What law restricts a plant from reopening after closure?

Answer 1

There is nothing in Federal law that directly restricts a plant from reopening after closure. There are some indirect restrictions.

The Worker Adjustment and Retraining Notification Act ("WARN") requires that large employers must give 60 days notice of a pending plant closure under certain circumstances. The US Department of Labor estimates that WARN requirements affect approximately 25% of plant closings. The penalty for not giving the required notice is payment of wages to the laid off workers for up to 60 days.

Nothing in WARN restricts the plant that has announced it's closing then failing to close or reopening.

The laws governing unionized plants might impose a burden on reopening a plant. When a plant is closed for a short period, reopening might force the company to honor the union representation and any existing contract after the reopening. Many plant closures are caused by the high cost and inflexibility of their union contract, if reopening the plant would put a company in the same financial difficulties that caused it to close, the company may well opt to open a plant somewhere else rather than reopening a closed plant.

Environmental problems caused by former management might make a plant unattractive. The EPA laws forces a new employer at an old plant assumes the former employers' liabilities for any pollution caused by the plant, even pollution that is decades or centuries old. A company might be afraid of the unknown liabilities attached to a closed plant.

Unemployment and workers compensation penalties from a previous employer may be transferred to the new employer. When plants close there are many people that collect unemployment there is also a flood of worker injuries and workers' comp claims. Reopening a plant, could transfer these costs to the new employer forcing them to look elsewhere for a new plant.

Another consideration is that the optimum design for a factory is constantly being updated and reviewed. If a plant was the peak of efficiency when it was opened 20, 30 or more years ago but isn't compatible with current production methods, it might be cheaper, faster and easier to just build a new plant rather than attempting to update an old design.

The US has the highest tax rates of any developed country and the huge deficits planned for the Federal government is making many people nervous about hyperinflation and a weak dollar. The US tax rates make it difficult or impossible to compete with companies that operate in more business friendly countries. The Obama administration is currently considering increasing taxes on businesses that operate overseas which would force many to close their US operations before the taxes drag the entire company down.