The 9th Circuit clarified employers need to determine the number of positions it plans to eliminate 60 days ahead of time in order to determine compliance under the WARN Act. The Court found employees who voluntarily leave after the company announces it will be shutting down will not serve to reduce the number of effected employees.
Gee West’s business was faltering and it began looking for a buyer in July 2007. Unable to find a buyer, the Company announced to its 150 employees on September 26, 2007, that if it did not find a buyer soon, it would close the business on October 7th. In the days following the announcement, 120 employees stopped coming to work. By October 5th, only 30 employees remained. The Company was forced to close the business two days earlier than planned because it did not have enough staff to run the plant. The employees claimed the Company failed to give proper notice under WARN.
Based on the small number of employees who were fired, the issue is does WARN apply? WARN requires employers to provide 60 days notice of covered plant closings and mass layoffs if at least 50 employees experience an employment loss. An “employment loss” does not occur if an employee voluntarily departs, retires, or is discharged for cause. Based on this definition, the Company argued it was not required to give WARN notice, because 120 of their employees left voluntarily, leaving the Company to terminate only 30 employees.
The 9th Circuit clarified the definition of “voluntary departure,” holding that employees who leave the Company in anticipation of a plant shut down are not considered a voluntarily departure. In addition, the Court instructed employers to calculate the number of employees who will suffer an “employment loss” 60 days before the closing of the business, not at the time of the closing. In making that determination, employers need not include “those whom the employer reasonably expects to retire, to discharge for cause, or to voluntarily depart before the closure.” (Employers would need evidence to support such a belief.)
At the time Gee West decided to shut down, it expected to eliminate 150 positions and that is the number which triggered the WARN obligation. The fact that only 30 were fired does not change this analysis.
As you can see, deciding whether or not a WARN notice is required is not always straight forward. If you are considering a large-scale layoff or closure, it is imperative you fully evaluate the mandates of WARN. Brody and Associates regularly advises management on complying with state and federal employment laws including the WARN Act. If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.965.0560.
