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Employees Accepting Voluntary Separation Packages Not Included in WARN Act Job Loss Calculations

    Client Alerts
  • January 21, 2011

When faced with impending layoffs, employers often develop voluntary early exit incentives intended to reduce the need to later involuntarily impose layoffs. These "early retirement" or "voluntary layoff" programs usually offer employees who elect their terms greater severance benefits than would otherwise be made available if they are later selected for layoff.

Last week, the Seventh Circuit Court of Appeals issued a decision discussing the impact of such voluntary departures on employers' advance notice obligations under the Worker Adjustment and Retraining Notification (WARN) Act. In Ellis v. DHL Express, Inc. USA AG, DHL decided to stop its small package delivery service in the U.S. As a result, the company negotiated a voluntary separation package with the union representing drivers and clerical workers at its facilities. Most DHL employees agreed to accept the severance package.

The plaintiffs in this case were employees who rejected the package. They sued under WARN, claiming that DHL had not provided them with adequate notice of their layoffs. DHL countered that not enough employees lost jobs due to the layoffs to meet the minimum threshold for providing WARN notice. The key issue here was whether the employees who accepted the voluntary early exit packages should be included in the number of employees deemed to be subject to an employment loss under WARN.

Under WARN rules, employees who truly voluntarily depart employment through early exit incentive programs are not included in job loss calculations. In this case, the plaintiffs argued that the departures were not voluntary because they occurred in the context of extreme economic uncertainty and pressure created by DHL.

The Seventh Circuit disagreed, affirming dismissal of the claim. The court noted that the separation agreements were written in plain English, and that managers had fully and fairly explained their contents. The employees' union had negotiated the packages on their behalf, and the short time periods provided to consider the offer did not make them unfair or involuntary.

This decision provides employers unable to provide full WARN notice with a possible mechanism for avoiding liability. A truly voluntary early exit incentive program that is fully and fairly explained to employees may result in a situation where enough workers accept separation packages to avoid WARN notification requirements for remaining employees.