498, 499, 500! Not So Fast, Says the Sixth Circuit on WARN Act Case
This week, the Sixth Circuit weighed in on what it identified as an “unusual” case involving the seldom-seen Worker Adjustment and Retraining Notification (WARN) Act. The WARN Act requires employers to provide at least 60 days written notice to affected employees before a mass layoff. The statute defines a mass layoff to include an “employment loss” at a single site of employment of at least 500 employees during any 30-day period. The WARN Act 500-employee threshold can be met by aggregating two or more layoffs during a 90-day period, unless the employer shows that they are separate layoff actions and not an attempt to simply circumvent the statute. An “employment loss” under WARN can be 1) a termination; 2) a layoff exceeding 6 months; or 3) a reduction in hours of work of more than 50 percent during each month of any 6 month period. Although the statute does not define “termination,” the Department of Labor has interpreted it to mean “the permanent cessation of the employment relationship.”
In Morton v. The Vanderbilt University, the timeline was very important in aggregating two different layoffs. On July 1, 2013, the University terminated 194 employees (the July Group). By themselves, the July Group did not meet the 500-employee threshold and did not qualify as a “mass layoff” under the WARN Act. However, on September 17, 2013, 279 additional Vanderbilt employees (the September Group) were provided individualized letters notifying them that their positions would be terminated. The letters stated that these 279 employees were immediately placed on 60 days of “paid leave,” but would not be required to report for work during that period. The 279 were told to collect their belongings and leave the premises. The July Group filed suit claiming that they were not provided proper written notice under WARN. They claimed that the July and September layoffs fit under the 90-day aggregation provision of the statute to add up to over 500—which would be a mass layoff.
For those of you who have done the math—I recognize that 194 and 279 do not add up to 500. However, the parties stipulated that if both groups were aggregated, the total number of employees terminated within 90 days of the July Group would reach or exceed 500.
The sole issue was whether the September Group suffered an employment loss in September, when they got the notice, or in November, when the 60 days of paid leave expired. If the employment loss was in November, it would be outside the aggregation period and the July employees would be out of luck. The lower court sided with the July Group and said the job loss was in September so WARN notice was required. Vanderbilt appealed.
The Sixth Circuit focused on the Department of Labor’s definition of “termination.” Since the September Group continued to receive wages and benefits until November, there was not a “permanent cessation of the employment relationship” until that later date. The fact that they were not actually performing work during the 60-day period was not the controlling factor—their receipt of the wages and benefits was. The Sixth Circuit ruled that the September Group’s termination fell outside of the aggregation period and therefore did not trigger any cause of action for the July Group.
While it is true that this is a situation that is likely rare for most employers, it is a good reminder of a possibly forgotten obligation that must be examined in layoffs. The WARN Act is fairly cut and dried—if you have over 100 employees and meet the statutory triggers within the covered periods, you must provide written notice and other services as specifically required in the statute. As such, planning may be necessary if it looks like the economics of a business are going to demand large personnel changes.