Employer's Failure To Issue WARN Notification Excused Due To Abrupt Termination Of Financing

Despite the increasing prominence of pre-packaged or pre-negotiated chapter 11 cases in recent years, not every bankruptcy filing by or against a company is a carefully planned event orchestrated over a period of months or even years to achieve a workable reorganization, sale, or liquidation strategy. Sometimes, unanticipated circumstances precipitate a bankruptcy filing. If the debtor employs a substantial workforce that is dismissed (pre- or post-bankruptcy) because the debtor either ceases operating or significantly reduces the number of its employees, state and/or federal law other than the Bankruptcy Code may impose obligations on the debtor in connection with the workforce dismissals or plant closures.

A recent unpublished ruling by the Fifth Circuit Court of Appeals examines a debtor-employer's responsibilities under the federal Worker Adjustment and Retraining Notification Act, 29 U.S.C. § 2101 et seq. ("WARN"). In Angles v. Flexible Flyer Liquidating Trust (In re Flexible Flyer Liquidating Trust), 2013 BL 35609 (5th Cir. Feb. 11, 2013), the court affirmed a bankruptcy court determination that a debtor-employer was not required to give a 60-day WARN notification to its employees because a sudden, unanticipated termination of financing which forced the company to file for bankruptcy protection satisfied WARN's notification exception for "unforeseeable business circumstances."

WARN

Enacted in 1988, WARN protects workers, their families, and communities by requiring most employers with 100 or more employees to provide notification 60 calendar days in advance of plant closings and mass layoffs. Twenty-nine U.S.C. § 2102(a) provides that:

[a]n 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 an order ‒ (1) to each representative of the affected employees as of the time of the notice or, if there is no such representative at that time, to each affected employee.

Twenty-nine U.S.C. § 2101(a)(2) defines "plant closing" as:

the permanent or temporary shutdown of a single site of employment, or one or more facilities or operating units within a single site of employment, if the shutdown results in an employment loss at the single site of employment during any 30-day period for 50 or more employees excluding any part-time employees.

"Mass layoff" is defined in 29 U.S.C. § 2101(a)(3) as a reduction in the workforce that is not the result of a plant closing and results in an employment loss at a single site of employment during any 30-day period of a specified percentage or aggregate number of employees.

Twenty-nine U.S.C. § 2101(a)(1) defines "employer" as "any business enterprise that employs ‒ (A) 100 or more employees, excluding part-time employees; or (B) 100 or more employees who in the aggregate work at least 4,000 hours per week (exclusive of hours of overtime)." However, a court-fashioned "liquidating fiduciary" exception provides that a liquidating fiduciary in a bankruptcy case (e.g., a trustee or other estate representative) does not fit the definition of an employer for purposes...

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