In a case of first impression, the Ninth Circuit held that if an employee leaves a job because the business is closing, that employee has not “voluntarily departed” within the meaning of the Worker Adjustment and Retraining Act (“WARN”).
In Collins v. Gee West Seattle, LLC, the defendant, Gee West, operated several automobile franchises in Seattle, Washington. In September 2007, it informed its 150 or so employees that it would likely be closing its doors in early October if it could not find a buyer for the business. After this announcement, employees stopped reporting to work, and by early October only 30 of the 150 employees reported to work. Since too few employees reported to work in order to operate the business, Gee West closed its doors two days prior to its anticipated close date.
Former employees of Gee West subsequently filed suit, claiming that they had not been given the full 60-days notice, as required under WARN. Gee West claimed that it was not subject to the requirements of WARN because only 30 employees remained – well below the WARN threshold requiring there to be, among other things, 50 affected employees.
The Court disagreed and held that all 150 employees, minus a few administrative employees, are considered affected employees since they reasonably expected to experience an employment loss as a consequence of the business closing its doors. The Ninth Circuit explained:
Instead of placing the onus on the employer to give 60-days’ notice before closing a plant, [the defendant’s] reading of the Act would measure an employer’s liability based solely on the number of employees remaining at the plant at the time of its closure, even though employees departed because of the plant closure. Such an interpretation is inconsistent with the basic structure of the WARN Act and frustrates its purposes.
Thus, employees who are departing because of a business closing are generally not “voluntarily” leaving, but rather leaving as a consequence of the shutdown. The Ninth Circuit seemingly places the burden on the employer to show that an employee should not be counted for purposes of WARN by requiring “evidence of imminent departure for reasons other than the shutdown.” In other words, if employees decide to stop coming to work because the company is ceasing operations – that is not sufficient to exclude them from the WARN calculation.
While this decision is a departure from the recent holding by the Seventh Circuit in Ellis v. DHL Express, Inc, there are some notable differences in the facts in Collins. For example, the employees in Collins were not offered an incentive program, providing them with the opportunity to enter into severance agreements prior to their departure. Also, Gee West’s own records confirmed that all employees who quit after notice was given had chosen to leave as a consequence of the business closing. Since Collins was the first venture into voluntary departures by the Ninth Circuit, it is yet to be seen how exactly these different factual situations will play out. In the meantime, the Ninth Circuit leaves employers with some clear guidance when calculating the number of voluntary departures for purposes of WARN:
The starting point for determining whether there is an actual or reasonably expected employment loss (as a consequence of a plant closing) is to determine how many positions will be eliminated by the closing.