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Does WARN Apply to Virus Closures?

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Enterprise, in Benson et al. v. Enterprise Leasing Co. of Florida LLC et al., has tried to argue that the Worker Adjustment and Retraining Notification Act (“WARN”), through its natural disaster exception, does not apply to closures caused by COVID-19. Two Florida workers sued Enterprise Holdings, the parent company of Enterprise Rent-A-Car, Alamo Rent a Car, and other car rental firms, after being fired allegedly with only a few days’ warning or completely no notice. The two workers sought to represent a class of hundreds of Florida workers terminated in a similar fashion this spring. Normally under WARN, employers are required to alert workers two months in advance if there will be layoffs of 50 or more employees. The Restaurant Law Center, National Retail Federation, and the U.S. Chamber of Commerce, filed an amicus brief last week urging the Eleventh Circuit to decide the case in Enterprise’s favor. In their brief, the groups argued that the lower court essentially nullified WARN’s natural disasters exception by interpreting it too narrowly. [1]

In its decision, the district court held that the natural disasters exception mandates that employers must show that layoffs were directly caused by a natural disaster. The district court also held that the COVID-19 pandemic did not directly cause the layoffs. The amici brief argues that the district court nullified the natural disaster exception by making it at least as hard or even harder to resolve than the act’s unforeseeable business circumstances exception. The amici also argues that the court’s decision on the pandemic not being the direct cause of the layoffs was “hastily conclud[ed]”. [2]

The amici goes on to argue that the district court should not have determined that a natural disaster must destroy infrastructure in order to be the direct cause of a mass layoff or plant closing. In other words, the amici argues that layoffs caused by the loss of labor supply and customers, which in this case resulted from the COVID-19 pandemic, should not be considered less damaging than layoffs caused by physical destruction of capital from a natural disaster. District Judge Roy B. Dalton, however, said that although the global pandemic could qualify as a “natural disaster” under WARN, the exception is still triggered only if a mass layoff or plant closing “comes as the ‘direct result’ of a natural disaster”, and Judge Dalton determined that the pandemic only indirectly influenced Enterprise’s layoffs. He explained that a business downturn, which was caused by a global shutdown and stalled travel, is what led to Enterprise’s mass layoffs and that the layoffs were therefore not the result of COVID-19 itself. He analogized Enterprise’s layoffs to a factory that closes after nearby flooding “depressed the local economy” as opposed to a factory closing because it was destroyed overnight by a massive flood. [3]

In February, though, Judge Dalton did grant Enterprise’s motion to certify the decision for interlocutory review by the Eleventh Circuit. In their amici brief, business groups argued that the decision will affect many more companies than just Enterprise Holdings, including retailers, service providers, hotels, restaurants, manufacturers, and others. Potential examples are automakers that had to shut down factories in 2020, such as Fiat Chrysler, Ford, Honda, and General Motors. [4] The Court of Appeals for the Eleventh Circuit has not yet made a decision. The case number is 21-11911. [5]

[1] Dave Simpson, “Chamber Tells 11th Circ. WARN Can’t Apply To Virus Closures”, Law360, 22 Jul. 2021, https://www.law360.com/employment/articles/1405763/chamber-tells-11th-circ-warn-can-t-apply-to-virus-closures, acc. 28 Jul. 2021.

[2] Ibid.

[3] Ibid.

[4] Nancy Cleeland, “U.S. Factories Closing Due to Coronavirus Concerns but Some Must Keep Producing”, SHRM, 20 Mar. 2020, https://www.shrm.org/resourcesandtools/hr-topics/employee-relations/pages/us-factories-closing-due-to-coronavirus-concerns-but-some-must-keep-producing.aspx, acc. 28 Jul. 2021.

[5] Dave Simpson, “Chamber Tells 11th Circ. WARN Can’t Apply To Virus Closures”, Law360, 22 Jul. 2021, https://www.law360.com/employment/articles/1405763/chamber-tells-11th-circ-warn-can-t-apply-to-virus-closures, acc. 28 Jul. 2021.

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