South-Western Legal Studies in Business

Layoff Warning Not Requires in Case of Unexpected Business Problems
Description Appeals court held that Arthur Andersen did not violate the WARN Act by not providing employees a 60-day notice that they would be terminated. Andersen's business collapsed suddenly during the Enron investigation. WARN provides an exemption from notice when the layoff is due to sudden business misfortune.
Topic Employment Law
Key Words WARN; Layoffs; Notice; Enron
C A S E   S U M M A R Y
Facts Arthur Andersen had 27,000 employees in the U.S. prior to the collapse of Enron. When the SEC investigated Enron, it discovered that the Houston office of Andersen, which worked for Enron, shredded thousands of documents related to the investigation. The Department of Justice indicted Andersen for obstructing justice. Many clients quit using Andersen, so its revenues collapsed. Consequently, Arthur Anderson laid-off large numbers of employees. A group of employees sued, contending that Andersen violated the Worker Adjustment and Retraining Notification Act (WARN) by not providing 60 days notice. The district court dismissed the suit; employees appealed.

Affirmed. Andersen could not reasonably foresee 60 days before the layoffs were made that its business was going to collapse. It, and its clients, knew that there was an investigation going on, but the indictment by Justice was unusual, and the major loss of business did not occur before that. WARN provides an exception for cases of unforeseen business situations, and this is one.

Citation Roquet v. Arthur Andersen LLP, 398 F.3d 585 (7th Cir., 2005)

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