Defunct Airline Not Liable for Layoffs

(CN) - Emery Worldwide Airlines did not need to give notice before laying off about 575 employees in 2001 as it struggled with safety violations that eventually caused it to shut down, the 6th Circuit ruled.

A class of former employees claimed that they were entitled under the Worker Adjustment and Retraining Notification (WARN) Act to 60 days' notice, or "pay in lieu thereof," of the airline's mass layoff.

After a bench trial in Dayton, Ohio, a federal judge concluded that neither Emery nor its parent, CMF, could be held liable. A three-judge panel from the 6th Circuit in Cincinnati affirmed last week, finding that a reasonable employee would have no expectation of returning to work at Emery. Before making temporary layoffs from August permanent in December 2001, the airline had provided many indicators that it would not survive the threat to its operations.

The Federal Aviation Administration kept a close eye on the struggling airline amid ongoing maintenance issues and a fatal plane crash in February 2000. By August, EWA had suspended its flight operations and temporarily laid off about 575 employees, with an eye toward resuming business within two to six months.

Over the next few months, Emery paid $1 million in fines and tried to resolving its maintenance, but the FAA demanded even more improvements. During all these negotiations with the FAA, Emery kept its employees informed with three sets of letters. When the airline couldn't get the FAA to back down on its additional requirements by November, its third notice grimly stated that it would need to secure additional funding if it hoped to resume flight operations before April 2002.

Although it is not disputed that the layoffs were initially thought to be temporary, they were declared permanent in December 2001. Emery also permanently laid off about 90 employees who had, up till then, remained active workers.

"Given the hurdles that had developed and the uncertainty as to whether, when, and at what cost EWA [Emery] would secure the approval of the FAA to resume operations, a reasonable employee under the same circumstances would not have expected to be recalled when EWA decided to close in December 2001," Judge Ralph Guy wrote for the court.

A lawyer for the laid-off workers has reportedly not yet confirmed whether he plans to appeal.

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