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In Re APA Transport Corp. Consolidated Litigation

541 F.3d 233 (3d Cir. 2008)

WARN ACT — A business that shuts down does not qualify for the “faltering company” exception provisions of the Workers Adjustment and Retraining Notification Act based upon only a single informal request to its lender for additional financing and therefore such a company is required to send a 60-day notice of closing.

A trucking business owned more than thirty other companies, including a truck leasing company. It dissolved after defaulting under multiple loan and security agreements. It made no direct efforts to seek additional financing. One week before closing down, the business provided its first notice to employees of the impending shutdown. The notice indicated that employees would be terminated. Following the shutdown of the trucking business, a number of non-union and union employees, along with certain Employee Retirement Security Act (ERISA) funds, brought actions against the trucking business and affiliated companies claiming that the business had violated the notice provisions of the Workers Adjustment and Retraining Notification Act (WARN) because it had not sent a 60-day notice of facility closure and required layoffs. All issues were ultimately decided by the Court of Appeals.

The Court first noted that the WARN Act’s purpose was to protect workers by obligating employers to give their employees advanced notice of plant closing, so as to give workers time to seek other work and retraining skills. It then held that ERISA funds were not persons who had standing to sue under WARN. Additionally, the Court found that the truck leasing company could not be held liable for any WARN violation by the trucking business as they were not a “single employer” under WARN. The Court noted that the leasing company did not control the trucking company and played no role in the trucking company’s decision to close its facilities. Lastly, it held that the trucking business did not qualify as a “faltering company” exception under WARN in that it was not “actively seeking” financing at the time it was required to send its 60-day notice. Upon review of the record, the Court stated that a single exchange between the lender and trucking business that it would seek additional financing from the lender did not constitute a formal request for financing.

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