WARN Litigation: An Inevitable Nuisance for Employers
In this unprecedented business environment, many employers have been forced to take swift action to stay afloat during the pandemic. Two common actions have been furloughs and layoffs. But each raises legal risks under the federal Worker Adjustment and Retraining Notification Act (“WARN”) and related state laws.
In short, WARN requires employers implementing a plant closing or mass layoff of at least 50 employees to provide 60 days’ notice before execution. Of course, such notice in the wake of COVID-19 risks and stay-at-home orders often has proved infeasible, if not impossible.
Furloughs – effectively, an unpaid leave of absence with the intention of recalling affected employees – offer a safe harbor from WARN at first glance. Specifically, WARN does not apply to furloughs of less than six months. Initial projections – and our best hopes – may have suggested that a furlough should be shorter than this duration. But employers should track the time closely, and consider whether an extension beyond six months may be on the horizon. If so, the furlough may trigger WARN requirements, after all.
Layoffs exceeding 50 employees frequently trigger WARN, but certain exceptions may apply in this unique circumstance. In particular, WARN provides exceptions to the 60-day rule for “unforeseen business circumstances” and “natural disasters.” Neither exception has been tested frequently in the courts, but it’s clear that reasonable business judgment, not hindsight, dictates.
While one or both of these exceptions seem applicable in the pandemic context, plaintiffs’ counsel nevertheless has wasted no time asserting WARN claims. In particular, lawyers in Florida filed a WARN class action against Hooters restaurants on April 16, apparently only three weeks after the defendant closed restaurants due to COVID-19. Plaintiffs’ counsel boldly argues that Hooters failed to give as much notice as possible, despite the pandemic’s rapid arrival. Surely more litigation – including similar class claims – will follow.
Employers who have implemented – or are still implementing – substantial furloughs or layoffs should remain cognizant of WARN obligations, despite the potential defenses to their coverage in this unique environment.