On June 15, 2022, the U.S. Court of Appeals for the Fifth Circuit held that COVID-19 does not qualify as a “natural disaster” under the federal Workers’ Adjustment and Retraining Notification (“WARN”) Act, effectively foreclosing one important argument used by employers in defense of COVID-19-related WARN lawsuits.  As this is the only appellate court to affirmatively interpret WARN’s “natural disaster” exception, barring a split by other circuits, this case sets an important precedent in ongoing COVID-19-related WARN litigation, as well as WARN suits related to future pandemics.

In the case before the Fifth Circuit, employees of a Texas oil “fracking” company filed a class action alleging that the company violated the WARN Act after the company terminated them without any advance notice.  The employees were terminated on March 18, 2020, due to the crash in the price of oil after the declaration of the COVID-19 pandemic as national emergency caused widespread COVID-related lockdowns and a precipitous drop in the demand for oil.  The employees were provided with written notice on the date of their termination invoking the WARN “unforeseeable business circumstances” exception, and the company also filed WARN notices with the Texas Department of Labor.

In an effort to bring the matter to quick conclusion, the company moved for summary judgment on the basis of the “natural disaster” exception to WARN, arguing that the COVID-19 pandemic was a form of “natural disaster” that caused the layoffs.  Under the “natural disaster” exception, WARN effectively does not apply to the situation as an employer is not responsible to provide any WARN notice at all.  This is unlike the “unforeseeable business circumstances” and “faltering company” exceptions, under which the employer bears the burden of not only proving that the exceptions apply, but that the employer has otherwise complied with WARN notice requirements.

Although WARN does not explicitly define “natural disaster”, the statute cites the following examples, “such as a flood, earthquake, or drought”. [1] Relying on principles of statutory construction, the Fifth Circuit disagreed with the district court’s analysis that the examples cited in the statute were illustrative, not exhaustive, and declined to expand the definition of “natural disaster” beyond the examples given (i.e. hydrological, geological, and meteorological events).  The court reasoned that Congress was familiar with pandemics at the time of the WARN Act’s passage and could have included terms like “disease,” “pandemic” or “virus” in the examples listed.  According to the Fifth Circuit, Congress choosing not to do so justified the inference that those terms were deliberately excluded.  The decision was in sharp contrast to the district court’s interpretation and analysis, which suggested that COVID-19 qualified as a “natural” disaster because, among other reasons, human beings did not start or consciously spread it.

Relatedly, the Fifth Circuit also found that for the “natural disaster” exception to apply, employers need to show that the “natural disaster” was merely a proximate, rather than the “but for”, cause of the layoffs.  In so holding, the court relied on U.S. Department of Labor (“DOL”) regulations and binding precedent.

The question of the application of the “unforeseeable business circumstances” exception was not before the Fifth Circuit on this interlocutory motion for summary judgment.  Therefore, the case will now head back to the district court for further proceedings to determine if the drilling company can avoid liability under WARN’s “unforeseeable business circumstances” exception defense. As noted in our previous blog on COVID-19-related WARN Act FAQs issued by the DOL, such a defense, while potentially viable, will require the employer to prove that the layoffs were not reasonably foreseeable at the time WARN notices would have been required and that the company otherwise complied with WARN notice obligations.

[1] 29 U.S.C. sec. 2102(b)(2)(B).

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