Madeline Pinto, Associate Member, University of Cincinnati Law Review
I. Introduction
The COVID-19 pandemic has drastically impacted the nation’s economy. Due to the need for social distancing, many governors have issued executive orders closing restaurants, bars, gyms, and non-essential retail stores.[1] These mandated closures have forced many employers to make swift termination decisions that may run afoul of federal employment laws designed to protect employees from abrupt mass layoffs.
On April 16, 2020, Ashton Scott and Amanda Seals, two former Hooters employees, (“Plaintiffs”) filed a class action complaint against Hooters III, Inc. (“Defendant” or “Hooters”) in the United States District Court for the Middle District of Florida.[2] Plaintiffs allege that Hooters violated the Worker Adjustment and Retraining Notification Act (“WARN Act” or “the Act”) when it engaged in mass layoffs in response to the COVID-19 pandemic without providing any advance written notice.[3]
On March 20, 2020, Florida Governor Ron DeSantis issued an executive order closing all of the state’s restaurants, bars, and gyms in an effort to stop the spread of the COVID-19 pandemic.[4] As a result, on March 25, 2020, Hooters terminated approximately 681 of its Florida employees, including Plaintiffs.[5] In an online statement released March 26, Hooters’ CEO, Terrance Marks, stated that Hooters “had no alternative but to dramatically reduce the size of [its] work force in response” to the “economic impact of the virus.”[6] Plaintiffs allege that the first written notice Hooters provided of their termination was on March 25, the same day that the terminations became effective.[7] Plaintiffs further allege that Hooters did not provide any justification for its failure to notify Plaintiffs of their termination prior to March 25.[8] Plaintiffs are seeking to recover from Hooters “their respective compensation and benefits for 60 days.”[9]
Hooters’ mass termination of its Florida employees without any prior notice violated the WARN Act. However, the Act provides several exceptions to its 60-day notice requirement that will likely apply here. An application of these exceptions to the facts alleged in the complaint reveals that the natural disaster exception is Hooters’ best defense against Plaintiffs’ WARN Act claims and will likely absolve Hooters of any liability for its failure to provide employees with notice of the mass termination.
II. Background
The WARN Act requires employers who employ 100 or more full-time employees to provide employees with at least 60-days’ notice of mass layoffs.[10] The Act defines a mass layoff as “a reduction in force which . . . results in an employment loss at the single site of employment during any 30-day period for at least 33 percent of [full-time] employees . . . and at least 50 [full-time] employees . . . or at least 500 [full-time] employees.”[11]
However, the WARN Act provides several exceptions to the 60-day notice requirement.[12] For example, an employer is not required to give any advance notice if the “mass layoff is due to any form of natural disaster.”[13] In order to meet the criteria for this exception, an employer must establish that the natural disaster was the direct cause of the mass layoff.[14] An event constitutes a natural disaster within the meaning of the Act “if it is ‘[e]xisting in or caused by nature; not made or caused by humankind.’”[15] Events that qualify as natural disasters include “floods, earthquakes, droughts, storms, tidal waves, or tsunamis, and similar effects of nature.”[16]
There is a dearth of case law on the issue of whether a pandemic qualifies as a natural disaster. However, courts have frequently treated illnesses and epidemics as “acts of god,” [17] a concept analogous to a natural disaster in the realm of contract law.[18] For example, in United States v. New York, O. & W. R. Co, the District Court for the Northern District of New York explained that sudden illnesses are acts of god on par with “extraordinary floods, storms of unusual violence, sudden tempests, severe frosts, great droughts, lightnings, [and] earthquakes” because an illness is “an act in which no man has any agency whatever.”[19]
The WARN Act also provides an exception for unforeseeable business circumstances.[20] An employer is not required to provide 60-days’ notice of a mass layoff if it “is caused by business circumstances that were not reasonably foreseeable as of the time that notice would have been required.”[21] In order to assert the unforeseeable business circumstances exception as an affirmative defense to a WARN Act claim, an employer “must establish that (1) the circumstance was unforeseeable, and (2) the layoffs were caused by that circumstance.”[22]
A business circumstance is unforeseeable if it “is caused by some sudden, dramatic, and unexpected action or condition outside the employer’s control.”[23] For example, “a government ordered closing of an employment site that occurs without prior notice . . . may be an unforeseeable business circumstance.”[24] To determine whether a particular business circumstance was unforeseeable, “a court must evaluate whether a ‘similarly situated employer’ in the exercise of commercially reasonable business judgment would have foreseen” the particular circumstance that caused the mass layoffs.[25]
The unforeseeable business circumstances exception does not fully absolve an employer from providing notice to employees.[26] Rather, even if the exception applies, an employer must “give as much notice as is practicable and at that time shall give a brief statement of the basis for reducing the notification period” to less than 60-days.[27] Courts have found that an employer who “takes approximately one week” after the occurrence of the unforeseeable business circumstance before notifying employees has provided “as much notice as is practicable.”[28]
III. Discussion
Plaintiffs properly alleged that Hooters’ termination of its Florida employees violated the WARN Act. Hooters is subject to the requirements of the WARN Act because the company employs 100 or more full-time employees. Additionally, Hooters’ firing of approximately 681 employees constitutes a “mass firing” within the meaning of the Act because the terminations caused an employment loss for at least 50 full-time Hooters’ employees and at least 33 percent of Hooters’ full-time employees. Further, Hooters failed to provide notice 60-days prior to the mass layoff as required by the Act, only notifying employees of their termination on March 25th, the same day the termination went into effect.
However, Hooters is most likely exempt from the WARN Act’s 60-day notice requirement under either the Act’s natural disaster or unforeseeable business circumstances exceptions. The COVID-19 pandemic likely constitutes a “natural disaster” within the meaning of the Act. Similar to a flood, earthquake, or drought, the COVID-19 pandemic is a naturally occurring event over which society has no real agency or control. Additionally, the COVID-19 pandemic has had a disruptive effect on society similar to that of a flood, earthquake, drought, or other event traditionally considered a natural disaster. Further, the courts’ tendency to classify illnesses and epidemics as “acts of god” akin to floods, storms, droughts, and earthquakes that excuse liability in the realm of contract law strongly suggests that the COVID-19 pandemic will be considered a natural disaster that excuses Hooters’ liability under the WARN Act.
Hooters will also most likely be able to establish that the COVID-19 pandemic was the direct cause of the mass layoff. Based on the facts alleged in the complaint, Hooters would not have fired the nearly 700 employees working in its Florida restaurants but for the pandemic and its negative effect on the economy. The facts alleged do not indicate that Hooters was experiencing any financial difficulties prior to the COVID-19 pandemic that would have necessitated a mass termination. Moreover, the statement made by Hooters’ CEO regarding the March 25 terminations indicates that Hooters fired its Florida employees in direct response to the “economic impact of the virus.” [29]
Plaintiffs could argue that the COVID-19 pandemic was merely an indirect cause of the mass layoff because Hooters only fired its employees after Florida’s governor mandated the closing of the state’s restaurants. In this way, Plaintiffs could argue that the direct cause of the mass layoff was the governor’s executive order and not the COVID-19 pandemic itself. However, this argument is unlikely to succeed because it borders on splitting hairs, and, as a policy matter, a global pandemic is exactly the type of devastating and disastrous event society would want to constitute a natural disaster that excuses an employer from abiding by the WARN Act’s strict notice requirements. Therefore, Hooters will most likely be able to assert the natural disaster exception as an affirmative defense to Plaintiffs’ WARN Act claims. Because the natural disaster exception completely excuses an employer from providing any notice of a mass layoff, Hooters will likely avoid any liability under the WARN Act.
Hooters could also attempt to assert the unforeseeable business circumstances exception as an affirmative defense to Plaintiffs’ claims. However, under this exception, Hooters will likely still be found liable under the WARN Act because it failed to provide Plaintiffs with any justification for reducing the notice period. The Florida governor’s decision to close all restaurants in response to the COVID-19 pandemic was most likely an unforeseeable business circumstance within the meaning of the WARN Act. The COVID-19 pandemic and the governor’s executive order were not reasonably foreseeable at the time the 60-day notice would have been required. These were “sudden, dramatic, and unexpected” conditions over which Hooters had no control.[30]
In order to comply strictly with the WARN Act’s 60-day notice requirement, Hooters would have had to provide notice of the mass layoff on January 25, 2020. However, the need for a mass layoff in response to the COVID-19 pandemic and the governor’s executive order was not reasonably foreseeable on January 25. A similarly situated employer in the exercise of commercially reasonable business judgment would not have foreseen a state-wide closure of restaurants in response to a global pandemic, the economic effects of which would require a mass termination. Additionally, the Department of Labor’s regulatory guidelines for the enforcement of the WARN Act specifically state that “a government ordered closing of an employment site that occurs without prior notice” is an event that qualifies as an unforeseeable business circumstance.[31] The Florida governor’s mandated closure of all the state’s restaurants without prior notice almost certainly fits within this category of unforeseeable business circumstances. Further, both the facts alleged in the complaint and the statement made by Hooters’ CEO indicate that the direct cause of the March 25 terminations was the economic impact of the pandemic and the governor’s executive order.
Hooters will most likely be able to establish that it provided notice as soon as practicable after the governor’s executive order. Courts have deemed notice sufficient when an employer provides notice of mass layoffs one week after discovering the unforeseeable business circumstance.[32] Therefore, a court will most likely find that Hooters provided as much notice as practicable when, after the governor’s closure of all restaurants on March 20, Hooters took five days to determine how to respond to such an unprecedented event before giving employees notice of the mass layoff. However, unlike under the natural disaster exception, Hooters is unlikely to completely escape WARN Act liability because the notice Hooters provided to terminated employees failed to provide a justification for reducing the notification period as required by the Act. As such, Hooters’ best defense against Plaintiffs’ WARN Act claims is that the COVID-19 pandemic is a natural disaster that completely excused the company from providing any notice of the mass termination to its Florida employees.
IV. Conclusion
Plaintiffs are unlikely to succeed in establishing Hooters’ liability under the WARN Act. The COVID-19 pandemic most likely constitutes a natural disaster that completely exempts Hooters from providing any notice to employees of a mass termination. Although Hooters could also establish that the COVID-19 pandemic and the Florida governor’s executive order satisfy the Act’s unforeseeable business circumstances exception, the natural disaster exception remains Hooters’ best defense against Plaintiffs’ WARN Act claims. Hooters failed to provide employees with the required justification for reducing the notification period and, thus, is unlikely to completely escape WARN Act liability under the unforeseeable business circumstances exception. Nevertheless, Hooters will most likely be able to defeat Plaintiffs’ WARN Act claims by asserting the Act’s natural disaster exception as an affirmative defense.
[1] Erin Schumaker, Here are the states that have shut down nonessential businesses, ABC News (Apr. 3, 2020), https://abcnews.go.com/Health/states-shut-essential-businesses-map/story?id=69770806.
[2] Complaint at 1, Scott v. Hooters III, Inc., No. 8:20-cv-00882 (M.D. Fla. Apr. 16, 2020).
[3] Id.
[4] A.G. Gancarski, Gov. DeSantis orders all restaurants to end dine-in service, Florida Politics (Mar. 20, 2020), https://floridapolitics.com/archives/324404-ron-desantis-closes-restaurant-dining-rooms-gyms.
[5] Complaint, supra note 2,at 1-2.
[6] Press Release, Terrance Marks, Our Commitment Continues (March 26, 2020), https://www.hooters.com/about/news/our-commitment-continues.
[7] Complaint, supra note 2, at 2.
[8] Id.
[9] Id. at 3.
[10] Worker Adjustment and Retraining Notification, 29 U.S.C. §§ 2101-02 (2020).
[11] Id. at § 2101.
[12] Id. at § 2102.
[13] Id.
[14] Worker Adjustment and Retraining Notification, 20 C.F.R. § 639.9 (2020).
[15] Carver v. Foresight Energy LP, No. 3:16-cv-3013, 2016 U.S. Dist. LEXIS 90665, *11 (C.D. Ill. July 12, 2016).
[16] Worker Adjustment and Retraining Notification, 20 C.F.R. § 639.9 (2020).
[17] See United States v. New York, O. & W. R. Co., 216 F. 702, 705-06 (N.D.N.Y. 1914); Sumner v. Philadelphia, 23 F. Cas. 392, 397 (C.C.E.D. Pa. 1873).
[18] See 1 Am. Jur. 2d Act of God § 1.
[19] 216 F. at 705-06.
[20] Worker Adjustment and Retraining Notification, 29 U.S.C. § 2102 (2020).
[21] Id.
[22] Gross v. Hale-Halsell Co., 554 F.3d 870, 875 (10th Cir. 2009).
[23] Worker Adjustment and Retraining Notification, 20 C.F.R. § 639.9 (2020).
[24] Id.
[25] Watson v. Mich. Indus. Holdings, 311 F.3d 760, 765 (6th Cir. 2002) (quoting 20 C.F.R. § 639.9 (2020)).
[26] Worker Adjustment and Retraining Notification, 29 U.S.C. § 2102 (2020).
[27] Id.
[28] USW Local 2660 v. U.S. Steel Corp., 683 F.3d 882, 889 (8th Cir. 2012).
[29] See Press Release, Terrance Marks, Our Commitment Continues (Mar. 26, 2020), https://www.hooters.com/about/news/our-commitment-continues.
[30] Worker Adjustment and Retraining Notification, 20 C.F.R. § 639.9 (2020).
[31] Id.
[32] USW Local 2660 v. U.S. Steel Corp., 683 F.3d 882, 889 (8th Cir. 2012).
