Should I Stay or Should I Go: The Seventh Circuit Explores Voluntary Departures under the WARN Act

In Ellis v. DHL Express, Inc., the Seventh Circuit affirmed the decision of the Northern District of Illinois and held that the Worker Adjustment and Retraining Notification (WARN) Act was not implicated as a result of the layoffs of employees by package delivery service, DHL Express.

As explained by the Seventh Circuit:

The WARN Act requires “employers” (defined as businesses with 100 or more full-time employees, 29 U.S.C. § 2101(a)(1)) to provide employees with written notice of impending “plant closings” or “mass layoffs” at least sixty days prior to the closing or layoffs. 29 U.S.C. § 2102. The WARN Act does not apply-and the employer need not provide advance notice to any of its workers-if the shutdown of a plant does not result in an employment loss of at least 50 full-time employees at a single site of employment, 29 U.S.C. § 2101(a)(2), or the layoffs do not affect at least 33% of full-time employees, 29 U.S.C. § 2101(a)(3). Despite the lack of practical distinction between eliminating 49 or 50 full-time jobs, or between laying off 32% or 33% of a workforce in a thirty-day period, the numerical thresholds in the WARN Act are immutable.

The calculation of how many employees were laid off at DHL Express – and whether the layoff met the above referenced definition of a “mass layoff” – was complicated by the fact that employees had the option to choose their method of departure.  Employees had the choice to (1) receive severance package benefits negotiated by their union and, in return, had to agree to waive all state (Illinois) and federal WARN Act claims against the company; or (2) forgo the severance benefits and retain their seniority status, recall rights, and right to bring legal claims against the company.

506 employees signed the release in order to receive severance pay and benefits, resulting in the layoffs not meeting the requirements of either a plant closing or a mass layoff, pursuant to WARN. In particular, the layoffs did not result in an employment loss at a single site of employment of 33% or more of the full-time workforce during the relevant statutory period.

The threshold issue the court considered on appeal was whether the employees truly entered into the severance agreements voluntarily. Of significance, some employees had only a short, two-day window to review and choose whether to agree to the severance package. However, the court emphasized that there was nothing to suggest the employees were given incomplete information or were somehow “strong-armed . . . into signing the release forms and accepting the severance package against their will.” Further, the agreements were negotiated by the employees’ union and were worded unambiguously. In fact, some managers even declined to discuss with employees their opinions regarding the severance plan in order to not pressure or sway them in any way. Accordingly, the plaintiffs failed to raise any genuine issues of material fact regarding the voluntariness of the union-negotiated settlement agreements, which would have resulted in the employees being counted as involuntarily separated for purposes of the WARN Act.

The Seventh Circuit focused on the “bright lines’” that exist within the WARN framework, in order to make the Act easier to administer. However, this case illustrates just how difficult the “bright lines” can be to draw, as they oftentimes require a fact-intensive analysis to understand who is and who is not counted for purposes of WARN.

About Ashley Kasarjian

Attorney at Snell and Wilmer in Phoenix, Arizona, and publisher of the blog, Employment and the Law.
This entry was posted in RIFs, WARN and tagged , , , , . Bookmark the permalink.

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