to various provisions of both the federal and Illinois WARN Acts.

How can employers ensure they abide by the WARN Act?

Employers can follow a few simple steps to ensure they will not inadvertently violate the WARN Act and that any closure or large layoff takes place without incident.

  1. Make a plan early on. If you foresee a closure or mass layoff, consult with your company’s leadership and counsel to develop a plan that will incur minimal business disruption while also providing exiting employees with the resources they need to move on. Beyond adhering to legal requirements, a solid plan constitutes good business practice and sensible people management.
  1. Provide notice. If your company employs at least 100 full-time workers, you may be required to provide 60 days’ notice of a closure or mass layoff. If you employ 75 full-time workers, you may be subject to Illinois’ law. Notice should be made in writing, be written clearly, explain the timeline of events, and provide a contact person in case workers have questions. Provide notice to your workers, as well as the appropriate union leaders and elected officials.
  1. Ensure compensation is properly paid. Workers are entitled to receive wages for the 60-day notice period, as well as health insurance coverage, pension benefits, accrued vacation time, and other forms of compensation. HR and payroll should have a plan in place to administer compensation and answer employees’ questions before notice is given.
  1. Show compassion. Shutting down a location that has been part of workers’ lives, sometimes for years, can be difficult, and no one likes losing a job, even if it is part of a mass layoff. Try to communicate in as empathetic a way as possible, working with your communications department, HR, managers, and anyone else involved in messaging. As always, make time to respond to workers’ fears and questions.

Employers who follow these simple steps can ensure as smooth a transition as possible in an otherwise trying time. Such businesses will not only maintain goodwill with employees, but also steer clear of WARN Act violations. That way, any warm and fuzzy memories that past clients or customers have of your business can also be shared by your former employees, who feel they left a workplace that valued them and their labor.