Third Circuit: WARN Notice Requirements Apply if Layoff is “Probable,” Not “Possible”

In Varela v. AE Liquidation, Inc., the sale of Eclipse Aviation Corporation fell through and Eclipse was forced to convert its then-furloughed employees to a layoff.  The employees brought a class action against Eclipse for failing to comply with the 60 days’ advance notice required under the WARN Act. The Third Circuit agreed that Eclipse did not comply with the timing requirement, but nevertheless stated that the company’s closing and layoff were caused by unforeseeable business circumstances, which is an exception to the WARN Act’s notice requirement.

The employees argued that the failure of the sale could have been anticipated in the 60 days prior to the layoff. However, Eclipse had received constant reassurance from the bank that the buyer would obtain the financing necessary to purchase Eclipse.  The court indicated that these reassurances, plus Eclipse and the buyer’s past business relationship—inclusive of historical funding reports—were a significant factor in demonstrating that it was reasonable for Eclipse to believe that the purchase would go as originally intended.

Based on these factors, the Third Circuit stated that the loan failure and ensuing layoff were not reasonably foreseeable and confirmed the standard that notice obligations are triggered when a mass layoff becomes “probable” rather than merely possible.

Action Items

1. Employers considering significant layoffs should review notice requirements, and possible exemptions, with counsel before taking action.
2. Subscribers can call our HR On-Call Hotline at (888) 378-2456 for further assistance.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser.

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