Vagueness of Plant Closure Law Has Business Worried

DETROIT —  Businesses throughout the nation, caught off guard by President Reagan’s decision Tuesday to allow a controversial plant closing bill to become law without his signature, are still pouring over the legislation’s fine print and are just now beginning to voice concerns about some of the less visible provisions they have found in the bill.

Officials from a number of major corporations said they don’t expect the law’s new requirement that workers be given 60 days’ notice of a plant closing to have much of an effect on their operations. Many firms, especially those where workers are represented by unions, already have labor contracts calling for much longer notice.

“I don’t think the pre-notification of plant closings will have any effect on us, because in the past we have given up to two years’ notice to our employees,” said Dale Sorget, a spokesman for Whirlpool Corp. in Benton Harbor, Mich.

But some of those same companies said they are upset by a provision in the law that requires a 60-day notice before any significant layoff, even when a plant isn’t being closed permanently. Violations of either the plant closing or layoff notice requirements could lead the Labor Department to make firms pay up to 60 days’ back pay and benefits to each worker affected.

“The layoff notice may be a problem for us,” said Henry Von Spreckelsen, a spokesman for Bethlehem Steel in Bethlehem, Pa. “You need to react to market conditions in a layoff and that usually means reacting faster than 60 days.”

“The layoff notice provision was the big concern of ours all along,” added Sarah Ross, a spokeswoman for the National Assn. of Manufacturers in Washington. “It is a lot easier to know ahead of time when you are going to close a plant than it is to know when you have to lay some workers off.”

Some Exemptions

Others complained that a provision calling for advance notice of plant closings or layoffs when a company buys another firm and plans to reorganize its troubled operations could tie up acquisitions in a blizzard of lawsuits.

In fact, the law’s rather vague language, which provides exemptions for firms faced with “not reasonably foreseeable events” has convinced some companies that it will be left to the courts to interpret the legislation.

“It’s going to be open to a lot of speculative interpretation between now and next February,” when the law takes effect, added Roy Verley, a spokesman for Hewlett-Packard.

Even firms that usually provide advance notice of layoffs are upset by the imposition of a new federal law requiring it. Ford, which has already agreed with the United Auto Workers to a moratorium on plant closings until 1990, already gives 90-days’ notice to the union of any layoffs caused by a shift of work overseas.

But Ford officials still believe that the new federal layoff notice requirement is likely to lead to administrative headaches that aren’t caused by the union contract. “We have a lot of complex facilities, where it would be difficult to keep track of which departments might be vulnerable to layoffs down the road,” said Tom Foote, a Ford spokesman. “The layoff notice is going to lead to a lot of extra paper work.”

Other companies that provide far less notice of layoffs warn that the law could make matters worse during a downturn. Whirlpool, for instance, quickly laid off workers to cut costs at the start of the recession in the early 1980s, rehiring many of them when the economy recovered. At the start of the next recession, Sorget notes, companies may be left wondering whether they will be able to get an exemption from the law because of general economic conditions.

May Slow Job Growth

Despite such concerns, however, few large corporations lobbied very hard against the bill; many say they are paying more attention to the trade legislation that Congress and President Reagan are hammering out.

But business leaders warn that smaller firms, which often lack the staff or resources for long-range planning, may feel the brunt of the closing law.

Some also warn that the new law could slow job growth in the small business sector. To avoid the law, which applies only to firms with at least 100 workers, businesses may avoid extra hiring if it means going over the 100-employee limit, Ross of NAM warned. In some European nations, where similar laws apply to companies with more than 50 workers, firms nicknamed “49ers” have refused to hire new employees.

Other companies may create new corporate entities to divide their employees into smaller groups, and thus try to avoid the regulations, added Jim Weidman, a spokesman for the National Federation of Independent Businesses.

“Absolutely, companies are going to try anything to avoid regulations,” added Bart Payne, an Arcadia entrepreneur.