The Controversy Over Advance Notice Legislation in the United States
| Author | John T. Addison |
| Date | 01 July 1989 |
| Published date | 01 July 1989 |
| DOI | http://doi.org/10.1111/j.1467-8543.1989.tb00220.x |
British
Journal
of
lndustrial Relations
2712 July 1989 0007-1080
$3.00
The Controversy Over Advance Notice
Legislation in the United States'
John
T.
Addison
*
I.
INTRODUCTION
European observers, long accustomed to fairly extensive job protection
legislation in the area
of
individual and collective dismissals,* might be
puzzled by the scale
of
the controversy attaching to a piece of plant closing
legislation passed by the U.S. Senate in July 1987 as part of the Trade Bill.
The Bill, which has subsequently negotiated all Congressional hurdles,'
seeks to impose upon employers a sixty-day notice requirement for
employment losses occasioned by plant closings and mass layoffs.
This paper seeks to establish what we do, and do not, know about the
consequences of advance notification and to identify the sources of
opposition to the proposed legislation. To this end, the current bill is first
discussed against the backdrop of earlier federal (and state) initiatives in this
area. A review of the extent of notice in individual and collectively
bargained contracts precedes discussion of the cases for and against
notifying workers of their impending displacement. An examination
of
the
extant literature charting the effects
of
advance notification on unemploy-
ment and earnings follows. It is concluded on the basis of these theoretical
and empirical arguments that a case can be made for the experimentai
adoption of legislation. That said, the next task is to explain the intensity of
employer opposition. This emerges as having less to do with the legislation
itself than with a major reform agenda also before Congress that seeks to
mandate an altogether wider array
of
employee benefits than prenotifica-
tion.
11.
LEGISLATION PAST AND PRESENT
Plant closing legislation has come before every Congress since 1973
-
over
forty bills have been introduced in the last decade alone
-
but it was not
until
1985
that
a
bill was reported out of a full committee of either House. In
*
Professor
of
Economics, Universitat Barnberg and University
of
South Carolina
236
British Journal
of
Industrial Relations
November
of
that year, the final version
of
the bill (‘The Community and
Dislocated Worker Notification Act’, H.R. 1616) was narrowly defeated by
a vote
of
208
to
203.
The bill would have required employers of fifty
or
more
full-time employees at
a
single site to provide ninety-days’ notice of
impending redundancy. This notice period applied where the employment
loss was either
30
per cent of the employees
or
fifty employees (whichever
was the greater)
of
any employer at any site during a thirty-day period,
or
100
or
more employees at any site during a thirty-day peri~d.~
The closeness of the vote on this particular piece
of
legislation has to be
viewed against the backdrop
of
earlier initiatives that went far beyond
prenotification rights. The abortive 1979 National Employment Priorities
Act, for example, sought to penalise firms that ceased operation for any
reason. Under the Act, firms were required to give up to two years’ notice
of
their plans
to
relocate
or
close. Employees were to be given fifty-two weeks
of
severance pay, amounting to 85 per cent
of
their average wages, after
allowing for earned income, unemployment insurance benefits, and trade
adjustment assistance. Additionally, dislocated employees were to be
offered re-employment at other plants for up to three years, without
loss
of
wages
or
fringes. Moreover, the firm was obliged
to
pay the community in
which
it
was located an amount equal to
85
per cent of one year’s taxes; and if
the firm in question was in the process of moving its operations overseas it
had to pay the federal government an amount equal
to
300
per cent
of
one
year’s total lost taxe~.~
A further diminution in the reach of legislation would appear to explain
the success of the most recent initiative.
As
noted earlier, in July 1987 the
Senate passed the Trade Bill (S.1420), appended to which were advance
notification provisions. As a result of a Conference Agreement (designed
to
reconcile differences between separate legislation in the Senate and the
House of Representatives) the terms
of
the original Senate amendment
were largely left intact. The final legislation, passed in May 1988, requires
sixty-days’ advance notice
of
a plant closing that results in employment loss
of
at least fifty employees at a single site
of
employment,
or
a (mass) layoff of
more than six months’ duration that results in an employment
loss
for fifty
or
more employees if
33
per cent of the workforce at a site of employment are
affected
or
that results in an employment loss for
500
employees in which
case the one-third rule does not apply. Employment loss is calculated over a
thirty-day interval.6 Only those employers with
100
or
more full-time
employees are covered by the legislation, and only employees working at
least twenty hours per week who have at least six months’ tenure are
included in calculating the number
of
employees who have experienced an
employment
loss.
Furthermore, employees are deemed not
to
have suffered
an employment loss in the event that they have been offered transfers within
a reasonable commuting distance
of
their current job, have accepted
transfers
to
any
of
the employer’s facilities,
or
have been rehired by a
purchaser
of
the business.
Note, too, that notice
is
not required if the closing is a shutdown
of
a
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