The Worker Adjustment and Retraining Notification Act of 1988 (the “WARN Act” –29 U.S.C. §§ 2101 to 2109 ) is a US federal labor law which requires most employers with 100 or more employees to provide 60 calendar-day advance notification of plant closings and mass layoffs of employees, as defined in the Act.
The advance notice is intended to give workers and their families transition time to adjust to the prospective loss of employment, to seek and to obtain other employment, and, if necessary, to enter skill training or retraining programs that will allow these workers to successfully compete in the job market.
In addition to the WARN Act, which is a federal law, several states have enacted similar acts that require advance notice or severance payments to employees facing job loss from a mass layoff or plant closing.
For example, California requires advance notice for plant closings, layoffs, and relocations of 50 or more employees regardless of percentage of workforce, that is, without the federal “one-third” rule for mass layoffs of fewer than 500 employees. Also, the California law applies to employers with 75 or more employees, counting both full-time and part-time employees.
A comparison of the key provisions of the Federal and California requirements can be seen in the Overview published by the Employment Development Department.
Employers who violate § 2102 of the federal WARN act are required to provide aggrieved employees “back pay for each day of violation.” The employer may avoid this liability by proving that it qualifies for the Act’s “faltering company” exemption, or that the closing or layoff resulted from “unforeseen business circumstances” or a “natural disaster.”
And a case of first impression from the Fifth Circuit Court of Appeals determined that the economic impact of COVID-19 did not qualify as a “natural disaster” exemption. Although California is in the 9th Circuit, and the case is not controlling law, it is still illustrative on how courts might view the issue.
In Easom v. US Well Services, Inc., No. 21-20202 (June 15, 2022) a class action complaint was filed by former employees against US Well Services, Inc. for allegedly violating the WARN Act by terminating them without advance notice.
US Well argued that COVID-19 was a natural disaster under the WARN Act, and consequently, that it was exempt. The district court certified two questions for interlocutory appeal: (1) Does COVID-19 qualify as a natural disaster under the WARN Act’s natural-disaster exception?; (2) Does the WARN Act’s natural-disaster exception incorporate but-for or proximate causation?
The Fifth Circuit Court of Appeals held that the COVID-19 pandemic is not a natural disaster under the WARN Act and that the natural-disaster exception incorporates proximate causation.
However the case has yet to determine if the drilling company can avoid liability under WARN’s “unforeseeable business circumstances” exception defense, since that issue was not yet an issue on appeal. The answer to that may or may not be forthcoming as litigation progresses.
This case thus far is controlling law, on the two issues decided, for employers in Louisiana, Mississippi, and Texas (the Fifth Circuit Court of Appeals jurisdiction) however it is only persuasive law in other jurisdictions such as the Ninth Circuit which covers California.
Nonetheless it is important to keep this decision in mind as employers navigate through employment law related business decisions.