Fifth Circuit Decision Protects Employees Who Were Laid Off Without Notice in Violation of WARN Act

The Fifth Circuit held that Signal International will have to pay a class action judgment because the company violated the Worker Adjustment and Retraining Notification Act (the “WARN Act”).  The WARN Act requires that certain employers provide written notice within 60 days in advance of any “mass layoff” at a “single site of employment.”  The Fifth Circuit agreed with the district court’s ruling that Signal International’s two facilities were a single site of employment for purposes of determining whether there had been a mass layoff.  Generally, two locations are considered separate sites, however, this case qualified under the exception for “truly unusual organizational situations” since the employees had been moved to two locations after Hurricane Ike.

From July to September 2009, Signal International laid off 159 employees without providing advance written notice.  Signal International argued that the WARN Act was inapplicable for two reasons.  First, Signal argued that the company’s two facilities were not a single site of employment.  The Fifth Circuit rejected this argument noting that the sites shared employees and used the same security, payroll, and other staff.  The Circuit Court also rejected the argument that the sites had different operational purposes.  The Fifth Circuit explained that “[o]f course it is true that different units within the same operation will have different purposes if one dissects those purposes finely enough. However, what matters in determining whether separate facilities constitute a single site of employment is not the immediate purpose of this or that facility, but rather what ultimate operational purpose is served by the facilities.”

Signal International also argued that the district court chose the wrong date as the “snapshot” date for measuring employment levels to determine whether the layoff was large enough to trigger the WARN Act.  The Fifth Circuit concluded that the district court had “plenty of reasons” to use this date including that the date was based on a specific example from the WARN Act preamble in which the Labor Department embraced the use of the date immediately preceding the first layoff (“Day 1”) and the date was relied on by the district court and parties for over two years.

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