Does the Worker Adjustment and Retraining Notification (WARN) natural disaster exception law provide a shield for Covid-19-related layoffs?

The answer is no. A recent federal appeals court (5^th circuit, Texas, Louisiana and Mississippi) answered this question directly by stating that layoffs triggered by COVID-19 do not constitute a natural disaster for purposes of the WARN Act.

The case began in March 2020, when the employer terminated several employees allegedly “due to unforeseeable business circumstances resulting from a lack of customer work” caused by factors including “the unexpected adverse impact that the Coronavirus has caused.’ ”

The workers sued, alleging that the employer violated the WARN Act’s notice requirements. The employer argued in its defense that COVID-19 was a natural disaster and that the WARN Act’s natural disaster advance notification exemption applied.

The WARN Act was adopted in 1988 to provide legal protections to employees at the time of separation from employment due to a plant closing or mass layoff. The law applies to companies with 100 or more employees. If the law is triggered, the affected employees must receive 60 calendar days advance notice of the separation. Failure to do so entitles the employees to sue the employer for unpaid wages and lost benefits.

The law recognizes that certain exceptions may justify the employer’s failure to give the full 60-day notice. However, even where an exception may apply, the employer must:

• provide notice as soon as is practicable,
• provide a statement of the reason for reducing the notice requirement
• fulfill any other notice information requirements.

The three exceptions recognized in the WARN Act are:

Faltering company: When a company is seeking capital or business and reasonably in good faith believes that advance notice would preclude its ability to obtain such capital or business, and this new capital or business would allow the employer to avoid or postpone a shutdown for a reasonable period;

Unforeseeable business circumstances: When the closing or mass layoff is caused by business circumstances that were not reasonably foreseeable at the time that the 60-day notice would have been required (i.e., a business circumstance that is caused by some sudden, dramatic, and unexpected action or conditions outside the employer’s control, like the unexpected cancellation of a major order); or

Natural disaster: When a plant closing or mass layoff is the direct result of a natural disaster such as a flood, earthquake, drought, storm, tidal wave, or similar effects of nature. In this case, notice may be given after the event.

The displaced workers brought a lawsuit alleging that their former employer violated the WARN Act by failing to give 60-day advance notice. The court evaluated the employer’s “natural disaster” defense and determined that COVID-19 was not a natural disaster. The federal appeals court determined that exemptions to the law’s notice requirements should be narrowly construed.

The Court wrote: “…we therefore decline to expand the definition of ‘natural disaster’ beyond what is justified by the Act’s statutory language, context, and purpose.”

In a separate case in Florida, the employer also alleged a natural disaster defense. In response, the federal court stated that “the layoffs resulted from the global travel shutdown that accompanied the spread of COVID-19, rather than the pandemic itself.”

The U.S. Supreme Court has yet to determine the scope of the WARN Act exceptions for purposes of determining what is a natural disaster. Until it does, employers should take care when looking to use the WARN exceptions as a justification for laying off workers without complying with the WARN Act notification provisions during the pandemic.

While the court may view natural disaster defense skeptically, they may be more open to the unforeseeable business circumstances argument, but it seems likely that the longer a company waited after the beginning of the pandemic to cite “unforeseeable business circumstances” the less credible the argument would be as the business circumstances became more and more foreseeable.

AIM members with questions about this or any other human resources issue may contact the AIM Employer Hotline at 1-800-470-6277.