Not So Final WARNing: Sixth Circuit Finds That Employment Ends with Termination of Wages, Not Notice

In Morton v. Vanderbilt Univ., 2016 WL 52439 (6th Cir. Jan. 5, 2016), the Sixth Circuit recently held that, for purposes of the Worker Adjustment and Retraining Notification Act (“WARN Act”), employment does not end at notice of termination, but rather the employment relationship continues as long as the employee continues to be paid wages and accrue benefits.

In Morton, a group of 194 employees brought a class action suit against Vanderbilt University alleging that it violated the WARN Act, which requires that certain employers give at least 60 days’ written notice to affected employees before a “mass layoff.”  The plaintiffs did not meet the numerical threshold for a “mass layoff” under WARN, so they attempted to rely on WARN’s 90 day aggregation or “look back” provision to include a second group of 279 other terminated employees, to trigger WARN Act requirements.  The second group of employees had been notified on September 17, 2013 that their employment would be terminated 60 days later, on November 16, 2013.  Although they were no longer permitted to report for work during the 60 day period, they continued to receive wages and accrue benefits after the notice was given.

The viability the plaintiffs’ WARN Act claims turned on whether the employees involved in the second round of lay-offs suffered an “employment loss” on September 17, 2013, or November 16, 2013, because the former date would place the layoffs within the 90–day window, while the latter date would not.  Plaintiffs argued that the September group’s termination became effective on September 17, and thereby fell within 90 days of the plaintiffs’ July 1 layoff.  The district ruled in favor of the plaintiffs and held that the September group’s employment immediately ended once they received notice of the termination, and therefore the two groups could be aggregated for purposes of triggering the University’s WARN Act obligations.

The Sixth Circuit reversed, holding that the WARN Act’s aggregation provision did not apply and thus the WARN Act was not triggered because the second group of Vanderbilt employees suffered an employment loss more than 90 days after the plaintiffs were terminated.  In reaching its conclusion, the court relied on the Department of Labor’s common sense interpretation of “termination” as “the permanent cessation of the employment relationship” and dismissed the idea that employees must be permitted to perform work or even show up to work during the notice period in order to continue the employment relationship.  The court held that “[s]o long as these employees were being paid and accruing benefits, there had not been a permanent cessation of the employment relationship.”  The court noted that Vanderbilt’s actions in providing the September employees with 60 days noted comported with the purpose of the WARN Act, which is to provide workers “some transition time to adjust to the prospective loss of employment, to seek and obtain alternative jobs and, if necessary, to enter skill training or retraining that will allow these workers to successfully compete in the job market.” 20 C.F.R. 639.1(a).

Conducting any reduction in force can be complex, and with many employers looking to tighten their belts in the New Year it is critical that they consult with counsel to carefully consider the repercussions of all group layoffs, including applicable WARN Act requirements.