The recent announcement that Ubisoft is laying off additional workers at its Red Storm Entertainment studio in Cary, North Carolina – following an earlier round of 100 cuts just three months prior – is a reminder that workforce reductions can happen fast, in waves, and across corporate structures that are more complicated than they first appear.
We advise employers on these situations regularly. The Ubisoft story raises exactly the kind of question we see most often: when reductions happen in multiple rounds across related entities, how does federal law treat them in the aggregate? For any employer considering a reduction in force, the answer starts with the Worker Adjustment and Retraining Notification Act, commonly known as the WARN Act.
What the WARN Act Requires
The WARN Act requires covered employers to provide written notice at least 60 calendar days in advance of a covered plant closing or mass layoff. The purpose is to give workers and communities time to adjust. The penalties for getting it wrong are severe as a violation can expose an employer to back pay and benefits for each affected employee for each day of the violation, up to 60 days. That is an expensive mistake.
The Act applies only to employers with 100 or more employees. Part-time workers count toward that threshold if the workforce collectively logs at least 4,000 hours per week, excluding overtime. Employers must include employees at every location in their total count, not just the site where reductions are occurring.
Plant Closings vs. Mass Layoffs: The Distinction Matters
The WARN Act distinguishes between two triggering events, and the difference is not always obvious.
A plant closing is a permanent or temporary shutdown of a single site of employment, or of one or more facilities or operating units within a single site, that results in employment loss for at least 50 employees during any 30-day period.
A mass layoff is a reduction in force not caused by a plant closing, resulting in employment loss at a single site during any 30-day period for either: (1) at least 50 employees who comprise at least 33 percent of active employees, excluding part-time workers; or (2) 500 or more employees, excluding part-time workers.
The WARN Act requires that employers look ahead 90 days from each employment loss to account for all employment losses associated with the applicable plant closing or mass layoff. This may seem incongruent with the “30-day period” listed above, but the purpose of this “90-day aggregation rule” is to ensure employers do not avoid WARN Act requirements through small layoffs.
The Ubisoft/Red Storm situation illustrates the application of the 90-day aggregation rule: layoffs that happen in multiple waves. The first round of 100 notices in March was filed by Red Storm Entertainment. The most recent round was filed by Ubisoft, but only for 17 workers. When reductions happen in multiple rounds, employers should look ahead 90 days and behind 90 days in order to analyze whether the aggregate numbers trigger WARN Act obligations that a single wave would not. An employment loss under the Act includes not just terminations, but also layoffs exceeding six months and reductions of 50 percent or more in an employee’s work hours over a six-month period.
What Has to Be in the Notice
When WARN Act notice is required, the content is not discretionary. The written notice must include the expected date the plant closing or mass layoff will begin, whether the action is permanent or temporary, the expected date when individual employees will be separated, whether bumping rights exist, and the name and telephone number of a company official who can be contacted for more information. Every employee affected by the action must receive notice.
Notice must also go to the state dislocated worker unit and the chief elected official of the local government where the employment site is located. For an employer in Cary, North Carolina, that means providing notice to the relevant North Carolina state agency as well as local officials.
Exceptions Exist, But They Are Narrow
The Act provides limited exceptions that can shorten or eliminate the 60-day notice requirement. These include situations where a company is actively seeking capital to maintain solvency and providing the required notice would prevent it from obtaining that capital, circumstances involving a natural disaster, and unforeseeable business circumstances. The unforeseeable business circumstances exception is the one we see raised most often, and most often litigated. Employers who rely on it should be prepared to demonstrate that the precipitating event was sudden and dramatically unexpected, not simply that business conditions deteriorated over time.
North Carolina Has No Mini-WARN Act, But Other States Do
North Carolina does not currently have a state-level equivalent of the WARN Act, which simplifies compliance for employers operating exclusively within the state. However, this changes significantly for organizations with operations in multiple states. Employers with facilities in states such as New York, California, New Jersey, or Illinois face additional notice requirements, different employee thresholds, and in some cases shorter advance notice windows than the federal standard. When we work with multi-state employers on a reduction in force, we map WARN Act obligations state by state before any notices go out.
Practical Steps Before a Reduction in Force
Beyond WARN Act compliance, here is what we advise employers to think through before any reduction in force:
Document your selection process. Be able to show a clear, defensible rationale for why particular employees or groups were selected. Decisions that appear arbitrary or that disproportionately affect a protected class can give rise to disparate impact discrimination claims. During tight labor markets, some HR departments let documentation practices slip. If workforce cuts follow, the challenge becomes supporting the decision as to why a particular person or group was chosen.
Consider severance with a release of claims. If your organization offers severance, condition it on a signed release. When the affected group includes employees over 40, the Older Workers Benefit Protection Act imposes specific requirements, including a 21- or 45-day consideration period and a 7-day revocation window.
Do it once. From both a legal and a cultural standpoint, it is better to structure a reduction in force so that it is complete in a single action. Multiple rounds raise the aggregate-count issue under the WARN Act and create sustained disruption for the employees who remain.
Plan for remote workers. The state where a remote employee performs their job controls the timing of their final paycheck and may impose additional notice obligations.
Communicate clearly and early. Poorly communicated layoffs create legal exposure and lasting damage to organizational culture. How the process is handled matters as much to the people staying as it does to the people leaving.
The Cost of Getting It Wrong
Under the federal WARN Act, employers who fail to provide the required 60-day notice can be liable for back pay and benefits for each affected employee for each day of the violation, up to 60 days. Civil penalties of up to $500 per day are also available for failure to notify local government officials. In a large workforce reduction, those numbers add up quickly. Plus, successful claimants may be able to obtain attorneys’ fees.
If your organization is evaluating workforce changes, the time to consult with employment counsel is before notices go out, not after.
