In one of the few cases addressing the "unforeseeable business circumstances" exception to the federal Worker Adjustment and Retraining Notification Act (WARN), the U.S. Court of Appeals for the Tenth Circuit (Denver, CO) held in Gross v. Hale-Halsell Co. that the company did not have to comply with the 60 days notice requirements of WARN when it laid off approximately 200 workers three working days after learning of the loss of its largest customer. The federal WARN Act requires that employers with at least 100 employees provide at least 60 days of prior notice of a plant closing or mass layoff. However, the statute creates an exception to this notice requirement if the mass layoff or plant closing is caused by business circumstances that were not reasonably foreseeable at the time notice would have been required.

Hale-Halsell Co., a wholesale grocery warehouse and distribution center, had a longstanding relationship spanning over 30 years with its largest customer, United Supermarkets, which accounted for approximately 40 percent of Hale-Halsell's orders. The court found that, although Hale-Halsell had been suffering from financial troubles for months, the company did not decide to lay off employees until it received a letter from United Supermarkets announcing that United would stop using Hale-Halsell as its primary supplier. The court ruled that the company met the exception for unforeseeable business circumstances.

Employers should be mindful, however, that California as well as several other states, have analogous state laws governing mass layoffs and plant shutdowns, which in some instances impose stricter requirements than the federal WARN. For example, under the California WARN Act there is no "unforeseeable business circumstances" exception to the notice requirements. For a comparison of the Federal and California WARN statutes click here.