18th Annual Workplace Class Action Report - 2022 Edition

Annual Workplace Class Action Litigation Report: 2022 Edition 739 off from their positions in violation of the Worker Adjustment and Retraining Notification ("WARN") Act. Defendants Roger and Shari Wilsey (the "Wilseys") filed a motion to dismiss, arguing that they were not alter egos to Defendant LME, Inc., and therefore the claims pursuant to the WARN Act against them failed. The Court explained that because the WARN Act defines "employer" as a "business enterprise," typically a Plaintiff could not bring a viable claim against an individual. However, the Court reasoned that one circuit had recognized that indirect claims may be asserted against individuals under an alter-ego or veil piercing theory. Id . at *7. The Court looked to whether federal common law should be applied in WARN Act cases when considering whether the Wilseys’ conduct pierced the corporate veil. Although the Eighth Circuit had not yet ruled on the issue in a WARN Act case, the Court noted that in an ERISA case, the Eighth Circuit had adopted a two-prong test fashioned by the Tenth Circuit: (i) whether "there [was] such unity of interest and lack of respect given to the separate identity of the corporation by its shareholders that the personalities and assets of the corporation and the individual are indistinct;" and if (ii) whether "adherence to the corporate fiction [would] sanction a fraud, promote injustice, or lead to an evasion of legal obligations.” Id . at *9. The Court found the test would be an appropriate analysis for the issues in this matter and thus applied it to Plaintiffs’ claims. As to the first prong of the test, Plaintiffs alleged that: (i) LME was under the complete control of the Wilseys; (ii) the Wilseys exercised complete domination of LME’s finances, policy, and business practice; and (iii) LME failed to observe corporate formalities, had its funds siphoned by its dominant shareholders, had non-functioning officers, and was merely a façade for the Wilseys’ individual dealings. Id . at *10. The Court concluded that Plaintiffs’ allegations satisfied the first prong of the test, and that the allegations were sufficient put the Wilseys on notice that Plaintiffs would bring veil-piercing theory against the Wilseys. As to the second prong, Plaintiffs asserted that: (i) the Wilseys owned Lakeville and that its employees were terminated without proper notice before Lakeville went bankrupt; (ii) the NLRB ordered LME to cease and desist from creating alter egos to avoid federal obligations; and (iii) Finish Line Express, a company owned and controlled by an LME officer, took over LME’s operations after LME went bankrupt. Id . at *12-13. The Court determined that Plaintiffs’ allegations sufficiently demonstrated a means of evading federal obligations by a continued use of the corporate structure to close facilities without proper notice and then declare bankruptcy, thus avoiding back pay and other payouts to former employees as required under the WARN Act. Id . at *13. The Court therefore concluded that Plaintiff’s allegation sufficiently satisfied both prongs of the test and therefore plausibly presented an alter-ego theory of liability. Accordingly, the Court denied Defendants’ motion to dismiss. Benson, et al. v. Enterprise Leasing Co. Of Florida, LLC, 2021 U.S. Dist. LEXIS 29606 (M.D. Fla. Jan. 4, 2021) . Plaintiffs, a group of former employees, filed a class action alleging that prior to a layoff in connection with the COVID-19 pandemic, Defendants failed to provide proper notice in violation of the Worker Adjustment and Retraining Notification ("WARN") Act. Defendant filed a motion to dismiss, which the Court denied. The Court noted that to sufficiently state a claim pursuant to the WARN Act, a Plaintiff must allege: (i) a mass layoff or plant closing as defined by the statute conducted by; (ii) an employer who fired employees; (iii) who, pursuant to the WARN Act, were entitled to notice. Id . at *11. Under the WARN Act, employees are entitled to a 60-day notice unless the employer can show that one of several affirmative defenses applies. Defendants asserted affirmative defenses under the WARN Act of a natural disaster defense and an unforeseeable business circumstances defense. Defendants argued that COVID-19 was a natural disaster, thereby relieving it of the WARN Act’s notice requirements. The Court opined that while COVID-19 may constitute a natural disaster under the WARN Act, Plaintiffs’ complaint did not allege the layoffs resulted directly from the pandemic. Rather, Plaintiffs’ theory of the case was that the company experienced "a dramatic downturn in business" due to less travel, and Plaintiffs were laid off. Id . at *6. The Court found that this sort of indirect connection would not support the natural disaster defense. As to the unforeseen circumstances defense, the Court held that unlike the natural disaster defense, the WARN Act does not waive the notice requirement but instead requires employers to "give as much notice as is practicable." Id . at *15. Since the time period in which practical notice could be given would be a factual issue, the Court ruled that dismissal of the claims was not appropriate. For these reasons, the Court denied Defendants’ motion to dismiss. Butler, et al. v. Fluor Corp., 2021 U.S. Dist. LEXIS 1916 (D.S.C. Jan. 6, 2021). Plaintiffs, a group of workers who were laid off from Defendants’ nuclear reactor project, filed a class action alleging that Defendants failed to provide 60-days’ prior notice of Plaintiffs’ termination in violation of the Worker Adjustment and Retraining Notification (“WARN”) Act. Defendant SCANA (“SCANA”) initiated a multi-billion dollar project in 2008 by