Employment Law Update: Measure of Employer Liability Under WARN Act

Under the federal Worker Adjustment and Retraining Notification Act (“WARN”), an employer who fails to provide its employees sixty days advance written notice of a “plant closing” or “mass layoff” is liable for back pay for each day of the violation. The issue of whether the measure of an employer’s liability for violation of the WARN Act’s notice requirement should be calculated based on (i) working days or (ii) calendar days has been addressed by several courts.

On October 5, 1998, the U.S. Supreme Court declined to disturb an appeals court ruling that the remedy for a violation of the WARN Act should be measured in terms of the actual work days at issue during the 60 day notice window, and not the calendar days. (Breedlove v. Earthgrains Baking Co., No. 98-77, cert. denied 10/5/98)

The U.S. Court of Appeals for the Eighth Circuit had agreed with the vast majority of federal courts that have considered the scope of the WARN ActÕs remedy. Of the five federal appellate courts that have considered the appropriate measure of damages under the WARN Act other than the Eighth Circuit, four have used working days rather than calendar days to calculate back pay.

The issue arose from the closing of Earthgrains’ baking facility in Little Rock, Arkansas. Earthgrains and its former employees agreed that Earthgrains breached the WARN Act, but disagreed over whether compensation should have included back pay based upon each calendar day the statute was violated or each working day. The Eighth Circuit affirmed the lower court’s finding that Earthgrains adequately compensated its former employees when it paid them for each “working” day it was in violation of the WARN Act.

The Eighth Circuit concluded that the “plain” language of the WARN Act, which provides “back pay for each violation,” is ambiguous. Although the court noted that the phrase “back pay for each violation” could include “calendar” days, such an interpretation would write “back pay” out of the statute. The court concluded that “[s]ince damages are to be measured by the wages the employee would have received,” the number of working days within the violation period must be used to calculate the amount owed by the employer. By contrast, a measure of damages based on calendar days would impose a penalty on the employer, not contemplated by Congress which “did not intend to provide employees who did not receive notice more compensation than they would have received had notice been given.”