The Unions' Power To Sue Is Growing

September 1, 1996
Think a large layoff could be looming in your company's future? You'd better take a look at a May Supreme Court ruling, especially if you employ organized labor. If you do, you already know the Worker Adjustment and Retraining Notification Act (WARN) obligates certain employers to give workers or their union 60 days' notice before a plant closing or mass layoff. In United Food and Commercial Workers Union Local 751 v. Brown Shoe Company, the Supreme Court ruled that if an employer fails to give such notice, employees may sue for back pay for each day of the violation—or, even more significant, the union may sue on their behalf.

The ruling increases union power considerably, and is likely to lead to more lawsuits under the WARN Act—from both union and nonunion employees. Don Savelson, partner in the New York City-based law firm Proskauer Rose Goetz & Mendelsohn LLP, details the three major implications of the ruling and outlines a plan to stay clear of trouble.

Can you start with some background on this case?
The case really came about because of a plant closing that Brown Shoe started in 1992. The company's leadership sent a letter to the union, the United Food and Commercial Workers, indicating the company was going to shut down a plant in Missouri and lay off 277 employees two months after sending this letter. The union subsequently filed a lawsuit under WARN claiming that in fact Brown Shoe had already begun to lay off [workers] before [the union] got the letter, and its members had not been given the full 60 days' notification. Therefore, the union was entitled to 60 days' back pay for each of its affected members. That's how it started.

How did the case end up at the Supreme Court?
Brown Shoe maintained the union had no [right] to bring action under this federal law on behalf of its members because it had suffered no damages itself, and therefore didn't have any standing. The union hadn't asked for lost dues, which would have been its own particular loss. The Eighth Circuit Court of Appeals decided Brown Shoe was right—that the union didn't have any standing. This decision was contrary to and inconsistent with several other circuit courts that previously had found unions to have that right. So it got to the Supreme Court because of a conflict in the circuit courts.

What did the Supreme Court find?
The Supreme Court interpreted the WARN law to find that in fact unions did have standing to bring WARN actions on behalf of their members. In doing so, it [made reference] to the role the Equal Employment Opportunity Commission (EEOC) and the U.S. Department of Labor (DOL) have when they bring actions on behalf of employees whose rights may have been violated—the EEOC in the area of job discrimination and the DOL in the area of wage-and-hour violations. The Supreme Court, in a decision written by Justice Souter, analogized the unions' role as being similar to the EEOC and DOL in terms of their standing.

That ruling yields three major implications—what's the first?
The first thing the union in this case has done since the Supreme Court's decision—and I can see why—has been to blow up the Court's analogy to the other government agencies. [The union] has said, "You see, they're comparing the union's role of protecting its members to that of a government agency protecting employees' rights." That's important because first, it certainly gives the union a stronger position in organizing unorganized employees in other places. It also reinforces and solidifies its current representation of employees. I think this is taking that statement somewhat out of context, but the unions have started to do that naturally, as any group might, and have found some really good language in the decision to use.

What's the second big implication?
The second thing is, I think, that the unions may be more apt now to at least threaten this kind of action on behalf of their members in negotiations with employers. [They could] indicate, "Look, we can bring this kind of action. We can go for attorneys' fees. We can go for back pay." Also, the law provides damages to individuals whose employee-benefit contributions weren't made or who suffered compensatory damages because their health insurance was cut off prematurely—those types of damages are available in a lawsuit like this. I think that gives the unions much more leverage in the downsizings and reductions in force that may continue to be characteristic of our economy for many years to come.

And the final implication?
Third, [consider] the unrepresented employees who are also in the group of laid off or terminated individuals in a WARN situation. Unions now have more leverage to negotiate and consummate severance packages that would include part or all of the 60 days they claim they're due. It may well entice other laid off employees who aren't represented by unions—like management people covered by this law—to request the same kind of remedy or damages even without going to court.

Does the ruling mean more lawsuits in general?
Most employees don't like bringing their own lawsuits against a former employer. The union employees now have a union that will be able to do that. For the management people, they can actually hang out awhile and see how the unions do on these kinds of actions—and then either file or threaten their own action. The statue of limitations under this law [depends on] the state where the actual shutdown or mass layoff occurred. It could be up to three years in some states. So people could really hang out there awhile before they'd have to file a lawsuit. To the extent that a union is litigating or has litigated that type of action and has been successful, it might encourage management employees to seek the same kind of remedy and damages. We think there's a distinct possibility the unions will start filing more of these actions. And even if these are eventually settled, I think that it's probably going to open the door to a lot more demands and possibly litigation by unrepresented employees seeking the same type of remedies.

What's the unions' stand on this?
There are some interesting possibilities just from a very simple decision that says unions have standing to file this kind of action. I think the unions have at least publicly started to tout their role as being the protector of workers' rights similar to the government agencies the Supreme Court analogized to. At the same time [they've] said, "We don't intend to file a whole rash of new lawsuits—but yes it does give us additional leverage in negotiating with management." So the truth is going to be somewhere in there. We think it's more likely we'll see more litigation and more threatened actions under WARN.

WARN actions can be fairly complicated, can't they?
A lot of WARN actions are close calls. Not a day goes by when a client doesn't call us up to ask whether something may be a WARN-covered event. There are many exceptions to it. There are a lot of mathematical computations involved. There haven't been many cases so far, and the law is still evolving. So there are some close calls, and sometimes there are risk assessments that you have to make on whether you have to give the notification and when you have to give it. This could well start a proliferation of lawsuits in this area.

What would you advise employers in light of this case?
The advice we're giving is to carefully analyze the type of reduction in force or downsizing activity that's going to take place. See if you can spread it out in terms of the numbers and the time period, so that you might not even have a WARN-covered event. In many cases, we've worked with our clients to make a much closer count of who's going to be a covered employee, and over what period of time the [client] could spread the layoff out so it might not trigger the WARN obligation. Also, look at whether you can take advantage of [discretionary] severance packages. Tie them into the actual layoff or shutdown, so you can take credit from those types of separation packages and cover whatever your exposure might be under WARN. To the same extent, we look at constructing waivers and releases from employees that effectively [bar] them from filing future litigation. There are a lot of things employers can do to reduce exposure when making a risk assessment of whether there's a WARN liability.

Personnel Journal, September 1996, Vol. 75, No. 9, pp. 135-141.