Second Circuit Grants WARN Plaintiffs New Life On “Single Employer” Theory

Potential wage liability attaches not only to hours already worked (under the FLSA), but also to violations of the Worker Adjustment Retraining and Notification Act (WARN) which requires 60 days’ notice or pay in lieu of notice for covered plant closings or mass layoffs. One issue that can arise under the WARN act, as it does under the FLSA, is which entities are, or can be alleged to be, joint employers or a single integrated employer of the workers in question, particularly where a failed subsidiary conducts layoffs in alleged violation of WARN, and employees seek redress from a corporate parent or related entity. Addressing that scenario, the Court of Appeals for the Second Circuit reversed a grant of summary judgment to the parent, and ruled plaintiffs could proceed to trial on their joint employer theory. Guippone v. BH S&B Holdings LLC, 2013 U.S. App. LEXIS 24560 (2d Cir. Dec. 10, 2013).

In Guippone, the trial court ruled that Plaintiffs failed to create a question of fact as to whether HoldCo, the holding company and sole managing member of the direct employer BH S&B, could be liable as a “single employer” with BH S&B. Reversing, the Circuit cited the applicable USDOL test for determining “if related entities are single employers” under WARN, and observed that “record evidence would allow a jury to conclude that [BH S&B] was so controlled by HoldCo that it lacked the ability to make any decisions independently.”

“Many businesses which find themselves entangled in WARN litigation are under financial duress,” observed Jackson Lewis WARN expert and Wage Hour Blog author Richard Greenberg, “one result is that many legal issues under WARN are not fleshed out. This decision is not helpful to businesses as it expands the scope of parties against whom claims for WARN violations can be asserted and limits the practical defense to liability that bankruptcies or similar events can provide.”

Parent corporations and other potential joint or integrated employers must analyze their potential employment liability under all applicable statutes and legal theories.