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When operating companies file bankruptcy, it often precipitates employee layoffs.  Employers should know about the notice obligations (we’ve posted about them before – or just call us).  As a recap, the federal WARN Act requires employers to notify employees of a mass reduction in force (“RIF”), layoff, temporary shutdown, or a closure of all or part of a business.  And those employers who do not provide proper notice to the employees face damages, including back pay and benefits-related compensation per each affected employee for each day the company violated the WARN Act (up to 60 days – you can do the math – it can be a substantial number).

Even when the WARN Act event occurs after a company bankruptcy filing, employers may still be liable for damages and penalties – unless an exception applies.  The good news is the Epps & Coulson, LLP attorneys’ practice includes employment and bankruptcy matters.

Synopsis:  the following may exclude the employer from WARN Act notice requirements:

  •      •Faltering company: The Department of Labor has said that the WARN Act’s requirements don’t apply if before a mass layoff or plant closure, the company was actively seeking capital and in good faith, reasonably believed that providing advance notice would prevent the business from obtaining such capital and the new capital would allow the company to avoid or postpone a shutdown for a reasonable period.
  •      •Unforeseeable business circumstances:  If the mass layoff or plant closure is caused by business circumstances that were not reasonably foreseeable at the time, the 60-day notice would have been required.  This exception has been applied to mass layoffs due to the Covid pandemic.  See In re Art Van Furniture, LLC, 638 B.R. 523 (Bankr. D. Del. 2022).
  •      •Liquidating fiduciary exception:  WARN Act notice requirements generally do not apply to a bankruptcy trustee whose sole function is to wind down the business.  Unlike when the employer is operating the business as a bankruptcy debtor-in-possession (“DIP”), trustees liquidating the business are not subject to the notice requirements.  If, however, the trustee continues to operate the business for the benefit of creditors, the trustee would be subject to the WARN Act obligations.


As you may imagine, circumstances and specific activities of the business dictate whether a DIP or trustee would be deemed an “employer” under the WARN Act.  The more closely the business activities of the bankrupt business resemble its pre-bankruptcy operations, the more likely it is that the WARN Act notice requirements apply.  If the activities more resemble those of a liquidation or business wind-down, the entity is likely not subject to WARN Act notice requirements.  Official Comm. of Unsecured Creditors of United Healthcare Sys., Inc. v. United Healthcare Sys., Inc. (In re United Healthcare Sys., Inc.), 200 F.3d 170 (3d Cir. 1999).  As you may imagine, this gray area is best navigated by pre-bankruptcy planning, if possible.

Here at Epps and Coulson, LLP we can help; we can interpret and address the WARN Act notice inquiries you may have.  Please feel free to contact dawn at: for any questions.

Information contained in this Memo is intended for informational and educational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.  It is likely considered advertising.  Epps & Coulson, LLP encourages you to call to discuss these matters as they apply to you or your business.

Attorneys admitted to practice in California, New York, Colorado, Texas, and Oregon