8th Circuit gives broad interpretation to unforeseeable business circumstances defense in WARN Act

The 8th Circuit Court of Appeals gave broad protection to employers  from liability under the WARN Act who lay off employees due to general economic conditions in a case decided today.

The United Steel Workers of America sued U.S. Steel for notifying them on Decmeber 3, 2008 that layoffs would begin at some of U.S. Steel plants in the Midwest that produced steel for the automotive and building industry starting on Decmeber 7, 2008. The WARN Act normally requires that employers give 60 day notice for mass layoffs. However employers can avoid liability under the WARN Act for layoffs with less than 60 days notice if they can prove “unforeseeable business circumstances”.

The Union relied on the common sense proposition that the economic crash that caused the layoffs was apparent more than 60 days before the layoff. The Union’s case was bolstered by a press release from U.S. Steel investor relations in late October 2008 stating their was a decrease for demand steel due to the downturn. However the court relied on affidavits from U.S. Steel management that the impact of the sudden downturn wasn’t fully apparent until late November 2008. In support of this proposition the downturn was unexpected the court cited to the undisputed proposition that U.S. Steel had records profits and revenue for the first three quarters of 2008. It also relied on the fact that U.S. Steel revised its business plan for four consecutive months in late 2008  and early 2009, whereas U.S. Steel typically made plans on a quarterly basis.

This case follows the overarching proposition that the 8th Circuit will defer to the business judgment of management — even if that business judgment is flat wrong. This should somewhat reassure Nebraska employers who might have to layoff employees because of a crash in commodity prices and/or a double dip recession that looks possible. Employees looking to pursue WARN Act cases will likely need to dig up evidence in the form of e-mails and other electronic documents produced by the defendant that management knew or should have reasonably known the extent of the deterioration of business conditions for their company.


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