By Gerald L. Maatman, Jr., Alex W. Karasik, and Aaron A. Bauer
Seyfarth Synopsis: In Easom v. US Well Servs., No. 21-20202, 2022 US App. LEXIS 16556 (5th Cir. June 15, 2022), the employer defendant invoked the WARN Act’s “natural disaster” exception when it conducted mass layoffs in its Texas workforce, due to the sudden economic downturn caused by the COVID-19 pandemic in March 2020. The Fifth Circuit held that the COVID-19 pandemic could not be considered a “natural-disaster” under the WARN Act, and that an employer invoking the “natural-disaster” exception must prove that the event was the proximate cause of the layoffs. .
The Fifth Circuit’s decision demonstrates the importance of careful analysis when deciding whether to invoke an exception to the WARN Act notice requirements and planning such layoffs.
In March 2020, oil producer US Well was forced to conduct mass layoffs in its Texas workforce due to the sudden steep decline in oil demand, precipitated by the COVID-19 pandemic. Later that summer, the laid off employees filed a class action in a Houston federal district court against the company, alleging that it violated the Federal WARN Act, 29 USC § 2102 (a), et seqby failing to provide them with at least 60 days-notice before conducting the mass layoffs. Id. at * 5.
The WARN Act provides an exception to this 60-day notice requirement for mass layoffs that are “due to any form of natural-disaster, such as a flood, earthquake, or  drought… ”29 USC § 2102 (b) (2) (B). Defendant US Well argued that this statutory exception applied to it because the COVID-19 pandemic was a “natural-disaster” which forced it to conduct mass layoffs. Id. The District Court agreed, and also held that US Well would only have to prove that COVID-19 was the ‘but-for’ cause of it having to conduct mass layoffs in order to successfully invoke the WARN Act ‘natural-disaster’ exemption. The terminated workers appealed the District Court’s decision to the US Court of Appeals for the Fifth Circuit. Id.
The Fifth Circuit Holdings
A three judge panel on the Fifth Circuit unanimously held that: (1) COVID-19 is not a natural disaster under the WARN Act’s natural-disaster exception; and that (2) the WARN Act’s natural-disaster exception requires that the employer prove proximate, not only ‘but-for,’ causation. Id. at * 2.
To reach its first holding, the Fifth Circuit applied fundamental concepts of statutory interpretation to determine that when Congress passed the Warn Act in 1988, it did not intend to include pandemics and infectious diseases within the meaning of ‘natural-disaster.’ Id. at 12. For its second holding, the Fifth Circuit determined that a regulation of the US Department of Labor (“DOL”) – interpreting the WARN Act’s provisions regarding the natural-disaster exception – provides that a natural disaster must be the proximate cause of an employer’s mass layoffs, in order for the employer to invoke the exception. Id. at 16.
The Fifth Circuit applied traditional concepts of statutory interpretation.
The Fifth Circuit first noted that at the time the WARN Act went into effect in 1988, leading dictionaries in publication had not defined the term “natural-disaster.” Because of this, it could not deduce a ‘plain meaning’ of term based on a dictionary definition. Id. at 8-9. So the Fifth Circuit then looked to the language in the Act surrounding ‘natural-disaster,’ in order to determine what types of ‘natural events’ Congress had intended to include within the term’s meaning. Employing this contextual reading of the Act, the court found that Congress had chosen to limit the meaning of the term “natural-disaster” to “hydrological, geological, and meteorological events;” not pandemics and infectious diseases. Id. at 9-10.
The Fifth Circuit further reasoned that Congresses decision to exclude pandemics and infectious diseases from the meaning of ‘natural-disaster’ was a deliberate choice, because “[b]y the late 1980’s, Congress was familiar with pandemics and infectious diseases. ” Id. at 11. Moreover the court observed that given the broad remedial purpose of the Warn Act to address extensive worker dislocation that occurred in the 1970’s and 1980’s, it should narrowly construe any exceptions to the Act’s application. Therefore, the court held that “COVID-19 does not qualify as a natural disaster under the WARN Act’s natural-disaster exception.” Id. at 12.
The WARN Act requires ‘proximate’ causation analysis
The Fifth Circuit also discussed how an employer must prove that a “natural-disaster” caused it to conduct mass layoffs. The defendant employer argued, and the lower court held, that it should only have to prove it would not have conducted mass layoffs ‘but-for’ a natural-disaster; in other words, that the layoffs would not have occurred in the absence of a natural disaster. Id. at 4. The plaintiff appellants disagreed, arguing that the employer should have to prove that a natural-disaster was also the ‘proximate cause’ of its layoffs; in other words, that the natural-disaster was sufficiently related to the layoffs. Id. at 12.
The Fifth Circuit sided with the plaintiff appellants. It looked to the DOL regulation interpreting the WARN Act, which says that a natural-disaster must be the “direct-cause” of an employer’s layoffs. It is reasoned that, because previous court precedents have interpreted ‘direct’ and ‘proximate’ causation to be synonymous terms, an employer invoking the natural disaster exception must also prove that a natural disaster was the ‘proximate cause’ of its mass layoffs. Id. at 13-14. The Fifth Circuit disagreed with the employer’s argument that such a holding would preclude employers from invoking the notice exception for natural-disasters such as hurricanes, where the hurricane might cause man-made levies to break, causing flooding, which would force businesses to shut down. . According to the Fifth Circuit, mass layoffs caused by such a natural disaster would not necessarily “foreclose the natural-disaster exception” under proximate-cause analysis. Id. at 14-16.
Implications for Employers
At first glance, the Fifth Circuit’s holdings in Easom may appear to have limited application, since pandemics have traditionally been viewed as multi-generational events. Still, whether we are fully past COVID-19 shutdowns remains to be seen, and the Fifth Circuit’s decision serves as a warning to employers who might otherwise be tempted skirt the WARN Act’s 60-day notice requirement during a COVID-19 shutdown.
More importantly, the Easom The decision shows the importance of carefully analyzing the WARN Act requirements before conducting reductions in force. As noted in the Fifth Circuit, exceptions to the WARN Act requirements are to be “narrowly construed.” This means that employers should conduct careful analysis when considering whether WARN Act exceptions apply to their reductions in force.