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WARN Act Still Applies During COVID-19

Last month, two former restaurant workers filed a lawsuit in the U.S. District Court for the Middle District of Florida against their former employer, Hooters III Inc. (“Hooters”), with the hopes of it becoming a class action lawsuit.  The plaintiffs, Ashton Scott and Amanda Seales, contend their former employer’s failure to provide advance written notice of a mass layoff due to COVID-19 was in violation of the Worker Adjustment and Retraining Notification Act (the “WARN Act”).

In their complaint, the plaintiffs seek damages for themselves and a potential class of employees which includes all Florida Hooters’ employees who were recently laid off without 60 days advance written notice.  Damages being sought are equal to 60 days’ compensation, plus benefits for all impacted employees.

Generally, the federal WARN Act (there are similar state acts in some states) requires employers with more than 100 employees to provide a minimum of sixty days advance written notice of employer’s intention for a plant closing or mass layoff of its employees in any 30 day period.  In their complaint, Scott and Seales argue, “In violation of the WARN Act, defendant failed to provide as much written notice as was practicable under the circumstance surrounding the COVID-19 pandemic, and also failed to provide a statement of the basis for reducing the notification period to zero days advance notice.”  The potential class includes approximately 679 former Hooters’ workers across Florida whom were terminated without notice in late March.

Despite the WARN Act’s general 60 day advance written notice requirement, the WARN Act does allow for certain exceptions when “layoffs occur due to unforeseeable business circumstances, faltering companies, and natural disasters.”  Hooters will most likely focus on this exception for its failure to provide 60 days advance written notice.

In anticipation of this potential defense, the complaint specifically references the new Paycheck Protection Program (the “PPP”) recently enacted under the CARES Act.  The complaint alleges Hooters had an option to prevent the mass layoff by participating in the PPP.  As we have written about previously, the PPP loans made available under the CARES Act are designed for companies to retain their employees during the pandemic.  However, President Trump did not sign into law the CARES Act until March 27, 2020, two days after Hooters gave its employees notice of termination.This lawsuit focuses on a practical question Employers must consider when contemplating a mass layoff or plant closure during the pandemic – is the layoff/closure the result of an unforeseeable business circumstance.  While Hooters may win on this claim, it will be harder and harder for employers facing future mass layoffs and plant closures to argue the unforeseeable consequences the pandemic had on their business.  Regardless of the outcome of the Florida case, employers should begin planning for the potential of mass layoffs/plant closures as soon as possible and provide as much notice as practicable to impacted employees.  If the mandated 60 days is not possible, reasons explaining this impossibility should be addressed up front in hopes of averting the next such lawsuit. 

The Florida case marks the first of what legal experts believe will be many WARN Act/ COVID-19 class action lawsuits.  In fact, it is expected that COVID-19 will spawn lawsuits related to many employment laws.   Be sure you consult with counsel before initiating any COVID-19 related initiatives.  

The subject matter discussed in this post can be very technical.  It is an evolving area of law and very fact specific.  Our goal here is to simply alert you to some of the key issues involved.  We urge you to seek competent legal counsel before applying these ideas to your specific situation.  Brody and Associates stands ready to discuss your particular needs.