Liquidating fiduciary exception to warn
Among other things, the regulations prescribe when an employer must give WARN notice, who the employer must notify, how the employer must give notice, and what information the notice must contain. Interestingly, although the bankruptcy court in Flexible Flyer also ruled that the company satisfied the "faltering company" exception in 29 U. Explaining that the bankruptcy court found the unforeseeable-business-circumstances exception to be "by far the most compelling," the court of appeals declined to express any views on this alternative exception to the WARN notification requirements. Department of Labor has prescribed regulations to implement WARN. According to the Fifth Circuit's analysis, the probability, rather than the possibility, of the occurrence of the business circumstance that forces the shutdown is the determinative factor. 2102(b)(1), the Fifth Circuit never reached the issue on appeal. 2104(a) provides that an employer who fails to give WARN notice shall be liable to each aggrieved employee who suffers an employment loss as a result of such plant closing or mass layoff for, among other things, back pay for each day during the period of the violation. (2)(A) An employer may order a plant closing or mass layoff before the conclusion of the 60-day period if the closing or mass layoff is caused by business circumstances that were not reasonably foreseeable as of the time that notice would have been required. Its regulations protect the employer's exercise of business judgment and are intended to encourage employers to take all reasonable actions to preserve the company and the jobs. 2102(b) provides as follows: (1) An employer may order the shutdown of a single site of employment before the conclusion of the 60-day period if as of the time that notice would have been required the employer was actively seeking capital or business which, if obtained, would have enabled the employer to avoid or postpone the shutdown and the employer reasonably and in good faith believed that giving the notice required would have precluded the employer from obtaining the needed capital or business. All of the evidence, the Fifth Circuit stated, "shows that the focus of Flexible Flyer's management was on saving the company, not planning for an upcoming shutdown." The court also determined that the bankruptcy court committed no clear error in concluding that management's exercise of its business judgment to keep Flexible Flyer operating and its expectation that it would continue operations into the following year were "completely reasonable," despite the fact that "Flexible Flyer's financial condition was perilous for much of its eight-year existence." According to the Fifth Circuit, "[i]t was only when CIT and Cerberus both decided to cut off funding completely, and did so almost simultaneously without warning, that the shutdown became inevitable." In affirming the rulings below, the Fifth Circuit observed that the case before it presented a "convincing example" of an event satisfying the unforeseeable-business-circumstances exception, consistent with the underlying purpose of WARN: [WARN] allows good faith, well-grounded hope, and reasonable expectations. In 2005, Flexible Flyer experienced several financial reverses, including a product recall due to defective parts. Each year, Cerberus informed Flexible Flyer that it would shut down the company if it did not become profitable within the coming year, but Cerberus never made good on the threat and continued to provide Flexible Flyer with capital. 2101(a)(1) defines "employer" as "any business enterprise that employs ‒ (A) 100 or more employees, excluding part-time employees; or (B) 100 or more employees who in the aggregate work at least 4,000 hours per week (exclusive of hours of overtime)." However, a court-fashioned "liquidating fiduciary" exception provides that a liquidating fiduciary in a bankruptcy case (e.g., a trustee or other estate representative) does not fit the definition of an employer for purposes of WARN. of Unsecured Creditors of United Healthcare Sys., Inc.
639.9(b)(1) states that closings and layoffs are not foreseeable when "caused by some sudden, dramatic, and unexpected action or condition outside the employer's control." The regulations also provide that, in assessing the foreseeability of business circumstances, the focus should be "on an employer's business judgment" and that an employer is required only to "exercise such commercially reasonable business judgment as would a similarly situated employer in predicting the demands of its particular market." See 20 C. After Cerberus refused a request for additional capital, Flexible Flyer filed for chapter 11 protection in Mississippi on September 9, 2005.
In certain respects, Flexible Flyer is a cautionary tale.
It also states that the employer's liability "shall be calculated for the period of the violation, up to a maximum of 60 days, but in no event for more than one half the number of days the employee was employed by the employer." However, if an employer can prove that it shut down operations because either it was a "faltering company" or the shutdown was due to business circumstances "that were not reasonably foreseeable," it need not comply with WARN's 60-day notice provisions. Holding Flexible Flyer liable for a [WARN] violation on the facts found by the bankruptcy court would serve only to encourage employers to abandon companies even when there is some probability of some success.
The court also found that, under the circumstances, Flexible Flyer had provided WARN notification to its employees "at the earliest practical date that such a notice could be provided." The district court affirmed the ruling on appeal.
The bankruptcy court ultimately determined that Flexible Flyer was excused from providing advance notice because it had demonstrated that the layoffs were the result of an unforeseeable business circumstance.