The Worker Adjustment and Retraining Notification Act (“WARN Act”) provides that “an employer shall not order a plant closing or mass layoff until the end of a 60-day period after the employer serves written notice of such order to each impacted employee.” Under the WARN Act, a plant closing is “permanent or temporary shutdown of a single site of employment, or one or more facilities or operating units within a single site of employment….” A mass layoff is “a reduction in force which…(a) is not the result of the plant closing; and (b) results in an employment loss at the single site of employment.” To determine who gets notice under the WARN Act, one must be an impacted employee. The main purpose of the WARN Act is to allow for “good faith, well-grounded hope, and reasonable expectations” that seek to “protect the employer’s exercise of business judgment and are intended to encourage employers to take all reasonable actions to preserve the company and the jobs.”
If an employer fails to comply with the WARN Act, and a claim is made against them, the plaintiff must show that “(1) the defendant was ‘an employer;’ (2) the defendant ordered a ‘plant closing’ or ‘mass layoff;’ (3) the defendant failed to give employees 60-days’ notice before the closing or layoff; and (4) the plaintiff is an ‘aggrieved’ or ‘affected’ employee.” If a plaintiff can prove all four elements, “the employer may avoid liability by providing an affirmative defense that qualifies for one of the Act’s three exceptions.” Those three exceptions to the WARN Act are the faltering company exception, the unforeseen business circumstances exception, and the natural disaster exception.
Prior to the pandemic, the aforementioned exceptions to the Act were used by businesses that filed for relief under Chapter 11 of the United States Code (the “Bankruptcy Code”) to argue why they could not comply with the WARN Act. However, businesses added COVID-19 as a defense after the virus became widespread and impacted business operations. Some courts, like the Delaware bankruptcy courts, held that COVID-19 was a valid excuse for businesses to not give notice under the WARN Act, meanwhile in other bankruptcy courts, COVID-19 is considered not to be an excuse as it is not explicitly named within the act.
This article examines the varying standard held by the bankruptcy courts in regard to whether COVID-19 is an exception to complying with the WARN Act and the different methods courts have interpreted this exception during Chapter 11 proceedings. Part I addresses how the bankruptcy courts dealt with WARN Act violations prior to the pandemic. Part II discusses how the courts dealt with WARN Act violations during the pandemic.