Ivo is a partner in Obermayer’s Labor Relations & Employment Law Department. He focuses his practice on representing employers, including advising companies on how to handle employee issues, and defending employee claims...Read More by Author
Federal Court Fires a WARNing Shot at Employer Over COVID-related Layoffs on Short Notice
Under the Worker Adjustment and Retraining Notification Act of 1988 (“WARN Act”), employers with more than 100 employees are generally required to provide a minimum of sixty (60) days’ notice prior to a plant closing or mass layoff that would result in an employment loss of at least 50 or more full-time employees at a single site of employment. However, there are exceptions to this requirement if an employer can show that the mass layoff or worksite closing is due to unforeseen business circumstances or natural disasters. These exceptions have been widely invoked by employers in response to the COVID-19 pandemic.
In a recent decision in the U.S. District Court for the Middle District of Florida involving Enterprise car rentals, the Court analyzed whether Enterprise could rely on either defense after it conducted layoffs during the early weeks of the pandemic with little notice to employees. The Court held that employers may not avoid WARN notice obligations for pandemic-related layoffs based on the defense of “natural disaster exception,” and denied the motion to dismiss based on the “unforeseen business circumstances” exception as premature.
When employers invoke the “natural disaster exception,” no notice is required “if the plant closing or mass layoff is due to any form of natural disaster, such as a flood, earthquake, or the drought currently ravaging the farmlands of the United States.” 29 U.S.C. § 2102(b)(2)(B). The Court reasoned that while the COVID-19 pandemic may constitute a natural disaster within the meaning of the WARN Act, the connection between the layoffs and the pandemic was too tenuous. The court explained that the pandemic caused global concern over the spread of the virus, leading to a reduction in travel. By contrast, the court pointed to the example of a factory being destroyed overnight by a massive flood as a layoff being the “direct result” of a natural disaster. The Court also pointed out that Department of Labor’s COVID-19 WARN Act Guidance does not mention whether a pandemic is a “natural disaster.”
While the Court acknowledged that the COVID-19 pandemic may allow Enterprise to invoke the “unforeseeable business circumstances” exception, it noted that dismissing the case at the pleading stage would be premature because, unlike the “natural disaster” exception, this particular exception does not dispense with the notice requirement altogether, but instead softens it. Employers must still “give as much notice as is practicable” and “give a brief statement of the basis for reducing the notification period.” 29 U.S.C. § 2102(b)(2)(A). In this case, however, Enterprise gave virtually no notice to the affected employees.
On January 19, 2021, Enterprise filed a motion for permission to file an interlocutory appeal to the Eleventh Circuit to review the trial court’s decision. Specifically, Enterprise sought review of the threshold question of the proper standard required to establish that a layoff is due to a natural disaster under the WARN Act.
This Enterprise case is still ongoing and HR Legalist will continue monitoring this case. As the question of whether the “natural disaster” exception to the WARN Act’s notice requirement remains unresolved, employers should presume that they need to comply with the notice requirement. Should an employer seek to rely on the “unforeseeable business circumstances” exception, it should provide as much notice as is practicable along with an explanation for the reduced notification. It should also be prepared to litigate the issue, as disputes over whether the reduced notice is proper will be determined on a case-by-case basis. Please also be aware that some states have more stringent notice requirements, as noted in HR Legalist’s previous blog article. It is therefore important for employers to consult with counsel before employers conduct COVID-19 layoffs.
The information contained in this publication should not be construed as legal advice, is not a substitute for legal counsel, and should not be relied on as such. For legal advice or answers to specific questions, please contact one of our attorneys.