The Worker Adjustment and Retraining Notification ("WARN") Ace was enacted by Congress in 1988 to provide limited protections to workers whose jobs are suddenly and permanently terminated. The WARN Act generally precludes an "employer" from ordering a "plant closing or mass layoff" until the expiration of a sixty-day period after giving written notice of such proposed action. Pursuant to legislative directive, the Department of Labor ("Department") promulgated a final rule in 1989 interpreting the provisions of the statutory language. Although neither the WARN Act itself nor the final rule makes any reference to bankrupt employers, in the preamble to the rule the Department declined to exclude bankruptcy "fiduciaries" from the definition of "employer." Instead the Department suggested that "a fiduciary whose sole function in the bankruptcy process is to liquidate a failed business for the benefit of creditors does not succeed to the notice obligations of the former employer... [but] where the fiduciary may continue to operate the business for the benefit of creditors, the fiduciary would succeed to the WARN obligations of the employer." This Article suggests that the distinction made by the Department rule, as implemented by the bankruptcy courts, is untenable as a matter of statutory interpretation, legislative history, and labor and bankruptcy policy. Part I of this Article discusses the background and language of the WARN Act. Part II looks at the Department rule and its provisions that might bear on a debtor in bankruptcy. Part III reviews the cases seeking to apply the WARN Act and its implementing rule. Part IV suggests that the Department's approach of making the WARN Act inapplicable to a fiduciary for a bankrupt debtor who has the "sole function" of "liquidat[ing]" the business demonstrates an inadequate grasp of the bankruptcy process. Although cogent arguments can be made to support excluding from the WARN Act all employment terminations ordered in bankruptcy, this Article concludes that the goals of the WARN Act would be better served by protecting employees who lose their jobs in bankruptcy to the same extent as they would be protected outside of bankruptcy and that Congress should so provide.
Banking and Finance Law | Bankruptcy Law | Law | Legislation | Workers' Compensation Law
Laura B. Bartell, Why WARN? – The Worker Adjustment and Retraining Notification Act in Bankruptcy, 18 Bankr. Dev. J. 243 (2002).