Opinion
Case No. 2:03-CV-149TC
December 23, 2003
ORDER
The twenty-six named Plaintiffs bringing this action are former employees of Defendant Financial Fusion, Inc. ("FFI"), a wholly-owned subsidiary of publicly-traded Defendant Sybase, Inc. ("Sybase") (collectively, "Defendants"). Plaintiffs claim that they were laid off without sixty days written notice in violation of the Worker Adjustment and Retraining Notification Act ("WARN Act" or "Act"), 29 U.S.C. § 2101-2109 (2003). The matter is before the court on the parties' cross motions for summary judgment.
Originally, Plaintiffs numbered twenty-eight, but Leslee West and Gene Woodward withdrew as plaintiffs on October 14, 2003.
Undisputed Facts
Plaintiffs worked in various positions at FFI's Orem site. During a ninety-day period spanning from August 2001 through October 31, 2001, Defendants, who had more than one hundred employees, laid off more than fifty of their employees at the Orem site (over thirty-three percent of FFI's full-time employees at that site), including Plaintiffs, without sixty days written notice. Defendants paid sixty days pay and benefits to the last eleven individuals laid off during that ninety-day period but not to Plaintiffs.
Each Plaintiff signed a Release Agreement ("the Agreement"). The Agreement reads:
I agree that my Severance Benefit is in full satisfaction of any claims, liabilities, demands or causes of action, known or unknown, that I ever had, now have or may claim to have had against the Company or any or [sic] its parents, subsidiaries, directors, officers, employees or agents as of the date of this Release, except claims for workers' compensation insurance and unemployment insurance benefits. Any claims, whether for discrimination, including claims under state law, Title VII of the Civil Rights Act of 1964 or the Age Discrimination in Employment Act, wrongful termination, breach of contract, breach of public policy, physical or mental harm or distress or any other claims, are hereby forever released and I agree and promise that I will not file any legal action asserting any such claims. Without limiting or affecting the finality of the foregoing, I understand that I am not prevented from filing a charge or participating in any investigation or proceeding conducted by the Equal Opportunity Employment Commission [sic].
(Declaration of Neil Morris in Support of Def.'s Mot. Summ. J. ("Morris Decl. in Supp.") at ¶ 34, Ex. A. (emphasis added).)
Discussion
Legal Standard
Under Federal Rule of Civil Procedure 56, a court may enter summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.'" Fed.R.Civ.P. 56(c); see Anderson v. Liberty Lobby. Inc., 477 U.S. 242, 250-51 (1986); Adler v. Wal-Mart Stores. Inc., 144 F.3d 664, 670 (10th Cir. 1998).
Were Plaintiffs Entitled to Notice under the Warn Act?
The Warn Act prohibits employers (with 100 or more full-time employees) from ordering a "plant closing or mass layoff until the end of a 60-day period after the employer serves written notice" of the closing or layoff to its employees, 29 U.S.C. § 2102(a). An employer found to be in violation of this provision must pay affected employees "back pay for each day of violation." 29U.S.C. § 2104(a)(1).
Under the Act,
The term "mass layoff means a reduction in force which —
(A) is not the result of a plant closing; and
(B) results in an employment loss at the single site of employment during any 30-day period for —
(i)(I) at least 33 percent of the employees (excluding any part-time employees): and
(II) at least 50 employees (excluding any part-time employees); or
(ii) at least 500 employees (excluding any part-time employees);29 U.S.C. § 2101(a)(3).
If there are separate layoffs which, even if viewed individually do not satisfy the minimum numbers described above, the Act permits aggregation in certain circumstances:
For purposes of this section, in determining whether a . . . mass layoff has occurred or will occur, employment losses for 2 or more groups at a single site of employment, each of which is less than the minimum number of employees specified in section 2101(a)(2) or (3) of this title but which in the aggregate exceed that minimum number, and which occur within any 90-day period shall be considered to be a . . . mass layoff unless the employer demonstrates that the employment losses are the result of separate and distinct actions and causes and are not an attempt by the employer to evade the requirements of this chapter.29 U.S.C § 2102(d).
Plaintiffs argue that it is undisputed that Defendants laid off two or more groups of employees at the Orem site (aggregating at least fifty full-time employees and thirty-three percent of the Orem work site) during a single ninety-day period, It is Plaintiffs' contention that, under the clear terms of the Act, because Defendants failed to give the required notice, Defendants violated the Act,
Although Defendants admit that they conducted several rounds of layoffs at the Orem, Utah site, "which, when aggregated, numerically exceeded the Act's 50-employee threshold," they contend that Plaintiffs were not entitled to notice under the Warn Act. (Def/s Mem. Opp. Pl.'s Mot. for Summ. J. at 8). Defendants advance what they consider to be three distinct arguments why they were not required by WARN to provide benefits and pay to Plaintiffs, even though they provided benefits and pay to the last eleven employees laid off. First, they argue that the layoffs they executed after September 2001 were not "planned." Second, they maintain that some of the layoffs during the ninety-day period were the result of "separate and distinct causes." Finally, they contend that Plaintiffs waived any claims they might have had under the Warn Act when they signed the releases,
On the first of these arguments, Defendants emphasize regulatory language instructing employers, in determining whether notice is required, to "[l]ook ahead 90 days and behind 90 days to determine whether employment actions both taken and planned, each of which separately is not of sufficient size to trigger WARN coverage will, in the aggregate for any 90-day period, reach the minimum numbers for a plant closing or a mass layoff and thus trigger the notice requirement." 20 C.F.R. § 639.5(a)(ii) (emphasis added). Defendants maintain that "looking ahead 90 days from the time of the September 2001 layoffs, they did not plan to conduct within the 90-day period additional layoffs at the Orem site that would cause FFI to exceed WARN's 50-employee threshold and thereby trigger the Act's notice requirements." (Def's Mem. Opp. Pl.'s Mot. Summ. J. at 9.) According to Defendants, "[i]t would defy logic to require an employer to "notify" employees of a "planned" layoff at a time when the employer had no plans to conduct such a layoff." (Id.)
In view of the language of the Act, the administrative regulations, and the purposes of the Act, Defendants' argument is not persuasive. The Warn Act's "Administration and enforcement of requirements" provision states, in pertinent part: "Any employer who orders a . . . mass layoff in violation of section 2102 of this title shall be liable to each aggrieved employee who suffers and employment loss as a result of such . . . lay off. . . ." 29 U.S.C, § 2104(a)(1) (emphasis added). And, as discussed above, § 2102(d) specifically requires the aggregation of employment losses that occur during a ninety-day period.
In addition, the relevant regulation clarifies that "[w]hen all employees are not terminated on the same date, the date of the first individual termination within the statutory . . . 90-day period triggers the 60-day notice requirement. . . . The first and each subsequent group of terminees are entitled to a full 60 days' notice." 20 C.F.R. § 639.5(a).
The WARN Act and its implementing regulations make clear that within any ninety-day period, all terminated employees (including the first employee terminated during that period) who are properly aggregated under Section 2102(d) are entitled to notice or, where notice has been denied, to the remedy of sixty days of pay and benefits lost, and possibly reasonable attorney's fees. 29 U.S.C. § 2104 (a)(1) and 2104(a)(6).
Finally, Defendants' interpretation is clearly at odds with the remedial purpose of the Warn Act. The WARN Act's advance notice requirement is designed to "provide workers and their families 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." 20 C.F.R. § 639.1 (a). The Act has been read to be so broadly remedial in nature that it essentially "provide[s] a statutory form of `severance pay,'" United Mine Workers of America Int'l Union v. Martinka Coal Co., 1997 WL 854936, *4 (N.D.W.Va. Dec. 30, 1997) (citing In re Hanlin Group. Inc., 176 B.K. 329 (D.NJ. 1995)).
Given this broad remedial purpose, Defendants' argument that an employer needs to give notice only to those employees terminated in the group that crosses the WARN threshold is unpersuasive. Defendants cite the district court case of United Paperworkers Int'l Union v. Alden Corrugated Container Corp., 901 F. Supp. 426 (D. Mass. 1995), for the proposition that where two different groups of layoffs at one site are aggregated to create a "mass layoff," the employer's WARN obligations arise on the date of the latter group of layoffs.
In United Paperworkers, there were two groups of layoffs at one site: (1) thirty employees laid off on September 11, 1990, and (2) twenty-four employees laid off on November 30, 1990. Id. at 435. The United Paperworkers Court held that the employer had not met its burden of showing that the two groups of layoffs stemmed from separate and distinct causes, and that "as a matter of law, the September and November layoffs at the Bates Plant must be aggregated such that a mass layoff shall be deemed to have been ordered by Bates." Id. at 436. Defendants apparently rely on language in the case noting that "[w]ith respect to Bates, the mass layoff occurred on November 30, 1990, Notice should have been given on September 30, 1990 when Bates employed ninety-three (93) workers."Id.
But Plaintiffs correctly point out that this language is dicta, because the court was deciding the issue of whether two separate employers were "employers" as contemplated by the Act (employing the requisite number of employees). Moreover, this dicta contradicts the implementing regulation's clear guidance that "[t]he first and each subsequent group of terminees are entitled to a full 60 days' notice." 29 C.F.R, § 639.5(a). The court also agrees that even if United Paperworkers "stood for the proposition that the 60-day `notice window' should be counted back sixty days from the last round of layoffs that put the aggregate number over the fifty-employee threshold, that `notice window' would still include all of the Plaintiffs here." (Pl.'s Reply Mem. Supp. Pl.'s Mot. Summ. J. at 10).
In short, there is no basis for Defendants' argument that they only owed notice or pay and benefits to those employees whose terminations crossed the WARN threshold.
Did Plaintiffs waive their WARN claims by signing the Agreements?
Both Plaintiffs and Defendants argue that the plain language of the release provision reads "clearly" and "unambiguously" to their advantage. Defendants also contend that Plaintiffs "knowingly and voluntarily" executed the Release Agreements, thereby waiving any WARN claims they might have had.
As factors going to knowledge and voluntariness, Defendants argue that Plaintiffs (1) received adequate consideration in exchange for their releases; (2) had ample time to consider the releases before signing them; (3) were encouraged to consult an attorney prior to signing; (4) are highly educated and experienced; and (4) should have known they were waiving their potential WARN claim. They further argue that the voluntariness of the releases is not compromised by the fact that Plaintiffs did not negotiate the terms of those releases.
Plaintiffs maintain that the language of the Agreement, specifically the language "as of the date of this Release," limits the waiver to claims past and present on the date of signing, and excludes future claims. The WARN claims did not arise until after Plaintiffs had signed the Agreements, according to Plaintiffs, because they were not actionable until the fiftieth employee was laid off on October 31, 2001, and the last Plaintiff was laid off on October 11, 2001, The court agrees.
Because the court finds that under the plain language of the Agreement, Plaintiffs did not waive their WARN claims, there is no need to reach the question of whether execution of the Agreement was knowing and voluntary.
Were the Employment Losses Separate and Distinct Actions
Defendants bear the burden of demonstrating "that the employment losses [occurring during the ninety-day period] are the result of separate and distinct actions and causes and are not an attempt by the employer to evade the requirements of this chapter." 29 U.S.C. § 2102(d); see Hollowell v. Orleans Reg'l Hosp. LLC., 217 F.3d 379, 383 (5th Cir. 2000) ("Section 2102(d) imposes an affirmative burden on the employer to prove that the court should disaggregate employment losses that occurred during the 90-day period"); Defendants have not met their burden, offering no evidence creating a question of fact on whether the later layoffs stemmed from "separate and distinct" causes. Indeed, their willingness to pay the last eleven employees sixty days benefits and pay can only be understood as an acknowledgment that those eleven employees were properly aggregated with the forty-six previously terminated employees to meet the fifty employee threshold. Under such circumstances, and under the above analysis, there can be no justification for denying Plaintiffs the very same benefits and pay, where no notice was given.
Defendants' sole argument on this point is that six of the employees terminated on October 31, 2001 were terminated for the "separate and distinct cause" of a reorganization plan implemented by Sybase. But because Defendants have admitted that they terminated fifty-seven employees during the relevant ninety-day period, omitting these six employees places the total number of layoffs at fifty-one, a number that still crosses the WARN threshold.
Did "unforeseeable business circumstances" justify Defendants' failure to give WARN notice?
Employers need not provide the full sixty day notice period "if the mass layoff is caused by business circumstances that were not reasonably foreseeable as of the time that notice would have been required." 29 U.S.C. § 2102(b)(2)(A). The relevant regulation provides that
[a]n important indicator of a business circumstance that is not reasonably foreseeable is that the circumstance is caused by some sudden, dramatic, and unexpected action or condition outside the employer's control. A principal client's sudden and unexpected termination of a major contact with the employer, a strike at a major supplier of the employer, and an unanticipated and dramatic major economic downturn might each be considered a business circumstance that is not reasonably foreseeable. A government ordered closing of an employment site that occurs without prior notice also may be an unforeseeable business circumstance,20 C.F.R. § 639.9 (b)(1) (2003).
Defendants claim that the September 11, 2001 terrorist attacks had a tremendous impact on their financial well-being. Plaintiffs do not dispute that these events were "unforeseeable" in early July, 2001, when the sixty-day notice would have been due to those Plaintiffs terminated on September 7, 2001. Rather, they question whether Defendants have actually demonstrated that the events "caused" the layoffs, and suggest that the September 11, 2001 explanation is a "convenient retroactive justification." ( Pi's Reply Mem. Supp. Pl.'s Mot. Summ. J. at 13.)
Defendants bear the burden of proving that the exception applies.Wholesale Retail Food v. Santa Fe Terminal Servs., 826 F, Supp. 326, 332 (C.D. Cal. 1993) (citing 20 C.F.R. § 639.9). To demonstrate a causal connection between the events of September 11, 2001 and the layoffs following close on the heels of that day, Defendants rely primarily on the affidavit testimony of FFI Human Resources Director Neil Morris, The relevant paragraph from Mr. Morris's affidavit reads as follows:
The Fifth, Ninth, and Third Circuits have declined to followWholesale and Retail Food Distribution on other grounds.
On September 28, 2001, subsequent to the events of September 11, 2001, FFI conducted a company-wide layoff. Based on a conversation I had with a Sybase executive and senior human resources employee on the evening of September 11, 2001, I understood that the day's events would likely have a devastating impact on a broad segment of FFI's customer base — i.e., its capital market clients — and that this would lead to significant additional layoffs at Orem. Therefore, my understanding at the time of the September 28, 2001 layoff was that the events of September 11 had, in substantial part, precipitated the layoff.
(Declaration of Neil Morris Opp. Pl.'s Mot. Summ. J. ("Morris. Decl. in Opp.") at ¶ 8.) Plaintiffs have moved to strike this portion of Mr. Morris's declaration, and the court GRANTS that motion, excluding the statement as inadmissible hearsay. Although Defendants assert that Mr. Morris's statement is offered to explain his layoff decisions, this argument ignores that fact that Mr. Morris was not the person who made the decision to lay off Plaintiffs and the other employees terminated during the relevant ninety-day period. Therefore, the hearsay exception Defendants rely upon does not apply.
Moreover, the parties' memoranda, arguments at the hearing, hearing exhibits, and other evidence in the record establish that the actual cause of the layoffs was FFI's steady financial decline, beginning in 2000 and ending in the third quarter of 2001, with FFI starting to show a profit again in the fourth quarter of 2001 (soon after September 11, 2003, which fell at the end of the third quarter). (See Def.'s Mem. Opp. Pl.'s Mot. Summ. J. at 3; Declaration of Pieter Van der Vorst ("Van der Vorst Decl.") at ¶¶ 4-9; Pl.'s Demonstrative Aids for Hearing on Motions for Summary Judgment at 7). Sybase's chief financial officer, Pieter Van der Vorst, stated by declaration that "FFI's financial performance throughout 2001 fell far short of the [budgeted] revenue and profit targets," and that "to meet the financial target numbers . . . FFI conducted a series of employee layoffs throughout 2001 to reduce its headcount and thereby cut costs." (Van der Vorst Decl. at ¶¶ 10-11.)
Defendants argue that they need more time to determine whether September 11, 2001 indeed caused the layoffs. The court agrees with Plaintiffs that Defendants have had ample time (over two years since September 11, 2001) to make that determination, and, as discussed, have failed to provide any admissible evidence.
Accordingly, Plaintiffs' Motion for Summary Judgment is GRANTED, and Defendants' Motion for Summary Judgment is DENIED.
SO ORDERED