HR Management & Compliance

As Weather Cools Down, WARN Act Lawsuits Likely to Heat Up

The global COVID-19 pandemic continues to affect employers, with no clear end in sight. While the prospect of a functioning vaccine may have to wait for a while, a spike in Worker Adjustment and Retraining Notification (WARN) Act litigation may be on the horizon.

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‘Hurricane Warning of Sorts’

Furloughs and workforce reductions have been prevalent since mid-March 2020, leaving millions of employees without jobs or on extended leaves while they wait (and hope) to be recalled to work. Only about a dozen WARN Act lawsuits have been filed to date, but the remainder of 2020 could become a hurricane season of sorts for litigation as:

  • Layoffs extend beyond six months;
  • New workforce reductions occur; and
  • More employees’ attorneys shift their attention to the claims.

As the days and weeks go by, your ability to assert the “unforeseeable business circumstances” defense for providing less than 60 days’ notice of a “mass layoff” or “plant closing” has diminished.

When Shortened Notice Periods Are Allowed

Employers must ordinarily give 60 days’ advance notice of a mass layoff or plant closing before laying off a certain number of employees or closing down an establishment. The WARN Act allows for a shortened notice period, however, when the mass layoff or plant closing is caused by an unforeseeable business circumstance, which would surely seem to cover the unprecedented COVID-19 pandemic.

When an unforeseeable business event happens, courts have said employers must issue notices that otherwise comply with the WARN Act requirements for when a plant closing or mass layoff becomes “probable”—i.e., when the objective facts reflect the layoff is more likely than not.

Although the WARN Act requires employers to give as much notice as possible, 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. Still, the linchpin is the unforeseeable nature of the business circumstances causing the mass layoff or plant closing.

What if Circumstances Worsen Later?

If you initially expect a layoff to last less than six months, it wouldn’t constitute an “employment loss” under the WARN Act. But, if it ultimately extends beyond six months, then a loss occurs. In that situation, even if you can successfully claim unforeseeable business circumstances existed at the beginning of the furlough—justifying less than 60 days’ notice at the outset—you must show you provided affected employees with 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, if you have conducted or are contemplating furloughs or workforce reductions, you 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 Act Litigation

Although only about a dozen WARN Act lawsuits have been filed since March, that’s likely to change as employees’ attorneys wait 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 Donald Trump’s declaration of a national emergency in March were foreseeable or became foreseeable, triggering the employer’s obligation to provide WARN Act-compliant notice before the employment losses occurred.

Even if it may be clear 60 days’ notice wasn’t possible, laid-off employees may allege the employer could have provided more warning, particularly when it provided little to no advance notice. Here are a few examples of the filed WARN Act lawsuits:

Florida rental car company. In May, an individual sued her former employer, a rental car company, in the Middle District of Florida alleging the company knew demand for rental cars was declining amid the pandemic yet failed to issue warnings of possible layoffs. She alleged the company furloughed employees for a few weeks, then terminated them without advance notice in violation of the WARN Act.

The employer requested dismissal of the case, arguing 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 never decided the point, however, because the former employee amended her complaint. She alleged that although the employer has claimed the unforeseeable circumstances exception, the Act still required it to give as much notice as practicable. The employer may still seek dismissal on other grounds. Benson et al. v. Enterprise Holdings, Inc., 6:20-cv-00891 (M.D. Fl., May 27, 2020).

Texas steel fabrication provider. In June, an individual filed a class action in the U.S. District Court for the Southern District of Texas against his former employer, a provider of steel fabrication services, alleging the company failed to provide any advance notice whatsoever after reasonably expecting a layoff or plant closing would occur. The company recently answered, claiming it was excused from providing advance notice under the unforeseeable business circumstances exception. Moreira et al. v. Spitzer Industries, Inc., 4:20-cv-02152 (S.D. Tex., June 18, 2020).

Texas hydraulic fracturing firm. Just before the end of August, former employees of a provider of high-pressure, hydraulic fracturing services sued the company in the same Texas federal court, alleging the firm violated the WARN Act by failing to provide sufficient (or any) advance written notice of layoffs that occurred in March or April 2020.

The former employees specifically allege the employer failed to give “as much notice as practicable,” indicating an acknowledgment of the unforeseeable business circumstance brought on by the COVID-19 pandemic. They also claim, however, the layoff had been planned well in advance of March 2020. Easom et al. v. US Well Services, Inc., 4:20-cv-02995 (S.D. Tex., Aug. 26, 2020).

Takeaways for Employers

You 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 circumstances exception becomes weaker and more susceptible to piercing:

  • Reassess immediately whether the business disruptions caused by COVID-19 will continue;
  • Determine whether additional employment losses—including furloughs that were anticipated to last less than six months but are now approaching that mark—are forthcoming; and
  • Keep in mind the unexpected business circumstances exception doesn’t excuse you from providing at least some advance notice in most situations.

Daniel G. Prokott, Gerald T. Hathaway, and Andres F. Puerta are attorneys with Faegre Drinker. You can reach them at daniel.prokott@faegredrinker.com, gerald.hathaway@faegredrinker.com, or andres.puerta@faegredrinker.com.