Loss of 95 percent of business excused WARN notice of plant closure

A bankruptcy court decision illustrates how an apparently slam-dunk “unforeseeable business circumstance” excusing an employer from giving notice under the Worker Adjustment and Retraining Notification (WARN) Act can still drag an employer into court. A manufacturer of roof racks and side rails was hit hard by the automobile industry’s economic slump. It approached its major customers on February 4, 2009, asking for financial assistance in return for guaranteed production.

The next day, Nissan found another supplier. Beginning on February 11, the rest of the rejections rolled in—within a 24-hour period, Toyota, Ford, General Motors and Chrysler all found other suppliers. Because these customers comprised 95 percent of their business, the CEO met with employees on February 12 and verbally informed them that the company would cease operations the next day. The company filed for bankruptcy protection, and the employees sued under the WARN Act, claiming they should have received 60 days’ written notice before the plant closure. The court sided with the company, saying that the loss of so many major customers at once was unexpected, and the company informed workers promptly (In re Advanced Accessory Systems, LLC, Bkrtcy ED Mich, Feb. 2011). 

Tips: If business conditions slow to the point where a plant closure or mass layoff is a possibility, evaluate whether the WARN Act may apply, and consider options to minimize liability. Your Vigilant staff representative can help. See our Legal Guide, “WARN Act:  The Unforeseeable Business Circumstances Exception” (2350).