Loss of Biggest Customer Is an Unforeseeable Business Circumstance under WARN Act

A grocery warehouse and distribution center had been experiencing financial difficulty for a number of months due, in part, to a strained relationship with its largest customer, which provided 40 percent of the employer’s business. The employer was forced to lay off approximately 200 workers when the customer ceased dealings with it. The layoffs occurred only days after the employer received notice that the customer was discontinuing its business. The laid off workers filed a Worker Adjustment and Retraining Notification (WARN) Act suit, because they did not receive 60-days notice of the layoff. The employer defended under a WARN Act provision which allows an exception to the 60-day advance notice requirement if a mass layoff is caused by “business circumstances that were not reasonably foreseeable as of the time that notice would have been required.” The United States Court of Appeals for the Tenth Circuit held that the employer met its burden of establishing that the loss of its biggest customer was an unforeseeable business circumstances. Even though the employer’s relationship with the customer was previously strained, the employer and customer had expressed desires about mending the relationship. Employers should be careful when relying on the narrow exception to the WARN notice requirement.

Gross v. Hale-Halsell Co., No 08-5028 (10th Cir. Jan. 20, 2009)