Ninth Circuit: WARN Act Opinion

The WARN Act requires companies to give at least 60 days' notice of shutdowns and mass layoffs that affect a certain number of people.  For example, to be covered, a "mass layoff" must involve an "employment loss" for a group comprised of at least 50 employees who constitute at least 1/3  of the workforce. 

The thing is, the law and regulations contain a number of exceptions and special definitions regarding who is an employee, who counts as a layoff, etc. There are so many moving definitions and exceptions, it is impossible (or maybe just dumb) to give WARN advice "off the cuff."

One of the key definitions is "employment loss" because that's how you tell how many employees are affected by a layoff or shutdown.  If < 50 employees have suffered an "employment loss" then federal WARN is not triggered.

So, in Collins v. Gee West, the employer was looking for a buyer and gave less than 60 days' notice of a shutdown.  Collins and other sued for the WARN damages due for failure to give 60 days' notice.
But the Company's notice was that the shutdown would occur on October 7. By that date, all the employees had quit for other employment.  The Company argued that these employees voluntarily departed before the October 7 shutdown date. Having voluntarily departed, they did not suffer an employment loss.

The district court bought that argument and granted the employer's motion for summary judgment. On appeal, not so much. The Ninth Circuit held that when folks leave employment after being told the business is going to shut down, that is not a "voluntary departure" exception to the "employment loss" definition. As the court pointed out, if that were the case, then the only way to tell whether a WARN notice was due would be after the fact.  So, the employer must reasonably calculate how many employees are anticipated to be affected by the employer's layoff or shutdown decision. The fact that an employee does not wait to the last day to leave does not eliminate the requirement of counting that employee as part of the layoff.

I figured there would be a discussion of the defenses to inadequate notice like the "faltering company" exception. Maybe next time.

The case is Collins v. Gee West and the opinion is here.


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California WARN's Faltering Business Exception Explained

Happy new year everyone!

The director of California's Department of Industrial Relations issued an opinion letter clarifying one of the provisions of California's baby WARN Act. In essence, the law requires employers to provide 60 days' notice of a shutdown, relocation, or mass layoff under certain circumstances. However, there are some situations in which notice is not required. One is when the employer is actively seeking capital or business when the notice was required to be given (at least 60 days before the triggering shutdown):

1402.5. (a) An employer is not required to comply with the notice requirement contained in subdivision (a) of Section 1401 if the department determines that all of the following conditions exist:
(1) As of the time that notice would have been required, the employer was actively seeking capital or business.
(2) The capital or business sought, if obtained, would have enabled the employer to avoid or postpone the relocation or termination.
(3) The employer reasonably and in good faith believed that giving the notice required by subdivision (a) of Section 1401 would have precluded the employer from obtaining the needed capital or business. . . . .
(d) This section does not apply to notice of a mass layoff as defined by subdivision (d) of Section 1400.

Note that the defense does not apply to layoff notices, only to shutdown notices. So, if a company is looking for a buyer, is that the same as seeking capital or business? No, said the Director. The opinion letter surveys the analogous federal case law and concludes that the employer should have given the notice even though it was trying to obtain a buyer before it went out of business.
The opinion letter is here.

WARN Act Inapplicable to Remote Employees

The WARN Act normally applies to layoffs or plant closings at "single" sites of employment. There are detailed regulations on what constitutes a "single site." These regulations extend the "single site" concept to mobile workers (such as traveling salespersons), who receive work assignments and report to management at a "headquarters." These mobile employees may be covered by WARN under those special circumstances.

In Bader v. Northern Line Layers Inc., the workers were at construction sites in several states. Headquarters was in Billings, MT. The workers argued that because the construction assignments were temporary, and the Billings office handled all accounting, billing, payroll, and other administrative functions, they were actually employed in Billings for WARN purposes. The Ninth Circuit disagreed. The court noted that work assignments were made locally. Most of the employees were not Montana residents. The supervision was located locally, not in Montana, etc.

WARN is tricky and each layoff or shutdown needs to be closely examined in light of the applicable regulations and case law.