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.
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