July 2012

By: James B. Sherman, Esq.

On July 2, 2012, the Eighth Circuit Court of Appeals held that a Minnesota mining company was excused from giving its employees the full 60-day notice of a mass layoff under the WARN Act. USW Local 2660 v. U.S. Steel Corp.

The court applied the WARN Act’s “unforeseeable business circumstances” exception based on the sudden and drastic drop in demand for iron ore in late 2008. This decision is helpful to employers faced with similar unfortunate situations brought on, for example, by sudden changes in the economy or perhaps this summer’s drought. However, the decision is also illustrative of how courts scrutinize employer excuses for not providing the full 60 days advance notice of a plant closing or mass layoff under WARN.

In this case the plaintiff was the union (USW) that represented laid off employees who did not receive 60 days advance notice. The court ruled in favor of the employer, excusing them from giving the full notice due to unforeseeable business reasons. The court used the following factors in deciding to whether the exception applied: (1) the notice was caused by an unanticipated and dramatic major economic downturn; (2) the employer acted within the scope of “commercially reasonable business judgment” when initially attempting to weather the storm before ultimately concluding that an immediate idling of the plant was necessary; and (3) although the economic downturn was apparent well before the employer gave a layoff notice to the union, the resultant sharply decreased demand for steel was not.

The first lesson of this case is that unionized employers are more likely to be sued under WARN since unions were given the right to bring claims under the Act on behalf of the employees they represent (after all, the WARN Act was lobbied for by unions). Another lesson is that employers are best served to issue WARN notices when in doubt if they wish to avoid costly litigation. In this particular case, the court found the employer did not violate WARN only after questioning whether U.S. Steel’s decision not to issue layoff notices to its union and employees sooner than it did, was “commercially reasonable” in view of a truly unforeseeable and sudden drop in demand for iron ore. On a final note, anyone relying on this or some of the other exceptions to WARN’s required 60-day notice for mass layoffs or plant closings must still give notice under this Act “as soon as practicable.” DOL regulations provide that this generally requires that notice be given within just two business days of when circumstances indicate the need for a covered event; i.e. layoff or closing.

The WARN Act is a very nuanced and complicated federal law. Violations of this law expose employers to back pay for each day notice is not given, as well as attorney fees and other damages caused by the failure to give notice. Sound legal advice from an experienced labor attorney is highly recommended well in advance of any potential for closings or mass layoffs. For answers to any questions on WARN or related state laws, contact attorney James B. Sherman in Wessels Sherman’s Minneapolis office at (952) 746-1700 or email jasherman@wesselssherman.com.