U.S. Supreme Court Declines to Resolve Circuit Split On Whether A Layoff Is Temporary Or Permanent Under WARN Act
Monday, April 6, 2020

On March 30, 2020, the U.S. Supreme Court declined to review a decision from the Seventh Circuit in Leeper v. Hamilton County Coal, LLC, No. 19-1109, which held that a layoff was temporary, and thus did not trigger the 60-day notice requirement of the Worker Adjustment and Retraining Notification Act (the “WARN Act”).

On February 5, 2016, the defendant employer in Leeper distributed written notice placing 158 employees on a temporary layoff the next day, which stated “[o]n August 1, 2016 you may return to your at-will employment. …”  Fifty-six recipients of the notice resumed employment, at full pay, within six months.  The employees filed suit under the WARN Act arguing their termination constituted an “employment loss” which required the employer to provide 60 days’ of advanced notice that they were being terminated, and they were only given 24-hour notice.  Under the WARN Act, a covered mass layoff is a reduction-in-force that eliminates more than 33% of full-time employees through employment loss in the form of either termination, a layoff lasting longer than six months or a 50% or greater cut in hours.

The Seventh Circuit ruled that the WARN Act’s 60-day notice requirement was not triggered because the employer informed employees that they “may return,” and a significant portion of the employees did, in fact, return to work within six months of the communication.   The Court also evaluated several other factors, such as whether employees ceased receiving pay or other benefits, but decided that the language of the notices ultimately controlled.

The Seventh Circuit’s decision deepened a circuit split.  The Seventh Circuit joined the Second and Sixth Circuits in holding that the content of any communication regarding a layoff’s permanence should be evaluated using a prospective analysis, i.e., from the view point of the employee at the time the notice is received.  These Circuits have determined that a permanent cessation of employment occurs when, at the outset of the employment cessation, employees lack a reasonable expectation of being recalled, a conclusion made after analyzing the employer’s communications, whether wages and benefits ceased, the employer’s policies and practices, industry standards and other factors.  The Seventh Circuit primarily focused on the communications received by employees and the employer’s invitation to return, placing less value on other factors that plaintiff argued pointed to a permanent separation, such as the fact that wages and benefits ceased.  By contrast, the Eighth Circuit has evaluated the content of the notice at issue with respect to the permanency of a layoff with the benefit of hindsight, i.e., determining that if an employee is rehired within six months, the layoff is temporary—even if the employee and employer believed at the outset that the separation was permanent.

On January 23, 2020, the plaintiff filed a petition for a writ of certiorari asking the U.S. Supreme Court to resolve this circuit split, seeking a uniform standard that sets forth the content, factors and analysis used to determine whether a layoff is temporary or permanent.  However, on March 30, 2020, the Supreme Court declined that petition.

Given the uncertainties employers are presently facing as a result of the coronavirus, it is important for employers to be mindful of the current Circuit split and carefully consider the timing of layoffs and content of employee communications.  Employers should also be aware of  the state in which any layoff takes place if the employer has multiple locations subject to conflicting standards concerning notice.


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