Is Your Subsidiary Closing Or Laying Off Employees? Be WARNed.

In the United States, the Worker Adjustment Retraining and Notification (WARN) Act requires employers of a certain size to provide specified notice of plant closings or mass layoffs to give transition time to workers and their families. Penalties for failure to comply with WARN can be steep.  The Second Circuit Court of Appeals applied U.S. Department of Labor regulations in a WARN Act violation class action to find that the parent company of the employer, as well as the private equity investors of the parent company, constituted a “single employer” for purposes of the WARN Act.

In holding the parent company and investors liable for the WARN Act violations, the court found that the employer and parent company had not maintained sufficient independent decision-making formalities for the separate legal existence of the parent company to insulate it from liability for its subsidiary’s illegal employment practices. The test for independent decision-making is fact-specific; no one factor controls and all of the factors need not be present for liability to attach.

If you are considering a plant closing or employee lay off, consult an attorney at an Ally Law member firm to assure you have implemented and observed appropriate corporate formalities to avoid the risk of litigation and liability. If you are currently being challenged for alleged illegal employment practices, an Ally Law member firm will advise you on the most efficient and cost-effective dispute resolution.  For more information about our services in this area, contact us at yourally@ally-law.com.

By Rich May, P.C.