11th Circuit Declines to Aggregate Workers of Multiple Contractors for WARN Act Notification Purposes

Closing up shop and winding down a business can have significant legal ramifications for employers if not handled appropriately. The WARN Act was designed to prevent surprise upon unsuspecting groups of employees, but the law is relatively straightforward as to which employers must comply with these rules and under what circumstances. More ›

Second Circuit: Parent Company has Liability for Subsidiary’s WARN Violations

The Worker Adjustment Retraining and Notification Act ("WARN") requires employers with 100 or more employees to provide 60 calendar days' notice of plant closings or mass layoffs to give transition time to workers and their families to adjust to the prospective loss of employment, seek alternative jobs, and/or enter skill training or retraining to successfully compete in the job market. 29 U.S.C. §2201 et seq. Employers who fail to comply with WARN are liable to affected employees for up to 60 days of pay and benefits. 29 U.S.C. §2104(a)(1).

In this case, the employee was laid off by the employer and filed a class action alleging that the employer and its parent company and other related ownership entities violated WARN. Specifically, the employee claimed that the parent was liable for the employer's WARN violations because the parent company disregarded the employer's corporate form and exercised de facto control of the employer. As it turns out, the parent company was the sole member and manager of the employer, and the parent company's board operated as the employer's board.

The Second Circuit reversed summary judgment in favor of the parent company, finding that a triable issue of fact existed that would allow a jury to conclude that the employer was so controlled by the parent that the employer lacked the ability to make any decisions independently and that a parent company resolution authorizing the employer to layoff this employee and the class of similar employees was a function of being an employer and created liability. Adopting Department of Labor regulations to determine if separate entities are a single employer, the court considered whether there was (1) common ownership; (2) common directors and/or officers; (3) de facto exercise of control; (4) unity of personnel policies emanating from a common source; and (5) dependency of operations. The Second Circuit observed that the inquiry is a fact-specific balancing test, no one factor controls, and all factors need to be present for liability to attach to the related entity. Significantly, a separate legal existence will not insulate a parent company from liability for a subsidiary's WARN violations if the parent is the decision-maker responsible for the employment practice giving rise to the litigation.

If you have questions about Guippone v. BH S&B Holdings, LLC et al., No. 12-183 (2^nd Cir. December 10, 2013), please contact David I. Dalby.

Eighth Circuit: Current Economic Downturn was an “Unforeseeable Business Circumstance” Under the WARN Act

The Worker Adjustment and Retraining Notification (WARN) Act requires qualifying employers to provide written notice at least 60 calendar days in advance of plant closings and mass layoffs. An exception to the Act exists, however, for “unforeseeable business circumstances.” Under that exception, no advance notice is required when the layoff event is the result of business circumstances caused by a sudden, dramatic, and unexpected condition. In its July 2, 2012, decision in United Steel Workers Local 2660 v. U.S. Steel Corp., the Eighth Circuit approved a shortened WARN Act notice for the employer, holding that the current economic downturn fell within that “unforeseeable business circumstances” exception. More ›

Eighth Circuit Adopts Narrow Definition of “Mass Layoff” Under the WARN Act

An employer hired more than 100 workers to replace its employees who went on strike. Upon resolution of the strike, the employer fired 123 of the replacement workers and then reinstated 103 of the returning employees. The replacement workers sued, alleging that the employer had failed to provide an adequate termination notice under the Worker Adjustment and Retraining Notification Act (WARN Act). Under the WARN Act, an employer that conducts a “mass layoff” must provide notice to employees 60 days prior to the layoff. Under the Act, a “mass layoff” occurs when an employer terminates at least 33 percent of its active workforce or more than 500 workers. The replacement workers argued that the court had to consider the number of workers the employer fired, rather than the number of positions the employer eliminated to determine whether a “mass layoff” had occurred. The U.S. Court of Appeals for the Eighth Circuit disagreed and held that simply firing one worker and replacing him with another does not result in a reduction in force as required by the WARN Act. Rather, a reduction-in-force requires a net loss in productivity measured by the numerosity requirements set out in the Act. Accordingly, the employer did not conduct a “mass layoff” because it terminated 123 of the replacement workers, and filled their positions with 103 returning employees, meaning only 20 positions were eliminated. This case clarifies the requirements for a “mass layoff” under the WARN Act for both employers and employees in the Eighth Circuit. Employers must be aware that when positions are eliminated for more than 500 employees, or for at least 33 percent of their workforce, the WARN Act’s notice requirements must be followed.