The Sugar Law Center for Economic and Social Justice is a national, non-profit organization, advocating for working people and their communities. We work for economic and social justice by binding corporations and government to their legal and ethical responsibilities. The Sugar Law Center has been at the forefront of WARN Act litigation since 1992. Together with our cooperating attorneys, the Law Center has represented thousands of workers and in hundreds of WARN Act cases throughout the country.
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In Guippone v. BH S&B Holdings L.L.C., 737 F.3d 221 (2d Cir. Dec. 10, 2013), the Court of Appeals considered whether a private equity firm and/or a parent holding company could be liable as a single employer under the WARN Act when layoffs were undertaken at a subsidiary retail clothing store chain. The Court of Appeals upheld the lower court's dismissal of the private equity firm but overturned the dismissal of the parent holding company finding:
The record evidence would allow a jury to conclude that Holdings was so controlled by HoldCo that it lacked the ability to make any decisions independently, and that the resolution passed by HoldCo's board "authoriz[ing] Holdings to effectuate the Reduction in Force" was, in fact, direction from HoldCo to Holdings to undertake the layoffs. Authorizing layoffs is not just a prerogative of ownership—it's a function of being an employer, especially where, as here, HoldCo was the sole member and manager of Holdings, and the HoldCo board operated as Holdings' board. There is sufficient evidence in the record to allow a jury to conclude that Holdings was not free to implement its  own decisions, and that the layoffs were, in fact, directed by HoldCo.
"[B]ecause the balancing of the factors is not a mechanical exercise, if the de facto exercise of control was particularly striking... then liability might be warranted even in the absence of the other factors." Pearson, 247 F.3d at 504 (internal citation omitted). Here, there is sufficient evidence from which a jury could conclude that HoldCo directed the layoffs with no regard to Holdings' separate corporate form. Given this, we reverse the grant of summary judgment to HoldCo.
In late September, the Northern District of Indiana issued an opinion and order denying defendants' motion to dismiss. The court considered whether a private equity firm (Monomoy) could be held liable under the WARN Act for layoffs at plastics manufacturing facility operated by a limited liability company (Fortis). The court found that:
This is a close case, but when each factor is balanced according to its relative weight, Mr. Young’s allegations regarding the status of Fortis and Monomoy as the “single employer” of Mr. Young and the other class members are sufficient to survive Monomoy’s Motion to Dismiss. On the issue of highest importance—the decision to close the Fort Smith Facility—Mr. Young made a number of clear factual allegations regarding Monomoy’s involvement and exercise of control over Fortis. As was noted in Pearson, if sufficiently egregious, de facto exercise of control can be sufficient to warrant liability on its own. Pearson, 247 F.3d at 496.
The case is Young v. Fortis Plastics, L.L.C., 2013 U.S. Dist. LEXIS 137075 (N.D. Ind. Sept. 24, 2013). The court's opinion can be found here.
With record high job dislocation in recent years, the nation’s courts have been confronted with numerous related lawsuits, many of which have been filed based on violations of the WARN Act. The following summaries detail decisions entered in recent months.
Platt v. Freedom Mortg. Corp. (D.N.J. 2010). Plaintiffs alleged that the Defendant terminated their employment as part of a mass layoff in January 2010 without giving the required advance notice under the WARN Act. The Defendant moved to dismiss for failure to state a claim and asserted that only 44 of the 60 employees were laid off. The court recognized that it would be improper to consider the employer’s extraneous evidence on the pre-answer motion to dismiss. As a result, the court denied the Defendant’s motion finding that Plaintiffs alleged facts sufficient to show that the Defendant is an employer subject to the 60 day advance notice provision and alleged facts sufficient to show that the Defendant’s layoffs constituted a mass layoff.
In re Storehouse, Inc. (Bkrtcy. E.D. Va. 2010). The Plaintiff brought an action against his former employer under the WARN Act. The court found that the Plaintiff was not a mobile worker, but rather, had worked from an identifiable single site of employment. The court found further that layoffs at the Plaintiff’s site of employment affected fewer than 50 people. As a result, the court held that the Plaintiff did not qualify for WARN Act protections.
Bennett v. Roark Capital Group, Inc. (D. Me. 2010). Former employees and their labor union brought an action against their employer WSI and various other corporate parents. Among other claims, the Plaintiffs alleged violations of the WARN Act. The Defendants moved to dismiss.
To determine the whether the corporate parent companies qualified as the employer under the WARN Act, the court recognized two tests. Under the first test, the court considered whether the parent companies and WSI had: (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) the dependency of operations between the companies. Under the second test, the court considered the: (1) interrelation of operations between the companies; (2) whethere there was common management; (3) the existence of centralized control of labor relations; and (4) common ownership. The court found it improper to consider the probability that there will be such evidence prior to the completion of discovery. The court held that Plaintiffs were entitled to conduct discovery to determine if such evidence exists and denied Defendants’ motion to dismiss.
Richards v. Advanced Accessory Systems, LLC. (E.D. Mich. 2010). Plaintiffs alleged a WARN Act violation when they were informed that they were laid off without 60 days advance. The court examined the extent to which an entity with a controlling ownership interest in an employer is subject to WARN Act liability.
Looking to US DOL regulations, the court considered the following factors: (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 court found that the third, fourth and fifth factors weighed in favor of the Defendant parent corporation and granted that company’s motion for summary judgment.
In re Taylor Bean & Whitaker Mortgage Corp. (Bkrtcy. M.D. Fla. 2010). On WARN Act claims, Plaintiffs requested certification of a class. Defendant argued that the claims should be handled through the claims administration process and that an adversary proceeding was unnecessary. The court found that a class action adversary proceeding was appropriate and preferable to the claims procedure and that an adversary proceeding was necessary to protect employees’ rights given the relatively small nature of the individual claims.
In re FF Acquisition Corp. (Bkrtcy. N.D. Miss. 2010). Former employees alleged that their former employer violated the WARN Act when, on the day of filing for bankruptcy relief, the employer terminated all manufacturing activities and issued a notice that it was ceasing business operations. In order to be exempt from the 60 day advance notice requirement, the court recognized that the employer must show that the circumstances were unforeseeable and that the layoffs were caused by those circumstances. The Plaintiffs asserted that the shutdown was foreseeable due to variety of factors. The Defendant stated that the failure of the company’s three principal customers to provide written commitments for orders by August 2005 resulted in an inability to provide their primary lender with a viable business plan showing that the company could repay its debts. Without funding from their lender, business operations could not continue.
The court held that the “unforeseen business circumstances” and the “faltering company” exceptions to WARN Act liability applied to the facts of the case. The court’s decision seemingly misapprehends the unforeseen business circumstances exception. By its very terms, a faltering company that is actively seeking capital (under the second exception) not only forsees but is critically aware of the dire circumstances necessitating the capital sought. Under such conditions, the adverse business circumstances cannot be considered “unforeseeable.”
Eash v. Export Packaging Co., Inc. (C.D. Ill. 2010). Plaintiffs alleged that the Defendant employer, failed to provide adequate (60 day) notice prior to the termination of their employment. Plaintiffs brough a motion for class certification that was not opposed by the Defendant.
Despite class certification being properly and routinely granted in such cases, the court curiously found it hard to believe that Plaintiffs would “be familiar with which employees did or did not receive written notice of their terminations” and that the Plaintiffs thereby failed to establish the numerosity requirement of FRCP 23. Plaintiffs’ motion for class certification was then denied without prejudice.
Gross v. Hale-Halsell Co., 554 F.3d 870 (2009). Plaintiffs
were employed by Hale-Halsell Co. (“HHC”). HHC owned fifty percent of United
Supermarkets, which was also HHC’s largest customer. At times, HHC failed to
meet orders that United requested. United terminated the relationship, and HHC
began experiencing financial troubles. In
January 2004, HHC met with some of its employees informing them of impending
layoffs. Approximately two hundred employees were to be laid off the very next
day. The plaintiffs brought this action and HHC moved for summary judgment on
the basis that it was excused from the WARN Act requirements based on the
unforeseeable business circumstance exception and the faltering company
exception. The district court granted
the summary judgment holding that the termination of the United-HHC
relationship was unforeseeable and caused the mass layoffs. The plaintiff
Court of Appeals recognized that in asserting the unforeseeable business
circumstance exception, the company has the burden of proving the circumstances
faced were not reasonably foreseeable and that the unforeseeable circumstances
was in fact the cause of the layoffs. The court concluded that the evidence showed
that HHC could not reasonably foresee that United would terminate their
relationship, which would make the circumstance unforeseeable.The court then went on to discuss the
regard to causation, the court concluded that HHC’s decision to shut down came
shortly after termination of the relationship with United. From this, the court
held that United’ withdrawal was the cause of HHC’s decision to layoff its
workers. Because the requirements of
the unforeseeable business circumstances exception found to have been met. The
court affirmed the decision of the district court.
In re Continental AFA Dispensing Co., 403 B.R. 653 (Bkrtcy.E.D.Mo.,2009). In
July 2008, Debtors terminated the majority of their 743 employees and in August
2008 filed for Bankruptcy. On August
11, 2008 Joshua Bridges, Plaintiff, filed a class action adversary proceeding
complaint on behalf of himself and a class of similarly situated employees
seeking damages under the WARN Act.
main issue the court dealt with was whether an employee terminated pre-petition
by a debtor can be granted an administrative expense claim for back pay under
the WARN Act. The granting of
administrative expense status gives those claims top priority for payment. The court found that to be granted
administrative expense claim status under the Bankruptcy Code the plaintiffs
had to show that the services were rendered post-petition, and those services
provided a direct and substantial benefit to the Debtor’s estate. The Debtors admitted that they had breached
the 60 day requirement under the WARN Act by terminating the employees, but
argued that the termination occurred pre-petition, and therefore, the
plaintiff’s services were not performed to preserve the estate. The court
denied the claim for administrative expense status, stating that a WARN Act
claim, for an employee terminated pre-petition, is not “an actual and necessary
expense of preserving an estate.”
In re Powermate Holding Corp., 94 B.R.
March 10, 2008, the Debtor Defendants sold their Minnesota assets and
terminated the employment of all the workers at that location. On March 17, 2008 the Debtor Defendants
eliminated an additional 260 employees without prior notice, and then filed for
Chapter 11 Bankruptcy.Plaintiffs filed a claim charging violations
of the WARN Act. The Debtor Defendant
moved for a dismissal or a determination that those damages were not entitled
administrative expense priority status.
light of the 2005 changes to the United States Bankruptcy Code, the court first
determined how the amendment of 11 USC § 503(b)(1)(A)(i) and (ii) should be
interpreted. Within these sections, the
court found the two subsections (i) and (ii) as categories within a particular
subset of allowable administrative expenses that were “actual, necessary costs
and expenses of preserving the estate.” § 503(b)(1)(A). Therefore the court
held that the amendment was to be independently evaluated in determining
whether the WARN Act claims were administrative expense claims. This was in
contrast to In re First Magnus Financial Corp., 390 B.R. 667 (Bkrtcy.D.Ariz.,2008),
which interpreted that conjunction “and” to mean that both provisions, (i) and
(ii), should be read together, requiring both sections to be satisfied for a
claim to qualify as an administrative expense.
court found that the decisive factor in determining whether a claim should
receive administrative expense status was the relation of the petition date to
the time when the rights or claims to back pay vested. If the claim vested pre-petition the claim
would not be entitled to administrative expense status because the back pay
would be attributable to the time occurring prior to the commencement of the bankruptcy
case. If the claim vested post-petition the claim would be entitled to
administrative expense status because the back pay would be attributable to the
time occurring after the commencement of the case.
court concluded that WARN Act claims vest at the time of termination. Therefore
the Plaintiff and employees claims vested entirely when they were terminated
pre-petition, and were not entitled to administrative expense claim status in
this case. The court also stated that other courts had consistently held that
pre-petition claims, such as the present claims, were entitled to fourth or
fifth level priority status pursuant to 11 U.S.C. § 507(a)(4) and (5).
In Meson v. GATX Technology Services
Corporation, 507 F.3d 803 (C.A.4
2007) the court held that an employee's home office was her “single site of
employment” for purposes of the WARN Act, affirming a lower court’s summary
judgment decision in favor of the employer. The court reasoned that the home office where the sales representative
was based, and not the headquarters to which she reported, was her “single site
of employment” for purposes of the 50-employee single-site layoff
requirement. The court found that WARN
Act provisions applicable to “workers whose primary duties require travel from
point to point” was intended to apply only to truly mobile workers without
regular, fixed place of work.
In New York’s Health and Human Service
Employees Union, 1199/SEIU, AFL-CIO v. Grossman, 2007 WL 2907386 (E.D.N.Y. 2007)
a U.S. District Court out of New York denied plaintiff-employees’ motion for
summary judgment. Abraham Grossman and
Chaim Sieger closed a long-term residential adult care site which they owned
and operated. Upon closing, at least 80
of the site’s employees began working at
a new site owned by the employer. The
question for trial will be whether the 80 employees were transferred to the new
site or whether they were independently hired by the new site’s
administrator. As a result of the
closing, plaintiff-employees lost their seniority, lost health and pension
benefits and had to be represented by a new union with a new contract at the
California This site has listings of committee members and contact information for state Senators and Representatives.
California Assembly Bill, AB 1543 Bill would require the Employment Development Department, upon receipt of the written notice of mass layoff or closing, to forward a copy of the notice to the Governor’s Office of Business and Economic Development and to post the notice on state website.
Minnesota This site has listings of committee members and contact information for state Senators and Representatives.
New Jersey Assembly Bill, A2278 Bill would require the Council on Affordable Housing to adjust a municipality's fair share obligation to reflect any permanent job loss within a municipality upon petition of the municipality. Related bill at A1264.
New Jersey This site has listings of committee members and contact information for state Senators and Representatives.
Vermont This site has listings of committee members and contact information for state Senators and House Representatives.
Wisconsin Assembly Bill, AB 375 Bill authorizes state economic development corporation to designate as a development opportunity zone an area in a county that experiences a mass layoff or business closing.
Wisconsin This site has listings of committee members and contact information for state Senators and Assembly members.
Wisconsin Senate Bill, SB 293 Bill authorizes state economic development corporation to designate as a development opportunity zone an area in a county that experiences a mass layoff or business closing.