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Legal Alert

Fair WARNing: COVID-19 WARN Act Class Action Filed Against Hooters

5.6.20

It took less than a month for the plaintiffs’ bar to seize upon what is likely to be the first of many COVID-19-related class action lawsuits alleging violations of the Worker Adjustment and Retraining Notification Act, also known as the WARN Act. The first such lawsuit, filed against a popular restaurant chain in Florida, highlights several important lessons for employers who are considering or have recently implemented layoffs due to government shut-down orders and a decline in business. You need to pay particular attention to this expected trend and prepare ahead of time to avoid facing a potentially costly claim. 

Mass Layoffs Lead To WARN Class Action

Like so many employers faced with the economic impact of this unprecedent pandemic, including many in the hospitality industry, Hooters III, Inc. made the difficult decision in March to conduct layoffs at several restaurants in Florida. These locations were forced to either shut down completely or close their dining rooms and offer carry-out or delivery only. 

According to a notice dated March 26, 2020, available on the WARN Act webpage for the Florida Department of Economic Opportunity, the company provided notice that one of its locations would close completely and another 10 locations (operated by separate legal entities) would be subject to significant reductions in force. This affected a total of 679 employees across all locations. This notice, which likely informed the factual allegations of the class action complaint, stated that all affected employees were provided a separation notice. 

The complaint filed in a Florida federal court contains sparse facts, but alleges that the company conducted layoffs as early as March 20 and failed to provide advance notice of the layoffs as required by the WARN Act. The plaintiffs, who claim to be long-term employees of the company, allege that the company “could have but failed to evaluate the impact of COVID-19 . . . as evidenced by the fact that it gave no advance written notice whatsoever.” The plaintiffs also claim that Hooters III could and should have relied on Paycheck Protection Program loans — which did not become available until April, about two weeks after the workers allege they were laid off — to raise funds that could have prevented many or all of the layoffs.

It should be noted that Hooters III has not yet responded to the complaint and is likely to raise several viable defenses to the allegations. As most employers experienced in defending workplace claims know, there are always two sides to every story. However, even examining just the bare-bones complaint can help you plot a strategy that will minimize your chances of being on the receiving end of a lawsuit.

What Does The WARN Act Require?

On its face, the WARN Act appears fairly straightforward, but the nuances of this federal law are complex. It requires covered employers to provide 60 days’ advance notice before a plant closing or mass layoff. But there are many issues to unpack in this simple sentence.

The WARN Act provides several exceptions to the 60-day advance notice requirement. One exception is referred to as the unforeseeable business circumstances exception, which allows for less than 60 days’ notice when the plant closing or mass layoff is caused by business circumstances that were not reasonably foreseeable at the time that notice would have been required. There are also exceptions for natural disasters and faltering companies (those actively seeking capital). Common to all of the WARN Act exceptions is the requirement that the employer give “as much notice as is practicable,” although the regulations contemplate that in certain cases this may be notice “after the fact.”

Additionally, the WARN Act regulations provide an additional requirement for employers who had previously announced and carried out a short-term layoff (six months or less) which is being extended beyond six months due to business circumstances (including unforeseeable changes in price or cost) not reasonably foreseeable at the time of the initial layoff. These employers are required to give notice when it becomes reasonably foreseeable that the extension is required. 

Practical Considerations For Employers

In light of the lawsuit against Hooters III, if you are considering layoffs in light of COVID-19 or have recently conducted layoffs, you should consider whether WARN Act notices should be provided to your employees. When evaluating the potential need for WARN Act notices, you should consider the following questions:

Conclusion

Reductions in force raise a variety of potential legal issues and you should seek legal guidance before implementing layoffs. You should begin planning as soon as possible if layoffs are possible and provide as much notice as is practicable in the event unforeseeable business circumstances prevent a full 60-day notice period. 

Fisher Phillips will continue to monitor the rapidly developing COVID-19 situation and provide updates as appropriate. Make sure you are subscribed to Fisher Phillips’ Alert System to get the most up-to-date information. For further information, contact the authors, your Fisher Phillips attorney or any member of our Post-Pandemic Strategy Group Roster. You can also review our FP BEYOND THE CURVE: Post-Pandemic Back-To-Business FAQs For Employers and our FP Resource Center For Employers.


This Legal Alert provides an overview of a specific developing situation. It is not intended to be, and should not be construed as, legal advice for any particular fact situation.

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