Don't Forget to WARN

 

South Florida residents should be familiar with the Plantation mortgage foreclosure law firm Law Offices of David J. Stern.  Stern himself built a fortune in recent years by operating the go-to firm for banks seeking to foreclose on residential mortgages.  (Full disclosure - my wife, who is an attorney, used to work for the Stern firm, but left several years ago.)  According to a litany of recent news articles, the firm is being investigated by the state Attorney General, and has recently lost many of its clients.   The firm and its related loan-servicing business reportedly laid off some 700 employees this fall.

Now, the firm faces a class-action lawsuit brought by four ex-employees. The lawsuit, filed last week, alleges violations of the federal Worker Adjustment and Retraining Notification Act, which is more familiarly known as the WARN Act. The WARN Act applies to businesses with more than 100 employees. Among other things, WARN requires that employers provide at least 60 calendar days notice to “affected employees” before “mass layoffs” that involve at least 50 people, if those people comprise more than 1/3 of the workforce. 

The four plaintiffs here claim they were all laid off this fall. They allege that the Stern firm failed to provide any advance notice to them, and that they had “barely an opportunity to gather their personal items before security badges and telephone extensions were deactivated”. 

The penalties for a WARN violation can include up to 60 days lost wages and lost benefits to the affected employees, plus the employees’ attorneys fees. Clearly, if the Court here were to certify this as a class-action involving hundreds of ex-employees, the stakes for the Stern firm would be quite large.

There are a few limited statutory exceptions to the WARN notice requirement. The one that the Stern firm here may argue applies is the “unforeseeable business circumstances” exception. Under that exception, the employer can give fewer than 60 days notice, if the mass layoff is as a result of a “sudden, dramatic, and unexpected” business circumstance that was not reasonably foreseeable. Loss of a major client can suffice. Even under this exception, the employer must give as much notice as practicable under the circumstances. 

The lawsuit here anticipates that the Stern firm will attempt to argue that exception, and claims that the firm “had plenty of advance opportunity to provide notice”. If this case progresses, the relevant questions will be when the Stern firm became aware of the “unforeseeable business circumstances”, and whether the firm had the opportunity to provide the  60-days notice, or at least some notice. 

It is obviously much too early to determine what will happen in this case. But, in these economic times, WARN Act lawsuits have become more prevalent than before. Any sizeable employer seeking to lay off numerous employees, or to shut down operations at any of its facilities, would be wise to consult labor and employment counsel before doing so. As stated above, the penalties for violating WARN can be severe.

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