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Unforeseeable Business Circumstances Excused Employer's WARN Act 60-Day Layoff-Notice Requirement

  • July 20, 2012

The federal Worker Adjustment and Retraining Notification (WARN) Act’s “unforeseeable business circumstances” exception to the statute’s 60-day notification requirement applied where an employer ordered a mass layoff because of an unanticipated economic downturn without providing the statutory notice, the U.S. Court of Appeals for the Eighth Circuit has ruled.  United Steel Workers of Am. Local 2660 v. U.S. Steel Corp., No. 11-3002 (8th Cir. July 2, 2012).  The Court affirmed summary judgment granted to the employer in an action commenced by the union representing some of the employees.  The Eighth Circuit has jurisdiction over Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota.

Under WARN, a covered employer ordering a mass layoff or plant closing must provide 60 days’ written notice to affected non-union employees, union representatives, and certain government officials.  An exception to this requirement, for which an employer bears the burden of proof, has been made for “unforeseeable business circumstances.”  It permits an employer to order a mass layoff or a plant closing without giving the full 60 days’ notice if the layoff or closing is caused by business circumstances not reasonably foreseeable at the time that notice would have been required.  According to Department of Labor regulations, an “unanticipated and dramatic major economic downturn” is an example of such a business circumstance.  Further, the test for determining whether business circumstances are not reasonably foreseeable “focuses on an employer’s business judgment,” and an employer “must exercise such commercially reasonable business judgment as would a similarly situated employer in predicting the demands of its particular market.”  The employer is not required “to accurately predict general economic conditions that also may affect demand for its products or services.”  In its preamble to the WARN regulations, the DOL stated the exception should not be narrowly construed.

The employer in this case commenced a layoff of more than 300 employees at its Keewatin, Minnesota, plant in late 2008.  While the employer provided WARN notices, it provided fewer than 60 days’ notice to the required individuals and entities. Almost all of the plant’s products were used in the steelmaking process at other U.S. Steel steelmaking facilities that primarily produce steel for the construction and automotive industries.  The appellate court found that the economic crisis of late 2008, coupled with the dramatic decline in customer orders at U.S. Steel, constituted an unforeseeable business circumstance under WARN.  The Court said that while the employer was aware an economic downturn would reduce demand for products, knowledge of the downturn did not bar the application of the unforeseeable business circumstances exception.  The Court noted that the sharp decrease in demand for steel was not apparent before the date the employer provided WARN notices.  It said, “unprecedented effects on the steel industry manifested themselves in late November 2008, … requiring immediate action in [the company’s] commercially reasonable business judgment.”  It continued, “Nothing in the record suggests that the extent of the economic downturn and its effects on the steel industry were probable anytime before late November 2008, much less sixty days before the layoff began.”  Therefore, the Court concluded the employer provided WARN notices as soon as practicable and unforeseeable business conditions excused the employer’s short notice.

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Since reliance on a WARN exception is not a guaranteed defense in WARN litigation, employers should seek legal guidance before attempting to invoke an exception.  These exceptions, moreover, do not excuse an employer from providing WARN notices; an employer still must provide as much notice as is practicable to all individuals, unions, government officials and agencies entitled to receive notices, along with a written explanation of the reasons for its reliance on the exception and why it could not provide a full 60 days of notice.

Employers also must be mindful of any applicable state or local WARN-type notice requirements.  Many states, including California, Hawaii, Illinois, Iowa, New Hampshire, New Jersey, New York, Tennessee, Wisconsin, and the U.S. Virgin Islands, among others, have mini-WARN statutes. 

Jackson Lewis attorneys are available to answer inquiries about federal and state WARN compliance. They can assist in analyzing WARN obligations for particular business closings and reductions-in-force, and in preparing strategies relating to reductions-in-force and other workplace issues.

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