The Worker Adjustment and Retraining Notification (WARN) Act requires a 60-day notice to employees before a “mass layoff” can take place. A mass layoff is a reduction in force which is not the result of a plant closure, but which results in an employment loss of at least 50 full-time employees at a single site. While the WARN Act does not specifically define “workforce reduction,” federal courts have determined that an employee is part of such reduction when that employee is not replaced after layoff or discharge. The 8th U.S. Circuit Court of Appeals relied on that interpretation of the term “workforce reduction” when it determined that 111 replacement workers – who ultimately were fired to allow a company’s original employees to return from strike – were not entitled to a 60-day mass layoff notice prior to their firings. Sanders v. Kohler Co., 8th Cir., No. 10-1848, June 8, 2011.

In 2006, Kohler Company shut down its Searcy, Arkansas plant after collective bargaining negotiations with the United Auto Workers Local 1000 broke down and the plant’s 247 union workers went on strike. Three months later, the company hired 123 replacement workers to help restart the plant. In March 2007, Kohler informed the replacement workers that if the strike was determined to be an unfair labor practices strike (as the union claimed), Kohler would release these replacement workers to the extent that any strikers would want to return to their old jobs. In November 2007, Kohler revised that message, and emailed its supervisors that strike settlement would not affect the fact that the replacement workers were considered to be Kohler employees.
In March 2008, Kohler and the Union settled their dispute, and Kohler agreed to reinstate certain strikers. In order to do that, Kohler then fired 123 of the replacement workers, and returned 103 of the original strikers to their former positions. Within weeks, 111 of the fired replacement workers filed a complaint, alleging that Kohler had failed to provide the required 60-day notice under the WARN Act. The complaint included a number of state law claims, including breach of contract, promissory estoppel, and unjust enrichment. The district court grated summary judgment to Kohler on the WARN Act claim, and dismissed the state law claims without prejudice (meaning that the plaintiff’s could pursue those claims in state court, should they choose to do so).

On appeal, the Eighth Circuit upheld the lower court’s decision, based largely upon the interpretation of the term “reduction in force,” which is undefined in the WARN Act. The Court pointed out that the statute defines mass layoff as a reduction in force “which results in” the requisite number of employment positions lost. Here, Kohler fired 123 people, but replaced 103 of those, with a net loss of 10 positions. Based on that fact, the Court held that employees who are fired but replaced are not part of a reduction in force and do not count toward the 50-employee threshold to trigger the required 60-day notice under the WARN Act, because their loss does not “result in” a net loss of employment positions.

While this issue is somewhat esoteric, and applies only within a limited fact scenario, it is important to understand that courts are willing to put parameters around the WARN Act’s requirements, based upon a reasonable reading of that statute. Companies who may face a scenario which includes the hiring and firing of replacement workers during a strike should keep this case in mind when making decisions related to the layoff of strike replacement workers. Similarly, groups who supply or assist such replacement workers should assure that those workers understand that they may not be entitled to a particular amount of notice prior to layoff or termination.