WARN Act: Is a WARN Notice Required if a Business Employer Declares Bankruptcy?
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Questions presented:
Is a WARN Notice Required if a Business Employer Declares Bankruptcy?
WARN remains applicable to an employer that declares bankruptcy in some circumstances. If your employer declares bankruptcy and then orders a plant closing or mass layoff, it may still be liable under WARN. There are two situations under which WARN still applies though your employer declares bankruptcy. The first situation occurs when your employer knows about the closing or mass layoff before filing for bankruptcy and should have given you notice but seeks to use bankruptcy to avoid giving notice. The second situation occurs when your employer continues to run the business in bankruptcy, usually as a “debtor in possession.” WARN generally does not apply where a bankruptcy trustee is simply liquidating a business.
Exceptions
The bankruptcy proceeding does change the court in which the WARN claim must be filed from the U.S. District Court to the Bankruptcy Court. The bankruptcy filing may affect how soon any damages are actually paid to an affected employee.
Often come up in bankruptcy cases, the exceptions to the notice requirement:
- a faltering company
- unforeseeable business circumstances