A law that needs real enforcement
By Phil Mattera for the Dirt Diggers
Digest
The
law in question is the Worker Adjustment and Retraining Notification Act of
1988, better known as the WARN Act. Oddly, the law does not provide for
enforcement by the U.S. Department of Labor. Instead, workers must usually take
a non-compliant employer to court. They have done so many times and have often
won substantial settlements.
WARN
Act class action lawsuits are the latest category of private litigation to be added to Violation
Tracker. The newly posted update to the database includes more than 100 WARN settlements totaling
over $225 million over the past two decades. About half of the settlements were
for $1 million or more. That includes the $1.3 million won by the Flexsteel
workers.
Overall,
the settlements range from $100,000 to $35 million, with the highest amount
coming in a 2011 case involving the now-defunct semiconductor company Qimonda. The second largest was $15 million,
in a case involving Taylor, Bean & Whitaker Mortgage Corp.
These settlements, like about three-quarters of the cases collected, came while the company was in bankruptcy proceedings. Many employers mistakenly thought that a bankruptcy filing exempted them from complying with the provisions of the WARN Act.
Although
bankruptcy cases can drag on for years, victims of WARN Act non-compliance are
often able to receive more timely relief by filing what are known as adversary
proceedings. These are the equivalent of civil lawsuits brought in federal
district courts and can get resolved much sooner than other bankruptcy matters.
While
most WARN Act cases are brought against direct employers, some of the
settlements involve private equity firms that controlled the company. For
example, in 2019 Apollo Global Management and a human resources service
paid $3 million to resolve a case brought by
about 1,000 workers laid off from Apollo’s portfolio company Classic Party
Rentals.
Additional
WARN Act cases are making their way through the courts. Tesla is the target of
one of those suits, filed earlier this year on behalf of those terminated as
part of the company’s practice of periodically weeding out workers considered
to have performance issues. Tesla is arguing that the workers should not be
able to bring a class action, given that they signed employment agreements
providing for the use of arbitration to resolve disputes.
Some
employers have tried to argue that layoffs that took place during the pandemic
should not be covered by the WARN Act, given that the law has an exception for
natural disasters. A federal appeals court, however, ruled in June that Covid should not be
lumped together with events such as earthquakes and floods mentioned in the
legislation.
If
the U.S. economy continues to move in the direction of a downturn, layoffs will
become more common and the protections of the WARN Act—and WARN class actions—will
help workers deal with the slump
Note:
The Violation Tracker update also includes the addition of 10,000 wage and hour
cases brought by the California Labor Commissioner’s Office over the past two
decades.