Monday, October 29, 2007

Fourth Circuit rules employer did not violate WARN Act

Today, in Long v. Dunlop Sports Group Ams., Inc., No. 06-2143 (4th Cir. Oct. 29, 2007) (PDF), the Fourth Circuit held that a golf ball manufacturer that ceased all production without the required 60 days notice to its employees did not violate the WARN Act where it continued to pay the employees for 60 days or until they took jobs with the successor entity, whichever occurred sooner.

The Worker Adjustment and Retraining Notification Act ("WARN Act"), 29 U.S.C.A. §§ 2101-2109, requires that certain employers provide their employees with written notice 60 days before a plant shutdown causes the employees an employment loss, including an employment termination other than discharge for cause, voluntary departure, or retirement.

In this case, the employer, provided notice of the shutdown at the time of shutdown and for the next 60 days continued to pay full wages and benefits to all but 22 employees. The employer stopped payments to those 22 employees when they began full-time employment with the successor entity.

Those 22 employees sued, asserting that the employer violated the WARN Act and should pay their wages and benefits for the entire 60-day notice period. They raised two arguments.

Argument #1. Plaintiffs suffered an employment termination at the time of the plant shutdown, and Dunlop violated the WARN act by failing to provide them with 60 days notice.

Not so, said the court:

The ordinary meaning of "employment termination" does not encompass a situation in which an employer continues to pay its employees full wages and benefits. Rather, "employment termination" is a "permanent cessation of the employment relationship." . . . When an employer commits to continue payment of wages and benefits to its employees, the employment relationship has not ended.
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in the regulations promulgated pursuant to the WARN Act, the Department of Labor noted that "neither WARN nor the regulations dictate the nature of work to be performed — or whether work must be performed — during a period of employment after notice of an impending plant closing or mass layoff has been given." Worker Adjustment and Retraining Notification, 54 Fed. Reg. at 16,048 (emphasis added).
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Dunlop’s decision to continue paying all benefits and wages for 60 days without requiring work in exchange entirely accords with the language, purpose, and structure of the WARN Act, as well as the Department of Labor’s authoritative interpretation of it. That decision did not constitute an "employment termination" under the Act.

Argument #2. (Alternatively) the Plaintiffs did not voluntarily depart the company when they were "kicked off the rolls" after they accepted new employment with the successor, but rather Dunlop constructively discharged them and thus caused them an "employment loss" at that time.

Again, the courts disagreed:

Although we agree that an "employment termination" occurred at this point, no "employment loss" occurred because the termination resulted from a voluntary departure. See 29 U.S.C.A. § 2101(a)(6).
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the WARN Act requires that covered employers, like Dunlop, provide notice 60 days prior to termination resulting from a plant shutdown. If this notice of termination would make workplace conditions "intolerable," then every employer that adhered to the WARN Act notice requirement would constructively discharge its employees at the moment of notice and so violate the WARN Act. Obviously, Congress did not pass legislation in which an employer’s very compliance with the statute constitutes a statutory violation.

And again, the regulations promulgated pursuant to the WARN Act fatally undermine the employees’ position. In these regulations, the Department of Labor states that it "does not . . . agree that a worker who, after the announcement of a plant closing or mass layoff, decides to leave early has necessarily been constructively discharged or quit ‘involuntarily’." Worker Adjustment and Retraining Notification, 54 Fed. Reg. at 16,048.


The only problem I see with this opinion is that the analysis under argument #1 could be construed to apply outside the WARN Act context. For instance, if an employee who is discharged on August 1 and is given a letter that says it is "effective August 1," but is given two weeks of additional pay and benefits to "soften the blow," would the date of his "adverse employment action" (i.e. his termination) for statute of limitations purposes be August 1 or August 14? I can see employees suing under Title VII using this to try to extend their limitations period.

1 comment:

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