The federal Worker Adjustment and Retraining Notifica-tion Act (“WARN Act”) requires employers who order “plant closings” and “mass layoffs” to provide 60 days’ advance notice to all employees who suffer an “em-ployment loss” in connection with such action. The statute provides, however, that the employment losses covered under the statute do not include “voluntary departures.” In recent decisions, the Courts of Appeals for the Seventh and Ninth Circuits considered the issue of what constitutes a voluntary departure under the WARN Act, and reached differing conclusions.
In Ellis v. DHL Express Inc. (7th Cir. Jan. 11, 2011), the Seventh Circuit addressed whether an employee who elects to separate from employment as a part of an exit incentive program offered amid substantial uncertainty as to an employer’s continued existence should be counted as experiencing an employment loss under the WARN Act. In November 2008, DHL announced that it would cease U.S. domestic shipping services. As a result, the company announced plans to close five of its six Chicago area facilities. After negotiations with the unions representing the affected employees, DHL offered employees at the facilities the option to take a severance package or to bid for open jobs at the company’s remaining facility. Employees were given very little time—between two and nine business days—to decide whether to accept the packages. Employees who accepted the package were required to sign a release of all claims.
Two employees who did not accept a package and were later laid off filed suit against DHL under the WARN Act, asserting that all employees who were laid off by DHL, including those who had accepted severance and executed a release, experienced employment losses under the Act and that therefore the numerical thresh-old for the issuance of notice (in this case more than 50 employees constituting 33% of the total number of employees at a single site of employment) was trig-gered. According to the plaintiffs, because of the pressure placed on employees in connection with DHL’s severance offers, acceptance of the packages was not “voluntary,” and therefore employees who received severance should be counted in determining whether the WARN Act’s notice threshold had been met.
The Seventh Circuit affirmed the lower court’s rejection of the plaintiffs’ claims. Although the plaintiffs had “paint[ed] a wretching picture of a difficult decision that had to be made quickly,” the court wrote, “they do not demonstrate that the workers were given incomplete information, or that DHL somehow strong-armed them into signing the release forms against their will.” Accordingly, the court concluded that it “cannot conclude…that the workers who accepted union-negotiated severance packages did so involuntarily.”
The issue of voluntariness was also recently considered by the Ninth Circuit in Collins v. Gee West Seattle LLC (9th Cir., Jan. 21, 2011). That case arose after Gee West, an operator of automobile dealerships, announced on September 26, 2007 that it would be going out of business on October 7, 2007. Between September 26 and October 5, 2007, all but 30 of Gee West’s 150 employees stopped coming to work. In response to a lawsuit alleging that it failed to provide the 60 days’ notice required under the WARN Act, Gee West asserted that the approximately 120 employees who left the company prior to October 5 did not experience em-ployment losses because they voluntarily departed their employment. The district court agreed, holding that the “pre-closure departure of the 120 employees…is not any less ‘voluntary’ for having possibly been motivated that they would be unemployed in the near future.”
The Ninth Circuit reversed, concluding that the employ-ees who left their jobs before October 5, but after Gee West’s announcement of the closure, experienced an employment loss as a result of the company’s plant closing. According to the court, “unless there is some evidence of imminent departure for reasons other than the shutdown, it is unreasonable to conclude that employees voluntarily departed after receiving notice of the upcoming closure.” The court then went on to announce a general rule that “[e]mployees’ departure because of a business closing…is generally not volun-tary, but a consequence of the shutdown and must be considered a loss of employment when determining whether a plant closure has occurred.”
While application of the WARN Act may appear at first blush to involve nothing more than simple mathematical calculations, cases like DHL and Gee West show that this is far from the truth. Particularly because liability under the WARN Act is often dependent on events occurring after the deadline for an employer’s issuance of notice to employees, employers must carefully consider whether voluntary decisions by employees have the potential to derail an employer’s attempts to avoid statutory liability.