January 27, 2017

Does a receiver have an obligation to comply with Worker Adjustment and Retraining Notification (“WARN”) Act, 29 U.S.C. § 2101-2109? The short answer is no. While no Michigan state court has addressed this specific issue, the federal courts have addressed it in the context of reorganizing and liquidating failed banks. The courts have consistently and unanimously held that the WARN Act does not apply to receivers appointed to reorganize or liquidate a failed bank. In reaching this conclusion, the courts agree that a receiver is not an “employer” under the WARN Act, and therefore, the receiver is not required to provide notice as proscribed by the WARN Act.

                                                          

The Warn Act, 29 U.S.C. § 2101-2109, mandates that covered employers provide employees (or their union) sixty days notice of a plant closing or mass layoff. Subject to certain conditions and exceptions, employers generally must notify each "affected employee" or "each representative of the affected employees," as well as certain state government officials. See 29 U.S.C. § 2102(a). An employer who fails to satisfy the statutory notice requirements is subject to civil liability. An "aggrieved employee" may bring a civil action to collect “back pay for each day of the violation . . . and . . . benefits under an employee benefit plan . . ., including the cost of medical expenses incurred during the employment loss which would have been covered under an employee benefit plan if the employment loss had not occurred.” 29 U.S.C. § 2104(a)(1). The employer's liability is capped at a maximum of (1) sixty days back pay and benefits or (2) one-half the number of days the employee was employed by the employer, see id., and is reduced by the amount of any wages paid by the employer to the employee during the period, see Id. at § 2104(a)(2); see also attached Department of Labor Summary.

While the WARN Act has serious ramifications for employers who fail to provide notice, it clearly does not apply when government regulators or receivers take over the entity and advertise the entity for liquidation and sale. See Buck v FDIC, 75 F3d 1285, 1290 (8th Cir., 1996) (finding the WARN Act did not apply to a bridge bank, acting as a receiver, for reorganization of a failed bank); see also Office & Professional Employees Int'l Union Local 2 v. FDIC, 138 F.R.D. 325 (D.D.C. 1991), rev'd on other grounds, 962 F.2d 63 (D.C. Cir. 1992) (“when the federal authorities take over the bank and shut it down, there is no employer to give notice. The former bank owners do not own the bank; nor did they close the bank. Moreover, the federal government is precisely not an employer if it is shutting the bank down.”). The WARN Act also does not apply when the Court renders a final decision to close an entity. See In re Parke Imperial Canton, ___BR___; 1994 Bankr. LEXIS 2274, at *19 (Bankr ND Ohio, Nov. 14, 1994). In that case, the Court is ordering the closing, not the employer.

From the above decisions, it appears that the WARN Act is strictly confined to employers, not receivers. While no Michigan court has addressed whether a state court receiver must comply with the WARN Act, it certainly appears that the Court will follow the FDIC decisions and find that the state court receiver is not bound by the Act. Indeed, the receiver in is acting as an extension of the Court. When the Court is ordering the closing or sale, the Court/receiver is not acting as an employer, as defined by the WARN Act. Because the WARN Act only applies to employers and not to government regulators or receivers, the WARN Act will not apply to state court receivers. 

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