Third Circuit Rules on Legality of Mass Layoffs After Failed Sale of Company

A person’s job can be one of the most important features of their identity. When two people meet for the first time, for example, one of the first questions asked is very often “What do you do?” One’s job serves other purposes, such as the obvious purpose of providing income to support oneself and one’s family. Finding a job is important, but losing a job can be devastating. New Jersey labor laws protect workers in many aspects of the employer/employee relationship, including limiting the ability of some employers to fire numerous employees all at once. Laws like the Worker Adjustment and Retraining Notification (WARN) Act of 1988 apply to large employers that are planning a mass layoff of employees. The Third Circuit Court of Appeals recently ruled on a claim brought under the WARN Act involving a company that had been sold as part of a bankruptcy case. In re AE Liquidation, Inc., No. 16-2203, slip op. (3rd Cir., Apr. 4, 2017).

After Layoff - EmptyThe WARN Act applies to businesses with at least 100 full-time employees. 29 U.S.C. § 2101(a)(1). Covered employers must provide advance notice to employees prior to a “mass layoff.” The statute defines a “mass layoff” as the termination of a large number of employees within a 30-day period that is not related to a plant closing. For the WARN Act to apply, the layoff must affect either (1) at least 50 full-time workers, who constitute at least one-third of the total full-time workforce; or (2) at least 500 full-time employees. Id. at § 2101(a)(3).

An employer must provide at least 60 days’ notice to “affected employees” before undertaking a plant closing or mass layoff. Id. at § 2102(a). Aggrieved employees may recover damages for violations that include up to 60 days of back pay. Id. at § 2104. New Jersey has a similar law that requires additional disclosures from employers and allows claims for compensatory damages. N.J. Rev. Stat. §§ 34:21-3, 34:21-6.

The plaintiffs in AE Liquidation were employees of an aviation company that declared bankruptcy in November 2008. The employer planned a sale of the business as a going concern, providing “almost daily assurances that the funding was imminent and the company could be saved.” AE Liquidation, slip op. at 4. The sale fell through due to lack of funding, and the plaintiffs were laid off in February 2009. The plaintiffs filed suit under the WARN Act.

The Third Circuit considered the question of whether the WARN Act required the defendant to notify employees when layoffs were considered possible, or only when layoffs became “probable—that is, more likely than not.” Id. at 3. The statute exempts employers from the 60-day disclosure requirement when a mass layoff is due to “business circumstances that were not reasonably foreseeable.” 29 U.S.C. § 2102(b)(2).

The court ruled that “reasonably foreseeable” means “probable.” While the court found in this case that the circumstances leading to the layoffs were not “reasonably foreseeable,” and the defendant therefore did not violate the WARN Act by failing to give 60 days’ notice, it reached another conclusion that may help future plaintiffs. It held that the sale of a business as a going concern “is presumed [to include] the hiring of the seller’s employees.” AE Liquidation at 21.

If you need to speak to a labor lawyer in New Jersey or New York, contact the Resnick Law Group today online, at 973-781-1204, or at 646-867-7997.

More Blog Posts:

New Jersey Law Requires Employers to Give Specific Notification to Employees During Layoffs and Other Major Upheavals, The New Jersey Employment Law Firm Blog, April 14, 2017

Employer Lays Off Worker After Learning About Cancer Diagnosis, The New Jersey Employment Law Firm Blog, December 10, 2014

New Jersey Employers Required by State Law to Provide Employees with Notice of Gender Equity Rights, The New Jersey Employment Law Firm Blog, March 14, 2014

Photo credit: Billy Bob Bain [CC BY 2.0], via Flickr.

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