WARN ACT NEWS

US DOL Issues Limited Guidance During the Covid-19 Pandemic

The U.S. Department of Labor has issued limited guidance for employers during the ongoing pandemic.  The guidance recognizes the obligation of covered employers to provide notice of layoffs that are anticipated to last more than 6 months and, for layoffs initially expected to last less than six months, to provide notice when extensions of those layoffs become reasonably foreseeable.  Throughout the pandemic, the application of the unforeseeable business circumstances exception has been at the forefront of WARN Act practitioners' minds.  The DOL's guidance recognizes that application of the "“unforeseeable business circumstances” exception rests on an employer’s particular business circumstances." 

The WARN Act's regulations at 20 CFR 639.9 states:

(1) An important indicator of a business circumstance that is not reasonably foreseeable is that the circumstance is caused by some sudden, dramatic, and unexpected action or condition outside the employer’s control. A principal client’s sudden and unexpected termination of a major contract with the employer… and an unanticipated and dramatic major economic downturn might each be considered a business circumstance that is not reasonably foreseeable. A government ordered closing of an employment site that occurs without prior notice also may be an unforeseeable business circumstance.

(2) The test for determining when business circumstances are not reasonably foreseeable focuses on an employer’s business judgment. The employer must exercise such commercially reasonable business judgment as would a similarly situated employer in predicting the demands of its particular market. The employer is not required, however, to accurately predict general economic
conditions that also may affect demand for its products or services.

While many of the closures and layoffs occurring in the early months of the pandemic are likely to come within the unforeseeable business circumstances exception, as the pandemic continues the applicability of the exception is likely to narrow considerably. 

Notably, the guidance recognizes that notice sent via email may be appropriate under certain circumstances.  The guidance reads:

A WARN notice sent via email must still be specific to the individual employee, and comply with all requirements of the WARN Act statute and  regulations regarding written notifications.

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[E]mployers may issue WARN notices via email, although the same requirements for the content of the notices remain in place (found at 20 CFR 639.7). Given the COVID-19 pandemic related guidelines and orders issued by many States, email may be a preferred method of notifying State and local government personnel ...

 

 

From the Second Circuit, Another Good Decision on Single/Joint Employer

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  [228]  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.

The decision in Guippone can be found here.

A Good Decision from the North District of Indiana on Single/Joint Employer

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.  

Unemployment Across The Nation

The American Observer posts a multimedia presentation by Latoya Egwuekwe that starkly reveals the spread of deepening unemployment across the nation.  Using U.S. Dept of Labor, Bureau of Labor Statistics data, the presentation titled The Decline: The Geography of a Recession graphically shows continuing increases in county unemployment rates from January 2007 through the present. 

Record High Extended Mass Layoffs In Third Quarter

The U.S. Department of Labor released its third quarter report for extended mass layoffs.  The report finds a record high number of extended mass layoffs for any third quarter previously reported (since data was first collected in 1995).  The 1,776 extended mass layoff events affected more than 275,000 workers.  The Western and Midwestern states were the hardest hit. 

Since being introduced before the U.S. Senate and House of Representatives, WARN Act reform bills (FOREWARN Act) S. 1374 and H.R. 3042 have been referred to and remain pending before committees of both chambers.

Colibri Workers - Update from Rhode Island

In a June 28, 2009 article, In These Times contributing editor, Kari Lydersen, provides an update on the courageous struggles of former Colibri Group workers to obtain back pay under the WARN Act.  Ms. Lydersen also has a forthcoming book, Revolt On Goose Island: The Chicago Factory Takeover, and What It Says About The Economic Crisis, which covers the sit-in by Republic Windows workers earlier this year at a factory in Chicago.  Among other issues, the Republic Windows sit-in occurred in response to the employer's failure to meet WARN Act requirements.

Republic Windows Factory Sold - New Owner Pledges To Rehire Displaced Workers

In February 2009, the Republic Windows’ Chicago factory was sold to Sunnyvale, Calif.-based Serious Materials, Inc.  Serious Materials is a manufacturer of environmentally sustainable construction products.  Serious Materials has pledged to reopen the factory and hire back the factory’s former workers. On December 2 last year, the owners of Republic Windows and Doors announced that their Chicago factory would be shutting down in three days.  In the weeks preceding, the company’s union workers noticed equipment being moved out of the plant at night and suspected that the owners were selling off equipment and planning to close the facility.  With the December 2 announcement, workers feared that the company planned to liquidate the remaining equipment and were closing the facility in violation of the workers’ rights under the WARN Act and without payment of back pay, accrued vacation, and other benefits.  (See reports here and here).  The employer claimed that the plant was being closed because the company’s primary lender, Bank of America, refused to extend further credit.  Bank of America had recently received approximately $25 billion from the federal government – money, which, among other purposes, was expected to be used to extend loans to companies facing circumstances similar to Republic Windows.  The workers however also learned that, while claiming to be without cash, the owners of Republic Windows had recently purchased a nonunion facility in Iowa.  On December 5, over 200 workers engaged in the first worksite sit-in seen in this country in many years when the workers refused to leave the factory until management negotiated the payment of severance pay and benefits.  With the support of their union, the United Electrical, Radio and Machine Workers of America United Electrical, Radio and Machine Workers of America (UE), and the support of people throughout the country, Republic Windows workers obtained a settlement and voted to leave the factor after ten days.

In February 2009, the Republic Windows’ Chicago factory was sold to Sunnyvale, Calif.-based Serious Materials, Inc.  Serious Materials is a manufacturer of environmentally sustainable construction products.  Serious Materials has pledged to reopen the factory and hire back the factory’s former workers. On December 2 last year, the owners of Republic Windows and Doors announced that their Chicago factory would be shutting down in three days.  In the weeks preceding, the company’s union workers noticed equipment being moved out of the plant at night and suspected that the owners were selling off equipment and planning to close the facility.  With the December 2 announcement, workers feared that the company planned to liquidate the remaining equipment and were closing the facility in violation of the workers’ rights under the WARN Act and without payment of back pay, accrued vacation, and other benefits.  (See reports here and here).  The employer claimed that the plant was being closed because the company’s primary lender, Bank of America, refused to extend further credit.  Bank of America had recently received approximately $25 billion from the federal government – money, which, among other purposes, was expected to be used to extend loans to companies facing circumstances similar to Republic Windows.  The workers however also learned that, while claiming to be without cash, the owners of Republic Windows had recently purchased a nonunion facility in Iowa.  On December 5, over 200 workers engaged in the first worksite sit-in seen in this country in many years when the workers refused to leave the factory until management negotiated the payment of severance pay and benefits.  With the support of their union, the United Electrical, Radio and Machine Workers of America United Electrical, Radio and Machine Workers of America (UE), and the support of people throughout the country, Republic Windows workers obtained a settlement and voted to leave the factor after ten days.