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

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.

© 2020 Proskauer Rose LLP.

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About this Author

Steven J Pearlman, Labor Employment Law Firm, Proskauer Law firm
Partner

Steven Pearlman is a partner in the Labor & Employment Law Department and co-head of the firm's Whistleblowing & Retaliation Group, resident in the Chicago office. Steven’s practice focuses on defending complex employment litigation involving claims of discrimination and harassment, wage-and-hour laws and breaches of restrictive covenants (e.g., non-competition agreements). He has successfully tried cases to verdict before judges and juries in Illinois, Florida and California, and defended what is reported to be the largest Illinois-only class action in the history of the U.S....

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Nicole A. Eichberger, Labor and Employment Attorney, Proskauer Law Firm
Senior Counsel

Nicole A. Eichberger is a Senior Counsel in the Labor and Employment Department, and a member of the Class/Collective Action Group and the Employee Benefits, Executive Compensation & ERISA Litigation Practice Center, resident in the New Orleans office. Nici assists clients in the defense of numerous complex employment and ERISA class and collective actions, including those alleging FLSA, ERISA and Executive Compensation Claims. Nici is also a member of the Firm’s eDiscovery Group and advises clients on eDiscovery matters, including day-to-day preservation, investigations, and litigation strategies. In addition to her litigation work, she counsels employers, fiduciaries, and trustees on employment, ERISA benefit and fiduciary issues.

Nici was recently appointed by immediate past ABA President Laurel Bellow to serve a three-year term on the ABA’s Standing Committee on Pro Bono & Public Service and serves as the Pro Bono Co-Coordinator for Proskauer’s New Orleans office.

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Samantha Shear Labor Employment Attorney
Associate

Samantha Shear is an associate in the New Orleans office and a member of the Labor and Employment Department. Samantha graduated cum laude from Tulane Law School where she spent two years as a member of the Judge John R. Brown moot court team. She served as coach of the moot court team one year, leading her team to win multiple awards for excellence in oral advocacy.

Prior to law school, Samantha worked as a freelance journalist for music publications.

Education

  • Tulane University Law School, J.D., 2018

Admissions & Qualifications...

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