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Coronavirus Layoffs Result In Class Action WARN Act Lawsuit

In what may be the first of many to follow, Hooters restaurant chain was hit with a proposed class action lawsuit alleging WARN Act violations. The lawsuit was brought in federal court by two employees on behalf of all employees in Florida whom Hooters allegedly failed to provide with 60 days advance written notice of their layoffs as required by federal law. Although the mass layoffs occurred in the context of the COVID-19 pandemic and government ordered closings, the plaintiffs contend that Hooters should have evaluated the impact of the pandemic sufficiently in advance of laying employees off. The complaint seeks 60 days' backpay and other damages for each day of advance notice employees were entitled to receive under WARN prior to being laid off. Alternatively, the complaint asks for damages caused by Hooters' alleged failure to give "as much notice as was practicable" under the circumstances, as required by D.O.L. regulations on the WARN Act. While the outcome of this lawsuit has yet to be determined, it and others likely to follow serve as a reminder to employers of the need to consider federal and state layoff and closing notification laws...even during a pandemic.

The federal WARN Act applies to employers with 100 or more employees; however, so-called "Mini WARN Acts" adopted under various state laws commonly cover employers with just 50 or fewer employees. These laws typically require that employees, their union representatives and/or state and local government officials be given written notification in advance of any defined mass layoff or closing. Triggering events typically involve those that impact 50 or more employees, but again, many state laws (e.g. WI and IL) trigger notice requirements when 25 or more employees experience an "employment loss." Most of these laws require at least 60 days advance notice, but how can an employer provide such notice when terminations or long-term layoffs are caused by something as unimaginable as a global health crisis? The WARN Act and similar laws provide for certain exceptions to the 60 day notice requirement; e.g. for "unforeseen business circumstances," "faltering businesses," or "natural disasters." However, employers who rely on these exceptions to conclude they are excused from providing any notice under these laws, may be making a costly mistake. D.O.L. regulations clearly state that where giving the full 60-day notice is not practicable, employers must provide as much notice as is practicable under the circumstances. In other words, when an employer becomes aware of the need to implement a covered plant closing or mass layoff, regulations consider just 2 working days as sufficient time to prepare and issue compliant notices under the law.

The federal WARN and similar state laws are full of nuances that create legal traps for employers and opportunities for plaintiffs and their lawyers. Here are just a few examples:

  • An employer need not close an entire plant to trigger a "plant closing" requiring advance notice; discontinuing an "operational unit" within a plant may trigger WARN if a sufficient number of employees are affected.
  • Employees do not need to be discharged to count toward the number of affected employees triggering notice requirements; e.g. a layoff lasting 6 or more months, or a reduction in hours of 50% or more in each of 6 consecutive months, can count as an "employment loss."
  • Employment losses are subject to being aggregated over 90 days, meaning employers not only should account for employees likely to be affected in any given month but also whether more employees may be impacted over roughly any rolling 3 month period.
  • Advance notification laws place considerable onus on employers to essentially predict the future to some degree. Arguments over whether closings and layoffs were foreseeable, often wind up in court as appears to be the plaintiff's argument in the pending case against Hooters.
  • Even where employees may already be furloughed or laid off, if it becomes apparent employees may not be recalled as originally expected the duty to issue WARN notices may be triggered after the fact (something counterintuitive in the context of laws requiring advance notification).
  • WARN and Mini WARN notices must comply with the very specific notice requirements of the law. For example, a generic letter that fails to address any one of the specific notice requirements such as bumping rights, expected duration of the event, etc., would be deficient.
  • Separate notices with different information must be sent to various government officials, union representatives and/or individual employees; one size does not fit all.

Given the complexities of federal and state notification laws, employers are well advised to take them into account from the moment they foresee any possibility of a plant closing, whether partial or total, temporary or permanent, or mass layoffs that might impact 50 or as few as 25 employees. Prudent employers may wish to have WARN-style notices prepared in draft form, ready to use during this pandemic. Two days is not much time to become familiar with WARN Act requirements, draft legally compliant notices, compile roster lists, etc., particularly during a crisis where things are so unpredictable from one day to the next. Unfortunately, for employers who may be experiencing great hardship during the Coronavirus pandemic plaintiff lawyers appear to still be actively working.

For answers to questions about what notification laws may apply to your business, when notice requirements have been or may be triggered, or for help with preparing compliant notices to use or have ready in draft form, contact attorney James Sherman: Email - [email protected]; Phone - (952) 746-1700.

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