WARN Act Liability

Hale-Halsell Co., a wholesale grocery warehouse and distribution center in Tulsa, Oklahoma, laid off about 200 workers on January 22, 2004, approximately three working days after learning that it had lost its biggest customer, which had provided about 40 percent of its business orders.

In February 2004, laid-off workers filed suit against Hale-Halsell in the U.S. District Court for the Northern District of Oklahoma, alleging violations of the Worker Adjustment and Retraining Notification Act requirement that employers with at least 100 employees provide workers with at least 60 days of advance notice of a mass layoff.

The court found in favor of the company, holding that it did not violate the WARN act by failing to comply with the 60-day notice requirement because such notice of the closure was not required due to “unforeseeable business circumstances.”

Affirming the court’s decision, the 10th Circuit Court of Appeals found that it was not until Hale-Halsell lost its biggest customer that it became reasonably foreseeable that it would have to lay off workers, and that the loss of this customer was “the straw that broke the camel’s back.”

Although Hale-Halsell had been experiencing financial difficulties for months prior to the layoff, the decision came only after it received a letter from its biggest customer withdrawing its use of Hale-Halsell as its primary supplier.

According to the court of appeals, “we should not burden the employers with the task of notifying employees of possible contract cancellation and concomitant layoffs every time there is a cost overrun or similar difficulty.” Gross v. Hale-Halsell Co., 10th Cir., No. 08-5028 (1/20/09).

Impact: An employer’s plant closing or mass layoff occurring before the conclusion of the WARN 60-day period may not violate the law if the closing or mass layoff is caused by business circumstances that were not reasonably foreseeable at the time the notice would have been required.