Modernizing the WARN Act to Protect US Workers from AI Displacement

Advances in artificial intelligence (AI) are upending labor markets, offering substantial productivity gains and altering how businesses operate. A textbook economist would celebrate any boost to productivity. They might recite the common line that productivity is the driver of economic progress. A nuanced economist, though, would ask who benefits from that progress and at whose expense? As much as progress in AI deserves applause, it also merits pause. The surge in AI use by Fortune 500 companies presents significant social and economic risks, particularly for workers with tasks that AI can easily take over and the communities in which those workers tend to concentrate.

The potential for AI-driven job loss is not speculative—it is already appearing in certain sectors. Few signs suggest a slowdown in corporate use of AI to perform ever more job functions. Though correlation is not causation, it is not surprising that substantial layoffs have been tallied in industries in which AI can take on a number of key tasks--such as the video game industry. A similar story has played out in industries such as manufacturing, transportation, and customer service. In those fields, AI is rapidly being incorporated into daily operations. Significant and rapid improvements in AI could result in large-scale job displacement in these and other industries. When such displacement occurs, the communities that play host to those companies will face the immense public policy challenges brought on by economic decline, population loss, and political instability.

Rather than attempting to stifle AI innovation to prevent these job losses, US policymakers should channel some of their regulatory attention to providing affected workers and communities with as much notice as possible when mass layoffs appear to be imminent. This foresight would empower local and state governments, businesses, and workers and their families to anticipate and adjust for looming structural shifts in the economy. Historically, such proactive measures have proven helpful in reducing the adverse effects of sudden industrial changes. One such measure is the Worker Adjustment and Retraining Notification (WARN) Act. Originally passed in response to large-scale factory closures in the 1980s, the WARN Act requires employers to give 60 days’ notice before mass layoffs or plant closures. The hope is that such notice gives workers and communities time to plan for some sort of economic pivot.

As AI continues to develop, it is crucial that policymakers revisit the WARN Act and update it to meet the challenges of the current technological landscape. Modernizing the WARN Act could provide a framework for giving workers and communities advance notice of job displacement caused by AI, equipping them to navigate the resulting shifts in local labor markets.

History of the WARN Act

Congress initially considered the WARN Act in 1973 amid extreme economic volatility. In 1970 alone more than 5,000 strikes occurred. Layoffs became a norm due to a severe recession. And, inflation seemed unstoppable. The Act didn’t pass. In fact, more than a decade of debate ensued. Various stakeholders contested which employers would be covered, what information they would have to disclose, to whom, and when.

The closure of a Youngstown Sheet and Tube plant in Mahoning Valley of Ohio, which displaced over 5,000 workers in a single day in 1977, became a key source of motivation for those advocating for the Warn Act and related legislation. The plant's sudden closure without warning or preparation led to significant economic distress in the region, sparking debates about the responsibilities of employers toward their workers and the broader community.

By the late 80s, globalization and technological changes placed significant competitive pressure on many US manufacturing industries. Many manufacturers buckled from those severe economic headwinds. Recognizing the need to provide workers with time to transition to new employment or retrain, Congress enacted the WARN Act in 1988 to partially mitigate the negative effects of mass layoffs. The Act requires qualifying employers to give at least 60 days’ notice before plant closings or mass layoffs at a single site. This notice aims to provide workers with time to seek new employment, enroll in retraining programs, or take other steps to adjust to their new circumstances.

The political motivation behind the WARN Act was driven by both economic and social concerns. Economically, Congress sought to address the disruption caused by rapid industrial change, particularly in regions heavily dependent on manufacturing. Socially, lawmakers recognized that sudden mass layoffs led to a host of secondary problems, including increased demands on social services, rising crime rates, and political instability in affected communities. The WARN Act, though, did not attempt to stifle technological progress. Instead, the goal was to balance the interests of businesses, workers, and communities by providing a transition period to lessen the shock of large-scale employment shifts.

Implementing the WARN Act

As suggested by the long political skirmish preceding passage of the WARN Act, its provisions were watered down. It completely excluded local, state, and federal governments from the Act’s requirements. In short, only fairly large employers--those with more than 100 full-time employees--are subject to the Act. They face relatively straightforward obligations. Covered employers must give 60-days notice to affected employees, any bargaining representatives, and the chief elected official of the local area of any of the following events:

A plant closing resulting in employment losses that affect at least 50 employees;

A mass layoff that affects at least 50 employees where the employment loss consists of at least 33% of employment at the site; or

A mass layoff with an employment loss of 500 or more at a single site of employment, regardless of its proportion of total employment at the site or if the employment loss is part of a plant closing.

The notice must include a description of the anticipated action, an assessment of whether the losses would be permanent or temporary, the date on which layoffs will begin, and contact information for a company official. Notably absent for the notice requirements is any outreach to federal officials.

Employers that violate the WARN Act by failing to provide adequate notice may be liable for back pay and benefits for the affected employees for the period of the violation, up to a maximum of 60 days. However, the Act includes several exceptions. For example, if layoffs result from a natural disaster or unforeseen business circumstances, such as a sudden, dramatic economic downturn, then employers may be freed from WARN Act compliance.

Yesterday’s compromises have become the source of today’s complaints. The WARN Act has faced criticism for its relatively narrow applicability. Companies just under that 100 employee threshold can escape the Act’s provisions. The short notice window has also drawn the ire of advocates--relatively little preparedness can occur in just 60 days. There’s also the issue of federal officials, such as the Department of Labor, being left in the dark. If the goal is to quickly mobilize relevant actors to assist with an impending economic crisis, surely the federal government should be informed as soon as possible.

In response to these limitations, some states have enacted their own versions of the WARN Act with stricter requirements. For example, New Jersey's Mini-WARN Act mandates employers to provide 90 days' notice of mass layoffs and guarantees severance pay for affected employees. Other states, such as California, have implemented similar state-level protections that extend the requirements of the federal WARN Act.

Proposed Amendments to the WARN Act for the AI Context

As AI continues to advance, Congress should amend the WARN Act to reflect the realities of the modern labor market. The first major update should involve tailoring the scope of the law based on the industries and job types most at risk of AI-induced displacement. AI and machine learning technologies are particularly disruptive in sectors such as manufacturing, logistics, and service industries, where repetitive tasks can be easily replaced by automation. The updated WARN Act should mandate that even medium-sized corporations in such industries disclose when they plan any widespread integration of new AI tools into their operations. Such companies need not disclose any sensitive business information--only enough information to give officials a chance to assess the likelihood of substantial job displacement in a short period.

Another key amendment would be to extend the notice period required by the WARN Act. The 60-day notice currently mandated is insufficient in many cases, particularly for workers who may need extensive retraining to transition into new roles. Extending the notice period to 90 or even 120 days would give workers more time to acquire new skills and seek employment in less vulnerable sectors. In addition to extending the notice period, the updated WARN Act should include provisions for worker retraining programs funded by employers, either as a direct investment in affected employees or through contributions to a national retraining fund.

The third proposed amendment is to lower the threshold for the number of employees affected by layoffs or job displacement before the WARN Act is triggered. Currently, the WARN Act applies only to mass layoffs of 50 or more employees, but in the AI context, job displacement may occur in smaller increments, especially as automation technology is gradually integrated. Reducing the threshold to 25 employees would ensure that more workers benefit from advance notice.

Finally, the WARN Act should be updated to include more robust enforcement mechanisms. In its current form, the WARN Act places the burden on employees to file lawsuits against non-compliant employers, which can be a lengthy and costly process. Establishing a dedicated enforcement body within the Department of Labor that actively monitors compliance and imposes penalties for violations would ensure that workers receive the protections they are entitled to under the law.

Conclusion

As AI technology continues to evolve, it brings with it profound changes in the labor market, with the potential to displace millions of workers. Updating the WARN Act to address the challenges posed by AI and automation will be critical for ensuring that workers and communities have the time and resources necessary to adapt to these changes. Expanding the scope of the law, extending the notice period, lowering the threshold for triggering WARN Act protections, and incorporating predictive analytics into the process are all steps that could help policymakers manage the coming wave of job displacement.

However, important questions remain, such as how to balance the need for technological innovation with the need for worker protection and what role private sector employers should play in mitigating the social costs of automation. Further analysis will be needed to address these issues and develop a comprehensive strategy for managing the AI-driven transformation of the labor market.