The U.S. Bankruptcy Court for the District of Delaware ruled that an affiliate that held an indirect ownership interest in, and was a lender to, an employer could be liable for severance payments under the Federal WARN Act. In order for liability to apply to the affiliate, the affiliate and employer need to be found to constitute a "single employer" for Federal WARN Act purposes. In making "single employer" determinations, the following 5-factor test is utilized: (i) common ownership, (ii) common directors and/or officers, (iii) de facto exercise of control, (iv) unity of personnel policies emanating from a common source and (v) the dependency of operations.
The court determined that only the first 3 prongs of the test had been established. Nonetheless, the court ruled that the de facto exercise of control prong carried special weight under the test and held the affiliate liable for severance payments.
D'Amico v. Tweeter Opco, LLC, No. 08-12646 (U.S. Bankruptcy Ct. (Delaware) July 8, 2011).