August 31, 2020

As Fall Approaches, WARN Act Lawsuits Likely to Heat Up

The global COVID-19 pandemic continues to impact businesses with no clear end in sight. While the prospect of a functioning vaccine may have a while to go, a spike in Worker Adjustment and Retraining Notification (WARN) Act litigation may be on the horizon. Furloughs and workforce reductions have been prevalent since mid-March, leaving millions of employees without jobs or on extended leaves while they wait (and hope) to be recalled to work. While only about a dozen WARN Act lawsuits have been filed to date, as layoffs extend beyond six months, new workforce reductions occur, and more plaintiffs’ attorneys shift their attention to WARN Act claims, the remainder of 2020 may become a hurricane season of sorts as WARN Act litigation could flood the courts. And as the days and weeks go by, an employer’s ability to successfully assert the “unforeseeable business circumstances” defense to providing less than 60 days’ notice of a “mass layoff” or “plant closing” has diminished and will only become more challenging for employers to assert.  

The Federal WARN Act

As explained more fully in our March and June client alerts under the federal WARN Act, an employer must ordinarily give 60 days’ advanced notice of a mass layoff or plant closing before laying off a certain number of employees or closing down an establishment. The WARN Act, however, allows for shortened notice when a mass layoff or plant closing is caused by an unforeseeable business circumstance. 29 U.S.C. §2102(b)(2)(A). In the event of an unforeseeable business circumstance, for which the unprecedented COVID-19 pandemic would seem to surely qualify, courts have said employers must issue notices that otherwise comply with the WARN Act requirements when the plant closing or mass layoff becomes “probable” — i.e., when the objective facts reflect that the layoff is more likely than not. In Re: AE Liquidation, Inc., 866 F.3d 515, 530 (3rd Cir. 2017).  Although the WARN Act requires employers to give as much notice as is practicable, there are times when no notice is practicable and the notice period may be eliminated, which a court determines on a case-by-case basis. Hotel Emps. & Rest. Empls. Int’l Union Local 54 v. Elsinore Shore Assocs., 173 F.3d 175, 187 (3d Cir. 1999).  Still, the linchpin is the unforeseeable nature of the business circumstances causing the mass layoff or plant closing. Also, in the case of a layoff originally anticipated to last less than six months, and therefore not constitute an “employment loss” under the WARN Act, if that layoff ultimately extends beyond six months then an employment loss occurs. In that situation, even employers that can successfully claim the unforeseeable business circumstances existed at the beginning of the furlough — justifying less than 60 days’ notice being provided before the furlough began — have to show they provided affected employees as much notice as possible as soon as it was "reasonably foreseeable" that an extension of the layoff beyond six months, or a permanent separation from employment, was going to happen. Therefore, employers who have conducted, or are contemplating, furloughs or workforce reductions must carefully consider whether WARN Act notice may be required and whether, almost six months into the pandemic, the unforeseeable business circumstances exception to providing 60 days’ notice remains viable.

Recent WARN Litigation

Although only about a dozen WARN Act lawsuits have been filed since March, that is likely to change as the plaintiffs’ bar waits for the proverbial dust to settle. One thing is certain — the incoming lawsuits will allege that any mass layoffs and plant closings conducted several months after President Trump’s declaration of a national emergency in March (and, in some cases, conducted shortly after that declaration) were foreseeable or became foreseeable, triggering the employer’s obligation to provide WARN Act-compliant notice before the employment losses occurred. And even if it may be clear that 60 days’ notice was not possible, plaintiffs may allege that more notice could have been provided by the employer, particularly where the employer provided little to no advance notice of the mass layoff or plant closing. A few examples of the filed WARN Act lawsuits provide some insight:

  • In May, a plaintiff sued her former employer, a rental car company, in the Middle District of Florida alleging that the company knew that demand for rental cars was declining amid the pandemic, yet failed to issue warnings of possible layoffs. Benson et al. v. Enterprise Holdings, Inc., 6:20-cv-00891 (M.D. Fl. May 27, 2020).  The plaintiff alleged the company furloughed employees for a few weeks, then terminated them without advance notice in violation of the WARN Act. The employer moved to dismiss, arguing that, among other things, it was excused from the WARN Act’s notice requirement because of the unforeseeable business circumstance brought on by the COVID-19 pandemic. The Court, however, did not reach the merits as it found the motion was mooted when the plaintiff amended her complaint. The amended complaint alleges that although defendants claim the unforeseeable business circumstance exception, they were still mandated by the WARN Act to give as much notice as practicable. The defendants may still move to dismiss on other grounds.  
  • In June, a plaintiff brought a class action in the Southern District of Texas against his former employer, a provider of steel fabrication services, alleging the company failed to provide any advanced noticed whatsoever after reasonably expecting that a layoff or plant closing would occur. Moreira et al. v. Spitzer Industries, Inc., 4:20-cv-02152 (S.D. Tex. June 18, 2020). The company recently answered, citing as an affirmative defense that it was excused from providing advanced notice pursuant to the unforeseeable business circumstances exception. 
  • Just before the end of August, former employees of a provider of high-pressure, hydraulic fracturing services sued the company in the Southern District of Texas, alleging the company violated the WARN Act by failing to provide sufficient (or any) advanced written notice of layoffs that occurred in March or April 2020. Easom et al. v. US Well Services, Inc., 4:20-cv-02995 (S.D. Tex. Aug. 26, 2020). The plaintiffs specifically allege that the company failed to give “as much notice as practicable,” indicating an acknowledgment of the unforeseeable business circumstance brought on by the COVID-19 pandemic. The plaintiffs also allege, however, that the layoff had been planned well in advance of March 2020. 

The Takeaways

Employers should take the recent WARN Act lawsuits as a cautionary tale and a call to action. With every passing day, the viability of the unforeseeable business circumstance exception becomes weaker and more susceptible to piercing. Employers should reassess immediately whether the business disruption caused by COVID-19 will continue and determine whether employment losses — including furloughs that were anticipated to last less than six months but that are now approaching that six-month mark — are forthcoming. Additionally, employers must keep in mind that the exception does not excuse them from providing at least some advanced notice in most circumstances.

For questions on WARN Act compliance, or on any of the state mini-WARN Acts, please contact Jerry Hathaway, Dan Prokott, or any other member of the Faegre Drinker labor and employment team. 

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