The Eleventh Circuit Could Tackle Whether COVID-19 is a Disaster for WARN Purposes with Companies Facing Continued Layoffs
While COVID-19 may have hit the business community like a hurricane, whether the pandemic, in fact, qualifies for a natural disaster exception under the federal law requiring businesses to warn employees of impending layoffs, remains an open question.
This February, a federal judge paved the way for the Eleventh Circuit to weigh in on whether a class action can proceed against an employer who was forced to lay off employees due to COVID-19. That case, Benson v. Enter. Leasing Co. of Orlando, LLC, is one of the first to look at the application of pandemic-related layoffs to the Worker Adjustment Retraining Notification Act of 1988, 29 U.S.C. § 2100 et seq. (“WARN Act”). Underscoring the case’s importance to the business community, the U.S. Chamber of Commerce has just filed an amicus or “friend of the court” brief asking the Eleventh Circuit to take up the case and provide “much-needed guidance” to other courts across the country.
The central issue in Benson is whether the pandemic qualifies under the “Natural Disaster Exception” to the WARN Act. The WARN Act requires businesses with more than 100 employees to provide 60 days’ notice of plant closings and mass layoffs. 29 U.S.C. § 2101(a)(2) and (3). The Act provides several exceptions to this notice requirement, including in the event of a natural disaster, such as a flood, earthquake or drought.
The employer in the Benson case argued that the Natural Disaster Exception applies to pandemic layoffs, excusing the employer from providing notice otherwise required under the WARN Act. The district court, however, held that for the exception to apply, the layoffs must be a “direct” result of a natural disaster, such as when a factory is destroyed overnight by a flood. Layoffs caused by the pandemic, according to the district court, were “indirectly” caused and were “more akin to a factory that closes after nearby flooding depressed the local economy.”
The employer moved to certify the issue for appeal and the district court granted the motion on February 4. In addition to the employer, the U.S. Chamber of Commerce is also urging the Eleventh Circuit to take the appeal and consider the broader impact of the district court’s decision on the business community.
“It is vital that businesses across the Nation have that ability to cope with sudden, unforeseen shifts to their industry when a national disaster strikes. But under the district court’s decision (particularly given the steep penalties for WARN Act infringement) companies may face significant liability for making tough decisions in the face of a pandemic or hurricane suddenly undermining their business,” said the Chamber of Commerce.
Notably, mass layoffs or plant closings caused by the COVID-19 pandemic may also be covered by the separate, “unforeseen business circumstances” exception that relaxes notice requirements when layoffs are triggered by a “sudden, dramatic, unexpected action or condition outside the employer’s control.” 20 C.F.R. § 639(b)(1). The district court did not certify a question related to this exception to the Eleventh Circuit. Importantly, unlike the Natural Disaster Exception, the “Unforeseen Business Circumstances” exception does not allow employers to forego notice altogether but, instead, requires that they provide “as much notice as is practicable.” Whether a particular mass layoff or plant closing falls within this exception and, if so, whether the employer provided “as much notice as is practicable,” would depend on the particular facts at issue.