Hotel Employees and Restaurant Employees Intl. Union Local 54 v. Elsinore Shore Assoc.

173 F.3d 175 (3rd Cir. 1999)
  • Opinion Date: March 31, 1999

WARN; NOTICE—A casino that is forced to close unexpectedly by governmental action is not required to give its employees notice under WARN if is does not know, within a 14 -day period, when it will be required to close.

Former employees of a hotel casino brought an action that the casino’s former owners violated the Worker’s Adjustment and Retraining Notification Act (WARN) by failing to provide them with advance notice prior to the casino’s closing by the New Jersey Casino Control Commission. WARN requires that employees receive 60 days’ notice of a closing. The Act has an exception for “unforeseeable business circumstances.” The casino in question encountered severe financial problems, suffered massive losses, and laid off hundreds of employees. It languished in Chapter 11 proceedings. For those reasons, the Casino Control Commission conditioned the renewal of its gaming license upon the casino obtaining specific levels of financing. Ultimately, the Commission denied a renewal license and appointed a conservator to oversee the casino’s operation and to sell the casino. Then, by reason of the casino’s inadequate cash position, the Casino Control Commission ordered the casino to close. Immediately after the Casino Control Commission’s order, the casino owner informed its employees of the closing and the elimination of their jobs. The District Court, relying mostly on regulations promulgated by the Department of Labor, determined that certain government-ordered closings are covered by the Act, and that the only government-ordered closings outside the Act are closings of a savings and loan institution. Nonetheless, the District Court ultimately held that the casino owner’s failure to provide sixty days’ notice of the closing did not violate WARN because the Casino Control Commission’s order was an unforeseeable business circumstance. Specifically, the District Court found that as of sixty days before the closing, it was not reasonably foreseeable that the Casino Control Commission would order the closing of the casino on a certain date or within a known 14-day period. The Court of Appeals agreed with the District Court. In its review of the record, it was clear to the Court that Casino’s closing was a direct result of an order from the Casino Control Commission revoking the license. The reason for the revocation was the casino operator’s continuing financial troubles. The Court felt it clear that the casino operator made every effort to keep the business open or to make a commercially viable sale of the casino.

When the Court of Appeals examined the WARN legislation, it found the statute itself to be silent on the subject of government-ordered closings or situations where both the government and employer play a role in the closing. The legislative history was not very helpful. In analyzing congress’ purpose in enacting WARN, it felt that the thrust of WARN is to give fair warning in advance of prospective planned closings. Therefore, to the Court, it appeared that if an employer knew of a government-ordered closing and failed to notify its employees, the WARN Act would apply.

The regulations promulgated by the Department of Labor state that notices provided under WARN must specify a 14-day period during which closing is expected. By implication, it could be argued that WARN’s notice obligations do not accrue unless closing is foreseeable within a known 14-day period. Both the District Court and the Court of Appeals found those regulations to be reasonable and each held that an employer may validly assert the unforeseeable business circumstances exception unless closing is foreseeable 60 days in advance and within a predictable 14-day period.

Here, the Court held that the casino operator was not without notice that the Casino Control Commission might revoke or fail to renew its license, but, on the day the revocation action took place, the casino operator could not reasonably foresee that the casino would close within 60 days and within a particular 14-day window. To the Court, it was equally foreseeable that the casino might be closed earlier, considerably later, or not at all. The Casino Control Commission had never failed to renew a casino license, even for applicants in serious financial distress. Although this particular casino operator had been in severe financial trouble for many prior years, the Commission not only renewed its license during those years but also failed to take any action to close the casino. As a result, the Court of Appeals held that the unforeseeable business circumstances exception applied to this situation and that the casino operator was not obligated to give notice to its employees under WARN.