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Florida Law Firm’s Abrupt 2015 Closure Violated Federal WARN Act

Published by on November 29, 2016

Federal court holds that Butler & Hosch’s immediate layoff of nearly 700 employees illegally failed to provide sixty-day notice period.

On May 14, 2015, nearly 700 attorneys, paralegals, and staff of Orlando-based law firm Butler & Hosch, P.A. were notified that the 43-year-old real estate and mortgage banking firm was closing immediately. To add insult to injury, firm CEO and sole owner Robert H. Hosch, Jr.’s firmwide e-mail that day also informed employees that they would not receive pay for the previous three weeks of work. The suddenly unemployed workers in 27 states and the District of Columbia were understandably shocked; the mass layoff came with no warning, despite federal law requiring it.

Hosch’s e-mail to employees acknowledged that the firm grew too fast and failed to attract new capital. U.S. District Judge Beth Bloom, however, stated in an early order that the firm had undergone an “acquisition binge” by acquiring multiple firms across the country. It then “created $7 million in fictitious receivables through false invoices in order to deceive its creditors.” Regal v. Butler & Hosch, P.A., No. 15-CIV-61081, 2015 WL 11198248, at *1 (S.D. Fla. Oct. 8, 2015). Hosch has already voluntarily surrendered his Florida law license as part of the fallout.

Now, Judge Bloom has granted summary judgment against the firm in a case brought by two former employees, holding that the firm violated the federal WARN Act by failing to provide adequate notice ahead of the layoff, and is liable to its employees. Unfortunately for the employees, the firm is already in bankruptcy and collection of any damages may be unlikely.

The Worker Adjustment and Retraining Notification or WARN Act, 29 U.S.C. § 2101 et seq., requires covered employers to provide written notice to employees sixty days in advance of a plant closing or mass layoff. The law generally applies to any business with 100 or more employees, excluding part-time employees. 29 U.S.C. § 2102(a)(1). A “plant closing” is defined as the permanent or temporary shutdown of a single worksite resulting in the loss of employment at the site for fifty or more full-time employees. § 2101(a)(2). A “mass layoff” is defined as a reduction in force resulting in the termination, in a thirty day period, of at least five hundred full-time employees at a single worksite or fifty full-time employees, if fifty employees equates to at least 33% of the site’s full-time employees. § 2101(a)(3). The full sixty-day notice period may not be required if the closure or layoff is not reasonably foreseeable, or if the notice would prevent the company from generating necessary capital or business to avoid the closure or layoff. § 2102(b).

An employer that fails to provide the full WARN Act notice period in the course of a plant closure or mass layoff will be liable to each terminated employee for back pay for each day it was in violation, minus any compensation already paid during the notice period. § 2104(a)(1), (2). Additionally, the employer may be subject to a civil penalty of $500 for each day it failed to give notice. § 2104(a)(3). An employer may escape or reduce liability with a showing of good faith. § 2104(a)(4).

Welter Insight

Because of the significant toll a potential layoff can have on a company’s workforce and ability to recover difficult economic periods, as well as the stiff penalties associated with the law, employers must be aware of when the WARN Act does and, possibly more important, does not require a sixty-day notice period. A notice is never required under federal law for a reduction in force of less than fifty full-time employees. Likewise, a reduction in force of between fifty and 499 full-time employees at a site, but not more than 33% of the site’s employees, does not require a notice. Employers must further keep in mind that two reductions in force within thirty days of each other must be aggregated to see if enough employees are affected to require a notice. Employers should also be aware that some states have enacted laws similar to the WARN Act that may impose additional or difference notice requirements.

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