Key takeaways | RIFs, WARN, and AI: Key Considerations for Employers

Employers face increasing complexity when planning workforce reductions as remote and hybrid work arrangements continue to challenge traditional employment frameworks. Evolving Worker Adjustment and Retraining Notification (WARN) Act interpretations, expanding state and local requirements, and the growing use of artificial intelligence (AI) in employment decision-making are creating new compliance considerations for employers navigating workforce change.

Members of McDermott Will & Schulte’s Employment and Business Restructuring Groups examined recent developments and whether certain groups of employees are still entitled to WARN protections.

Top takeaways included: 

1. Remote work continues to challenge traditional WARN act frameworks. The WARN Act’s “single site of employment” analysis remains unsettled for remote-first workforces. Courts increasingly grapple with applying a statute designed around physical workplaces to employees who work exclusively from home. The March 2026 Dargon decision concluded that fully remote employees generally cannot rely on the WARN Act’s mobile-worker provisions to establish a common worksite based solely on managerial reporting relationships. Nevertheless, employers cannot assume WARN obligations are inapplicable, because other jurisdictions have reached different conclusions, and several courts continue to treat the issue as highly fact specific. Proposed federal legislation, H.R. 5761, seeks to provide additional statutory guidance regarding remote workers.
2. State WARN laws frequently create greater compliance obligations than federal WARN. Federal WARN establishes only a baseline framework for workforce reductions. At least 15 states maintain mini-WARN statutes that often apply to smaller employers, impose lower triggering thresholds and require longer notice periods. For example, New York and New Jersey require 90 days’ notice rather than the federal 60-day standard, and New York may trigger notice obligations for layoffs involving as few as 25 employees under certain circumstances. Further, New Jersey and other states are expanding employer exposure by imposing enhanced obligations and financial penalties in connection with workforce reductions, including severance requirements and additional pay for insufficient notice. Employers conducting multi-state reductions in force (RIFs) must analyze each applicable jurisdiction separately because state obligations may apply even when federal WARN does not.
3. Financial distress requires early WARN planning and liability assessment. WARN compliance becomes particularly important when employers face restructuring, distressed operations or potential bankruptcy. Workforce reduction decisions should be evaluated early to assess potential wage-related liabilities, director and officer exposure and state-specific obligations. In bankruptcy, the timing of WARN-related claims may materially affect whether liabilities receive administrative priority treatment or are treated as prepetition claims. Early analysis allows employers to evaluate notice strategies, minimize exposure, and better align workforce actions with broader restructuring objectives.
4. The Yellow Corp. decision provides important guidance on WARN exceptions during restructuring. Recent litigation involving Yellow Corp. demonstrates that the federal WARN Act’s faltering-company exception may protect employers facing imminent financial collapse when they actively pursue financing or restructuring alternatives. Courts expect employers to provide notice as early as practicable and to document efforts to secure capital, reorganize operations, or avoid closure. Although the appellate court ultimately found the exception applicable, it characterized the outcome as a close call and emphasized the importance of detailed support for any claimed exception. The decision provides practical guidance for distressed employers navigating federal WARN obligations before a bankruptcy filing.
5. AI can improve workforce planning but cannot replace human judgment. Employers increasingly use generative AI to analyze organizational structures, identify overlapping functions, evaluate workforce skills, and model restructuring scenarios. While these tools can improve efficiency and identify redeployment opportunities, legal risk increases when AI influences retention, ranking, or termination decisions. Regulators and litigants are expected to scrutinize the underlying data, potential bias, testing procedures, and governance controls supporting AI-generated recommendations. Employers should maintain meaningful human oversight, implement AI governance frameworks, document decision-making processes, and ensure that employment decisions remain grounded in independent business judgment rather than algorithmic outputs.

To view the webinar slides, click here.