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Monday, January 24, 2011

Collins v. Gee West: Employee Who Leaves Job When Business Closes Suffers "Employment Loss" under Federal WARN Act

In Collins v. Gee West Seattle, LLC, --- F.3d ----, 2011 WL 182447 (9th Cir. January 21, 2011), the Ninth Circuit held:
[I]f an employee leaves a job because the business is closing, that employee has not "voluntarily departed" within the meaning of the WARN Act. [29 U.S.C. § 2101 et seq.] Rather, that employee has suffered an "employment loss."

Gee West had approximately 150 employees. On September 26, 2007, Gee West informed its employees that it would close its doors on October 7, 2007. After the announcement, employees began to stop reporting to work. By October 5, 2007, ten days after the announcement, only 30 employees remained.

The District Court (W.D. Wash., Judge Pechman) held that those who left before Gee West closed had "voluntarily departed" and did not suffer an "employment loss" under the WARN Act. The Ninth Circuit reversed:

[U]nless there is some evidence of imminent departure for reasons other than the shutdown, it is unreasonable to conclude that employees voluntarily departed after receiving notice of the upcoming closure. For example, Gee West argues that 150 affected employees reasonably expected loss of employment, and those employees' positions were eliminated, but that only 30 employees actually experienced employment loss. Gee West claims that all other employees voluntarily departed after notice was given. This argument would allow an employer to escape responsibility for failing to give proper notice simply because its employees subsequently leave the business due to its imminent closure. The unexpected and urgent need to find new employment is precisely the type of pressure that this Court held that Congress was attempting to eliminate by creating the WARN Act. Employees' departure because of a business closing, therefore, is generally not voluntary, but a consequence of the shutdown and must be considered a loss of employment when determining whether a plant closure has occurred. Gee West's argument that only 30 employees lost employment as a consequence of the plant closing is thus not credible. Indeed, Gee West's records note that all employees who were terminated after Sept. 26, 2007, left as a consequence of the business closing.

Slip op. at 5. As the Court notes, this holding leaves intact the "faltering business" exception to the WARN Act, which allows businesses to refrain from giving notice under circumstances. Slip op. at 6.

The opinion is available here.

1 comment:

  1. This is a terrible opinion. It turns the 60 day WARN notice pay into 60 day vacation pay. Businesses should expect to (1) pay employees for (a) 60 days prior to closing, or (b) for 60 days after notice (whether notice is sufficient or not), or (c) for 60 days after closing w/o notice; and (2) have employees work at the business until it closes (if they want to receive their full 60 day pay).

    I'm not sure if this opinion would extend to sufficient notice, but this court would let an employee leave 1 day after getting a 59-day notice and get paid for 60 days. Absurd.


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