The U.S. 5th Circuit Court of Appeals (whose rulings apply to all Texas employers) has determined that the COVID-19 pandemic is not considered a natural disaster, thus it is not an exception to the federal law that requires businesses to give employees advance notice of mass layoffs. Employers could find themselves liable for mass layoffs that occurred two years ago.
What Is the WARN Act?
Passed in 1988, The Worker Adjustment and Retraining Notification (WARN) Act is a U.S. labor law intended to protect workers. It requires most employers with 100 or more employees to provide a 60-day advance notification of mass layoffs or plant closings.
A plant closing occurs when a single site of employment temporarily or permanently shuts down, resulting in employment loss for at least 50 employees during a 30-day period. A mass layoff is a reduction in force that results in employment loss for 50+ employees, if that comprises 33% of the active workforce, or 500+ employees generally.
There are some exceptions to the WARN Act’s notification requirement, including natural disasters. The plant closing or mass layoff must be a direct result of a natural disaster for an employer to qualify and have notification requirements reduced. Covered employers that do not qualify for an exception and fail to meet the requirements of the WARN Act can be liable to affected employees for back pay and benefits.
How Does the COVID-19 Pandemic Come into Play?
The unforeseen onset of the COVID-19 pandemic caused employers to make many difficult decisions regarding their businesses. As a result, millions of employees were subject to layoffs since March of 2020. Some employers believed a 60-day notification wasn’t required as the pandemic was an “unforeseeable business circumstance.” Others believed the natural disaster exception applied. At that time, there was no precedent for application of the WARN Act in the wake of a pandemic.
However, a decision coming from the 5th Circuit on June 15, 2022, has provided some clarification. Although a district court previously held that the COVID-19 pandemic was a natural disaster under the WARN Act, the 5th Circuit’s three-judge appellate panel reversed this holding. The panel found that the virus does not qualify as a natural disaster according to the language used in the statute. The specific mention of earthquakes, floods, and droughts, shows the intended use of the term was for geological events. Thus, the natural disaster exception does not apply to plant closings and mass layoffs caused by the COVID-19 pandemic.
What Does This Mean for Covered Employers?
This decision from the 5th Circuit may lead to some difficulties for covered employers. Companies that failed to provide a 60-day notice for mass layoffs due to the pandemic may now find themselves liable for back pay and benefits. These employers could also be subject to a civil penalty of up to $500 per day of violation.
Since WARN Act claims that arose from the pandemic are likely not yet barred by the statute of limitations, there is still time for employees to bring these actions. This means a surge in class-action lawsuits may be coming soon. Employers should consult with counsel for guidance on potential issues like these.
Good News: A Different Exception May Apply
While the assertion that the virus was a natural disaster is no longer viable within the 5th Circuit’s jurisdiction (Texas, Louisiana, and Mississippi), employers and their counsel may have a strong argument for the “unforeseeable business circumstances” exception. Under this, employment loss that was caused by an unexpected action or condition outside the employer’s control may qualify for reduced notification requirements. However, courts have varied in their application of this exception. It is essential that employers seek the advice of legal counsel to better understand and navigate their specific concerns related to the WARN Act.
For more information on COVID-19 and the WARN Act, see the Department of Labor’s COVID-19 FAQ.