As layoffs continue to occur, the WARN Act will become increasingly meaningful to employers, particularly those who are considering bankruptcy protection.
The WARN Act requires employers to give advance notice to employees who will be affected by a plant closing. Generally, 60 days’ written notice is required before closing a plant or implementing a mass layoff. Failure to comply with the Act can result in serious liability, including back pay and benefits for each affected employee for every day that the notice was not provided, for up to 60 days. This number can quickly add up to millions of dollars, which, for a company considering bankruptcy protection, can become an important factor in managing a bankruptcy estate.
On October 10, 2008, Delaware’s Bankruptcy Court issued a memorandum opinion which held, in a question of first impression for the Third Circuit, that an employee’s WARN Act claim is a general unsecured claim, rather than an administrative expense claim–a favorable opinion for debtor-employers.