Is the COVID-19 pandemic a “natural disaster” for purposes of the Worker Adjustment and Retraining Notification (WARN) Act notification exception?
“No,” says the first federal appeals court to rule on the issue.
The United States Court of Appeals for the Fifth Circuit has ruled that the COVID-19 pandemic is not a natural disaster and does not exempt an employer from providing notice before implementing a mass layoff or plant closure. Easom vs. US Well Services, Inc.no. 21-20202 (5th Cir. June 15, 2022).
The Fifth Circuit has jurisdiction over Louisiana, Mississippi and Texas.
Notice Required by WARN Act
The Federal WARN Act (29 USC § 2101 and following.) requires covered employers to provide at least 60 days written notice before implementing a “factory shutdown” or “mass layoff”.
Under WARN, a “plant closure” is the permanent or temporary closure of a single job site or one or more facilities or operating units within a single job site where the closure results in “loss of employment” for any 30-day period. for at least 50 full-time employees.
A “mass layoff” is a reduction in the workforce that is not a plant closure and results in the loss of employment at a single job site within a 30-day period for at least 50 employees full-time who constitute at least 33% of the active workforce. full-time employees on this unique job site Where when 50 or more full-time employees at the same job site suffer job losses during a 30-day period.
A “loss of employment” is an involuntary dismissal (other than a dismissal for cause, voluntary departure or retirement), a layoff of more than six months or a reduction in working hours of more than 50%, during each month of any six-month period. period.
Three exceptions to the 60-day notice requirement exist, allowing an employer to provide less than 60 days notice as soon as possible and with an explanation of why they reduced the notice period. The Department of Labor (DOL) WARN Act regulations provide that an employer who relies on any of these exceptions to justify less than 60 days’ notice bears the burden of proving that they have met the requirements. specific to the exception and given as much notice as possible. The “failing business” exception is only available for a factory closure, while the “unforeseeable business circumstances” exception and the “natural disaster” exception may be available for both a factory closure or collective dismissal.
Although the WARN Act specifically states: “No notice under this chapter shall be required if plant closure or mass layoff is due to any form of natural disaster, such as flood, earthquake, land or the drought that is currently ravaging the farmlands of the United States. United States,” the WARN regulations expressly require an employer to provide notice, albeit reduced or after the fact, of a plant closure or mass layoff due to a natural disaster. The WARN Act regulations go on to state that “floods, earthquakes, droughts, storms, tidal waves or tsunamis and similar effects of nature are natural disasters…”. The WARN Act regulations further state that “to qualify for this exception, an employer must be able to demonstrate that their plant closure or mass layoff was a direct result of the natural disaster.”
The COVID-19 conundrum
The few federal courts tasked with determining whether the COVID-19 pandemic is a natural disaster for purposes of the WARN Act’s natural disaster exception have been divided. The only such case to have been brought before a federal appeals court is Benson v Enterprise Leasing Co., No. 21-11911 (11th Cir. Oct. 25, 2021).
In Benson, a car rental company initiated layoffs at its Orlando and Tampa, Florida airports in April 2020. The plaintiffs, who were terminated employees, filed a class action lawsuit in district court alleging that Enterprise had failed to provide sufficient or any WARN Act notices. Enterprise filed a motion to dismiss, arguing that the unforeseeable business circumstance exception and the natural disaster exception applied in light of the “unprecedented economic dislocation” triggered by the COVID-19 pandemic and that, by therefore, the company was not required to give notice.
The High Court dismissed the request. He noted that, unlike the natural disaster exception, notice must be provided if the employer seeks to rely on the unforeseeable business circumstances exception. With regard to the natural disaster exception, the Benson The court assumed that the COVID-19 pandemic qualified as a natural disaster, but concluded that the defense did not apply because Enterprise had not established that the layoffs were the “direct result” of a natural disaster . “This is not a situation where, for example, a factory was destroyed overnight by a massive flood – that would be a ‘direct result’ of a natural disaster,” the court explained. “This is an indirect result – more akin to a factory closing after nearby flooding depressed the local economy.”
The WARN Act regulations (20 CFR § 639.9) provide that for the natural disaster exception to apply, the mass termination in question must have been the “direct result” of a natural disaster. Enterprise, however, argued that the exception applies where the natural disaster was only a “but for” cause of the layoff. The company has filed an appeal with the United States Court of Appeals for the Eleventh Circuit. (The Eleventh Circuit has jurisdiction over Alabama, Florida and Georgia.) However, the parties settled and the Eleventh Circuit did not decide the issue of causation.
In Easom, a provider of fracking services to oil producers laid off its employees in March 2020 after oil prices plummeted and its customers halted fracking work at the employer’s wellsites in Texas. The employer told employees they were being made redundant, effective immediately, “due to unforeseeable business circumstances resulting from a lack of work available to customers caused by the significant decline in oil prices and the unexpected negative impact that the coronavirus has caused”.
The terminated employees filed a class action lawsuit alleging a violation of the WARN Act. The employer claimed that because the natural disaster exception applied, it was exempt from the statutory notice requirement. Employees countered that the COVID-19 pandemic was not a natural disaster and, in any case, was not the direct cause of the layoffs. The district court ruled that the pandemic was a natural disaster; it also ruled that the more lenient “but for” standard applies to determine whether the natural disaster caused the job losses. Denying cross-motions for summary judgment, the court found factual issues remained as to whether COVID-19 was the root cause of the layoffs.
The District Court certified two questions for the Court of Appeal:
- Is COVID-19 considered a natural disaster under the WARN Act natural disaster exception?
- Does the WARN Act’s natural disaster exception incorporate ineffectual or immediate causation?
Fifth Circuit decision
The Fifth Circuit has ruled that COVID-19 does not not be considered a natural disaster for the purposes of the WARN Act exception. She also found that the proximate cause standard applied. The appeals court noted binding precedent that equates proximate cause with proximate cause and upheld section 639.9 of the WARN Act Regulations and its proximate cause standard under Chevron principles. (The DOL filed a friend brief in the case, urging the appellate court to preserve the stricter standard it had enacted.)
The Fifth Circuit rejected the employer’s assertion that the direct cause standard “would preclude the application of the natural disaster exception in any case with an intermediate event between the natural disaster and the termination.” Rather, he explained:
Here, flooding, power outages, layoffs and closures are among the reasonably foreseeable consequences of hurricanes and other natural disasters. Thus, imposing a proximate cause requirement on employers who must terminate employees due to a natural disaster would not preclude the natural disaster exception for all cases involving an intervening cause.
EasomThe fact that the direct cause standard of the natural disaster exception applies to the WARN Act notification requirements is binding in Fifth Circuit locations only. However, even as COVID-19-related layoffs and the pandemic itself begin to recede, the Fifth Circuit’s ruling in Easom may have implications beyond the pandemic in defining the parameters of the natural disaster exception – and the causation standard attached to it – especially as severe weather and similar events are expected to occur. produce more frequently.
Even under the DOL’s interpretation of the exception, there may be relief for employers indirectly affected by a natural disaster, in the form of the WARN Act’s unforeseeable business circumstance exception. While the Unforeseeable Business Circumstances Exception does not allow an employer to provide no WARN Act notices, it can give disaster-affected employers who are in urgent need of a plant shutdown or collective dismissal some latitude to provide WARN Act notices as soon as possible and with an explanation of why they could not have provided notice sooner. Employers in such circumstances may be better off relying on the unforeseeable business circumstances exception to the WARN Act notification obligations. Regardless of which exception an employer may rely on, the onus will be on the employer to prove that they have met the requirements of the exception and provided notice as soon as possible.
Given the complexities involved, please contact a Jackson Lewis attorney if you have any questions about whether and when notice of mass layoff or plant closure is required under the WARN Act or type statutes. state WARN law, or when defending a threat and expectation. WARN Act shares.