By Ruder Ware Alumni
March 24, 2005
The WARN Act requires that an employer give 60 days notice to employees before laying them off. An exception to this rule is where the business faces “unforeseen business circumstances.” A business circumstance may be reasonably unforeseeable if it was caused by some sudden, drastic, and unexpected action, or by conditions outside of the employer’s control.
In Roquet & Robinson v. Arthur Andersen, LLP, the Plaintiffs were former employees of Arthur Andersen, and were terminated after Arthur Andersen was indicted for destroying and withholding documents in connection with the Enron security fraud investigation. After news of the indictments went public, the majority of Arthur Andersen’s clients defected to other accounting firms. As a result, Arthur Andersen lost 300 million dollars in business in one month. After the sharp decline in business, Arthur Andersen announced it was eliminating support services, and terminated 560 employees. The employees were given between two to five weeks notice of their termination. The Plaintiffs sued Arthur Andersen and alleged that it violated the WARN Act by failing to give 60 days notice to its workers before laying them off.
In this case, Arthur Andersen argued that the indictment was unexpected, and the sudden decline in business was outside its control. The Court found that Arthur Andersen, faced with this unprecedented legal and business catastrophe, reasonably needed time to assess the situation before it announced massive layoffs. The Court found that Andersen was not a company that secretly plotted to move its operations to Mexico and closed up shop without any notice to its employees. Instead, Andersen, although responsible for the facts that caused the investigation, was unable to determine with any reasonable certainty the Department of Justice’s intention to indict the Company instead of the individual culprits. The Court held that the circumstances were “reasonably unforeseeable,” and found that Arthur Andersen did not violate the WARN Act.
If you have questions regarding the above, please contact any of the attorneys in the Employment, Benefits & Labor Relations Practice Group of Ruder Ware.
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