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Employer Update: Make Sure You Are In Compliance With WARN Notice Requirements Before Plant Closings or Mass Layoffs

top.lawyers.arrive.mag.2011.jpgU.S. broker dealer MF Global recently fired over 1,000 employees after its parent company MF Global Holdings Ltd. Declared bankruptcy on October 31st under Chapter 11 of the U.S. Bankruptcy Code. Employees in the New York and Chicago offices may have strong claims under the WARN Act (Worker Adjustment and Retraining Notification) since MF Global has not filed notice of the layoff with state agencies nor given employees the required notice.

Since MF Global is not eligible to be reorganized, the bankruptcy trustee is liquidating the company. The employees who were fired were helping in the investigation of missing customer funds which is estimated to be about $600 million. The Department of Justice and the Commodity Futures Trading Commission are investigating the missing money. The bankruptcy trustee decided which employees to terminate without consulting MF Global’s parent company.

According to the trustee’s office, none of the terminated employees will receive severance pay, deferred compensation, or bonuses. They will receive health coverage through the end of November and salaries through November 15th.

The terminated employees can file claims against MF Global’s assets for severance, unused vacation days, benefits, and any other money owed to them. However, they will only get paid a portion after customers are paid and administrative fees are paid off.

Under the WARN Act, large companies must provide 90 days notice when closing down or ordering massive layoffs. The purpose of the Act is to give employees time to look for another job and plan for health insurance before their employment ends. Under New York state law, the Act applies to all private businesses with 50 or more full time workers and covers the following situations:

– closings which affect 25 or more workers – mass layoffs involving 25 or more full time workers, if the 25 or more workers make up at 33% of all workers at the site – mass layoffs involving 250 or more full time workers – other relocations and covered reductions in work force.

The Act provides that prior to a plant closing, mass layoff, relocation, or other covered reduction in work hours, covered businesses must provide all employees with 90 days notice before terminating their employment. If a business fails to provide a WARN notice, it may be required to pay back wages and benefits as well as a civil penalty.

If MF Global did not give the employees adequate notice and has not filed WARN notices with the state agencies, the employees may be able to take legal action. The employees can sue for eight weeks of pay and benefits. Since they were terminated after MF Global filed for bankruptcy, their WARN claims would be grouped with the administrative expenses which means that they would get paid as the same time as the attorneys handling the bankruptcy. In other words, their claims stand a much better chance of getting paid compared to other non-administrative claims.

Not complying with the notice requirement of the WARN Act can lead to hefty fines as well as payment of back wages and benefits. If your business is considering laying off a substantial number employees, call our WARN Attorneys at Villanueva & Sanchala at (800) 893-9645 to ensure that your company is in compliance with all state and federal laws. Our attorneys have helped many companies strategize and file the proper notices to ensure legal compliance.

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