Enterprise Can't Shake WARN Act Liability Over Virus Layoffs

By Anne Cullen
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Law360 (January 4, 2021, 5:58 PM EST) -- A Florida federal judge has cleared a WARN Act case over Enterprise's coronavirus layoffs to move ahead, finding Monday that the federal statute's carveouts for employers facing extreme, unexpected situations don't completely neutralize protections for workers laid off during the pandemic.

Dealing a blow to businesses hoping to stave off legal liability for pandemic-related cuts, U.S. District Judge Roy B. Dalton refused to derail a proposed class case alleging Enterprise Holdings — the parent of car rental firms Enterprise Rent-A-Car, Alamo Rent a Car and others — violated the federal Worker Adjustment and Retraining Notification Act when it axed hundreds of Florida workers this spring.

The statute makes it illegal for companies to fire 50 or more people at once without giving them two months' notice, and two fired Sunshine State workers sued Enterprise last year asserting they were sent home with just a few days' warning or no notice at all. 

Enterprise argued that the case should be thrown out, citing two key loopholes in the law that relax the statute's notice requirements. In the event of a natural disaster — which the law defines as "any form of natural disaster, such as a flood, earthquake, or the drought currently ravaging the farmlands of the United States" — businesses don't have to give any advance warning.

Or, under the "unforeseeable business circumstances" defense, employers only need to give as much notice "as is practicable" if there's a "sudden, dramatic and unexpected action or condition outside the employer's control."

However, Judge Dalton ruled Monday that neither argument sinks the case.

While he agreed that the global health crisis could qualify as a "natural disaster" under the law's definitions, he said one major caveat knocks it out of play. The loophole is only triggered when a plant closing or mass layoff comes as the "direct result" of a natural disaster, and the judge found the pandemic only indirectly influenced the Enterprise firings that sparked the suit.

"While COVID-19 may be a natural disaster within the meaning of the WARN Act, the complaint does not allege the layoffs resulted directly from the pandemic," the judge said. "The complaint (and unfortunate experience) shows a more tenuous connection: COVID-19 caused global concern over the spread of the virus, leading to a global shutdown — travel stalled, as did economies."

The business downturn Enterprise experienced because of the pandemic prompted the terminations, not the pandemic itself, Judge Dalton argued.

"This isn't a situation where, for example, a factory was destroyed overnight by a massive flood — that would be a 'direct result' of a natural disaster," he said. "This is an indirect result — more akin to a factory that closes after nearby flooding depressed the local economy."

He added that the health crisis "caused changes in travel patterns and an economic downturn, which affected defendants — so the natural disaster defense doesn't apply."

He also pointed out that the U.S. Department of Labor's guidance on the topic doesn't even discuss whether the pandemic could be considered a natural disaster, "a deafening silence" that he said lends credence to his position.

As for the second carveout, he said it may apply, but he noted that this provision doesn't eliminate the WARN Act's notice requirements, just "softens" them to mandate that firms just give as much notice as they can.  

And Judge Dalton said it's not yet clear if Enterprise complied with these obligations, pointing out that one of the fired workers spearheading the lawsuit received no advance notice before she was let go, while the other was told less than a week ahead of her termination.

"Nothing in the complaint or attached documents clarify defendants couldn't have given more notice, as required by statute," Judge Dalton said.

The judge concluded that even if this legal shield is triggered, there are still too many unknowns to pull the plug on the case.

"Exactly when defendants had to give notice will doubtless be a hotly contested factual issue, but at this stage, taking the allegations in the complaint as true, plaintiff has stated a claim for a WARN Act violation," he said.

The decision marks a significant loss for Enterprise and other employers that sent home a large portion of their workforce this year because of COVID-19's impact on the economy, as the case represents one of the first tests of how WARN Act defenses apply to pandemic-related cuts.

Counsel and representatives for the parties did not respond to requests for comment.

Former Enterprise employee Elva Benson is represented by Brandon J. Hill and Luis A. Cabassa of Wenzel Fenton Cabassa PA.

Enterprise is represented by Jason C. Schwartz and Brian Richman of Gibson Dunn & Crutcher LLP and Christina M. Kennedy and Michael D. Leffel of Foley & Lardner LLP.

The case is Benson et al. v. Enterprise Leasing Company of Florida LLC et al., case number 6:20-cv-00891, in the U.S. District Court for the Middle District of Florida.

--Additional reporting by Hannah Albarazi and Braden Campbell. Editing by Leah Bennett.

For a reprint of this article, please contact reprints@law360.com.

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