WARN Act Notice Not Required for Contractors' Employees, 4th Circuit Rules
Author: David B. Weisenfeld, XpertHR Legal Editor
December 7, 2021
The advance notice requirements of the Worker Adjustment and Retraining Notification (WARN) Act do not extend to a company's contractors, the 4th Circuit Court of Appeals has ruled.
The WARN Act requires employers with 100 or more employees to provide 60 calendar days' advance written notice to each employee, or each representative of an employee, affected by impending plant closings or mass layoffs.
In Pennington v. Fluor Corporation, 4,000 of a utility company's contractors' employees lost their jobs as a result of the sudden shutdown of construction on a nuclear power plant. The plaintiffs claimed that the utility corporation in charge of the project and their employer violated the WARN Act's notice requirement.
But in rejecting the claims against the utility corporation, SCANA, the 4th Circuit - which covers Maryland, North Carolina, South Carolina, Virginia and West Virginia - held that the scope of the WARN Act extends only to a company's own employees.
While the plaintiffs may have been affected by the closure, they worked for a contractor hired by SCANA, never received SCANA's employee handbook and were not under its direct control. As a result, the court found that the plant owner's decision to close did not make it liable to the contractors' employees.
The 4th Circuit also affirmed the dismissal of claims against Fluor Corporation, the contractor that actually employed many of the 4,000 laid off employees, finding that the WARN Act's unforeseeable business circumstances exception applied because it could not have known in advance of SCANA's decision to close.
The ruling is significant in light of the many workers who lost their jobs as a result of projects being cancelled or from plant closings due to the COVID-19 pandemic. The US Chamber of Commerce filed a brief in support of the employers claiming that a finding of WARN Act liability could have a "potentially devastating impact" against the broader business community, discourage business-to-business transactions and extend the scope of liability far beyond what Congress intended.
Since the outcome turned on whether the contractor's employees were under SCANA's control, the ruling does not limit covered employers' responsibilities in any way to provide advance notice of a plant closing or mass layoff to their own employees under the WARN Act.