By Marjorie Johnson, J.D.
Ending a WARN Act action brought by 194 former Vanderbilt University workers, the Sixth Circuit held that they could not meet the Act’s 500-employee “mass layoff” threshold by aggregating with a separate group of 279 employees who were notified of their future job eliminations within the Act’s requisite 90-day period, but who continued to receive pay and benefits for two more months. Reversing the district court’s determination that this other group was actually discharged on the date of their notice, the appeals court held that they did not suffer an employment loss until their pay and benefits ceased, which occurred more than 90 days after the first class of plaintiffs was terminated, and thus could not be counted under the WARN Act’s aggregation provision (Morton v. The Vanderbilt University
, January 5, 2016, McKeague, D.).
The 194 plaintiffs claimed that Vanderbilt violated the WARN Act’s 60-days’ written notice requirement when it terminated them on July 1, 2013. Because the WARN Act’s notice provisions apply to “mass layoffs” of at least 500 employees, they could only pursue their claim if the university’s treatment of 279 other
employees on September 17, 2013, was an immediate termination. If that was the case, the WARN Act’s aggregation provision could apply, which allows for separate layoffs within a 90-day period to be counted together in determining whether a mass layoff occurred. However, noting the unusual nature of the case in that the 279 employees were not before the court and did not protest their treatment, the Sixth Circuit determined that the group was not terminated until November 16 (they had been notified their employment would end on that date and it was the date that they stopped receiving wages and benefits).
Placed on “paid leave.”
On September 17, the 279 employees were notified in writing that their jobs would be eliminated in 60 days and that, while they would “remain employed” for those 60 days, they would be placed on “paid leave” and not be required to report to work. Their managers also told them to gather their personal belongings and return all Vanderbilt property, including identification badges, laptop computers and cell phones. They were then taken to meet with a career transition counselor, after which they were told to leave the campus and not return. They remained on Vanderbilt’s payroll and received full pay and benefits for 60 days, even if they worked elsewhere.
The district court held that the 279 employees suffered an employment loss on September 17. Thus, because this date fell within 90 days of the plaintiffs’ layoff, it ruled that they were subjected to a mass layoff and should have received 60 days’ written notice as required by the WARN Act. The Sixth Circuit disagreed, finding that the 279 employees did not suffer an employment loss until November 16, which was outside the requisite 90 days.
Continued pay vital.
In the appellate court’s view, the district court ignored the “crucial fact” that the other employees continued to receive wages and accrue benefits until November 16. So long as they were being paid and accruing benefits, there had not been a permanent cessation of the employment relationship, explained the appeals court. This comported with the WARN Act’s purpose of providing 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.” Additionally, those employees were not eligible for state unemployment benefits until November 16, when they no longer received wages and accrued benefits.
No entitlement to continued work.
Recognizing the “obvious logical fallacy” in generally equating the date of notice with the date of termination, the district court had emphasized that the 279 employees were instructed to clean out their workstations, to return Vanderbilt property, and to leave the campus and not return. The implication of this reasoning was that in order for employment to continue after the WARN notice, employers must permit employees to perform work after notice regardless of any legitimate reasons for wanting them gone from the premises. However the WARN Act does not require employers to allow employees to work after the WARN notice as long as they continue to receive wages and accrue benefits. “It would hardly make sense for the WARN Act’s aggregation provision to apply if an employer sent employees home for the notice period, but not apply if the employer had the employees sit in an empty room and do nothing.” Thus, there was no cessation of the employment relationship as long as the employees continued to be paid and accrue benefits.
Not pay in lieu of notice.
The Sixth Circuit also rejected the plaintiffs’ assertion that because Vanderbilt provided the 279 employees with pay and benefits for 60 days regardless of whether they got new jobs, it unlawfully provided them with pay in lieu of notice. However, pay in lieu of notice occurs when an employer immediately terminates a group without notice and simultaneously provides 60 days’ backpay. That did not occur here because they employees were not given pay in lieu of
notice but rather they were given pay in addition to
notice. “The WARN Act is not triggered when an employer does exactly what Vanderbilt did here—provide employees 60-day notice, continue to pay them their wages and provide them their benefits, but not permit them to report for duty during the notice period.”
The appeals court was equally unconvinced by the plaintiffs’ assertion that that by placing the 279 employees on paid leave, Vanderbilt impermissibly evaded the requirements of the WARN Act by manipulating the timing and numbers of employees laid off. There was nothing illegal about an employer spacing out layoffs so that some occur beyond a relevant 90-day period. Accordingly, since the 279 employees’ termination fell outside of the 90-day aggregation window, the plaintiffs were not subjected to a mass layoff as defined by the WARN Act.