WARN Act Notice Requirements Apply to Operating Units Within a Single Site of Employment
A recent case from the U.S. Court of Appeals for the Second Circuit provides clarification of when an operating unit exists for purposes of requiring advance notice of job loss under the federal Worker Adjustment and Retraining Notification (WARN) Act.
The WARN Act requires employers of 100+ full-time employees to give 60 calendar days’ notice of plant closings and mass layoffs. A “plant closing” is defined as a permanent or temporary shutdown of a single site of employment – the more common situation – but also of an operating unit within a single site of employment. And the regulations further define an “operating unit” as “an organizationally or operationally distinct product, operation or specific work function.”
Whether workers constitute an operating unit is a fact-specific analysis, for which the critical factor is the organization or operational structure. The obligation to provide notice is triggered when the number of impacted employees exceeds a certain threshold or percentage of the total number of employees at the site or within the unit.
In Roberts v. Genting New York LLC, a casino closed its buffet. The impacted workers sued for failure to provide them with a WARN Act notice. The casino argued that the buffet was not a “single site of employment” nor an “operating unit,” pointing to the fact that the buffet depended on the casino’s centralized services, including supplies, storage, cleaning, human resources, legal issues, payroll, insurance, and accounts payable. The Second Circuit disagreed, rejecting the interpretation that an operating unit encompasses only entities that could exist independently.
Other factors that the Second Circuit also reviewed included the physical location of the buffet, whether it offered an experience distinct from other dining options at the casino, the staffing arrangements, and uniforms. Some of these factors favored a finding of an operating unit and some did the opposite. The Second Circuit noted that other factors could also come into play. On the whole, however, the Second Circuit found it was possible that a fact-finder could determine that the buffet was a distinct operating unit, thereby triggering the WARN Act notice obligation.
Employers that are considering a reduction in force or other mass layoff of particular departments or functions must be careful to consider whether those groups could be deemed an operational unit for purposes of triggering WARN Act obligations.