(CN) – Workers who stop punching in after they learn that their employer is shuttering the business have not voluntarily quit, the 9th Circuit ruled on Friday. The employer must still provide 60 days’ notice before letting workers go, according to the court’s latest worker-friendly interpretation of federal employment law.
The Seattle-based appellate reversed a district court ruling that found no protection in the Worker Adjustment and Retraining Notification (WARN) Act for employees who jump a sinking ship.
“Unless there is some evidence of imminent departure for reasons other than the shutdown, it is unreasonable to conclude that employees voluntarily departed after receiving notice of the upcoming closure,” Judge N. Randy Smith wrote for the three-judge panel, which ruled 2-1 to overturn the district court’s finding in favor of a defunct Seattle car dealership.
In 2007, Gee West Seattle notified its approximately 150 employees that it would close down, in the absence of a buyer, in less than two weeks. The company explained that it had not been able to give its employees 60 days’ notice of impending job losses, required under the WARN Act, because it had been trying to sell the business. Before Gee West had shut its doors at the end of two weeks, just 30 employees remained on the job.
“The unexpected and urgent need to find new employment is precisely the type of pressure that this court held that Congress was attempting to eliminate by creating the WARN Act,” Smith wrote.
Former employees sued Gee West in 2008 for violating the WARN Act by failing to give them proper notice. A federal judge ruled for Gee West, concluding that the company was not required to give notice since most employees had “voluntarily departed” their jobs within the meaning of the act. The law defines a mass layoff as the termination of at 33 percent of a business’s workforce.
The federal appeals panel disagreed, however, and settled the issue of first impression with an interpretation of “voluntarily departed” that favors employees who need to move on and find other work.
“Gee West argues that 150 affected employees reasonably expected loss of employment, and those employees’ positions were eliminated, but that only 30 employees actually experienced employment loss,” the ruling states. “Gee West claims that all other employees voluntarily departed after notice was given. This argument would allow an employer to escape responsibility for failing to give proper notice simply because its employees subsequently leave the business due to its imminent closure.”
Since failing businesses also have protection under the act, they “need not resort to a broad definition of voluntary departure to avoid liability,” Smith added.
“Struggling businesses face difficult issues such as whether to give notice at all, since closure is not certain, and whether giving notice will hasten the business decline or impair efforts for a sale,” the ruling states.
In light of those realities, there is a faltering business exception to the WARN Act that allows struggling employers to “give only such notice ‘as is practicable'” Smith noted.
Finding that there was “at least some evidence in the record that employees left their jobs because the business was closing,” the panel reversed summary judgment and remanded the case.
Chief U.S. District Judge Richard Cebull, a Montana judge sitting on the panel by designation, dissented, arguing that the majority’s interpretation runs counter to the Labor Department’s commentary on the passage of the WARN Act, which he writes “makes clear that a worker who decides to leave early after the announcement of a business closing has not necessarily been constructively discharged or quit involuntarily.”