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Ninth Circuit Says Employees Who Quit Due to Business Closing Are Included in WARN Job Loss Calculations

    Client Alerts
  • February 04, 2011

Last month, EmployNews reported a Seventh Circuit Court of Appeals decision that allowed employers to exclude employees who accept voluntary departure severance packages from job loss calculations used to determine whether the employer must give advance notice of a business closing under the Worker Adjustment and Retraining Notification (WARN) Act. Last week, the Ninth Circuit Court of Appeals reviewed the same issue in a different context, and determined that employees who voluntarily leave a closing business are included in WARN job loss calculations.

In Collins v. Gee West Seattle, LLC, the plaintiffs were employees of a car dealership undergoing business hardships. The employer informed employees of the pending closing of the dealership, but did not provide adequate notice under WARN. Upon receiving this notice, a number of employees abandoned their jobs, presumably to seek or accept alternate employment. When a group of employees sued under WARN, the employer argued that the Act was inapplicable to the closing, because fewer than 50 employees (the WARN threshold) had actually been terminated. The remainder quit upon learning of the impending closing of the business.

The Ninth Circuit rejected this argument, reversing a grant of summary judgment for the defendant and remanding the case for trial. While WARN excludes voluntary employee departures from its job loss calculations, the departures here were not truly voluntary. They resulted from employees' need to find new work upon learning of the closing of their employer. This was the very type of circumstance that Congress intended to provide employee protection through advance notice. Even if the employees who left did so to accept new employment, WARN provides no exception from the notice requirements in this circumstance.  WARN also provides specific exemptions from the notice requirements in situations where the employer can prove that notice would have interfered with its efforts to save the business.

In the earlier Seventh Circuit case, employees resigned to accept a severance package under terms negotiated with their union. Other federal courts may distinguish the facts between these two cases, finding that agreeing to severance is a voluntary departure even in the face of impending layoffs.