Registry’s Closing May Pose Test of Advance Notice Law
When the Registry Hotel in Irvine closed and laid off 230 workers a week ago, it became one of the first apparent violators of a new federal law requiring companies to give advance notice of most plant closings and large layoffs.
But several provisions of the law--called WARN, for Worker Adjustment and Retraining Notification--are so vague that it will take a court ruling to determine whether the hotel’s owners really broke it.
In addition, the plant-closing law was intentionally written so no federal, state or local agency has enforcement powers. In other words, WARN is relatively toothless.
While the federal Department of Labor was given jurisdiction to write regulations to implement the law, the only way to prove a violation is through a civil suit filed by aggrieved employees, their labor unions or local government officials, said Don A. Balcer, regional administrator of the Labor Department’s employment and training branch.
For the Registry, whose employees were non-union, that means that either a laid-off worker or Irvine would have to sue in U.S. District Court.
No former Registry employees could be reached for comment. But Irvine officials said it is unlikely that the city will sue because the Registry’s owners--Associated Investors Joint Venture in Dallas--are in bankruptcy proceedings and apparently have few assets.
“We are aware of the situation, and they certainly did not file any advance notice of the closing with us,” said Paul Brady, Irvine’s assistant city manager. “But we have been working with them for 2 years--that’s how long they’ve been in arrears on the (city-imposed) bed tax, and it doesn’t look like there is much to go after” in a suit.
Herbert Katz, an attorney for the Registry, declined to comment on the reasons the hotel was closed and its employees fired without the advance warning required in the new law. “We gave notice to employees on the day they picked up their checks,” was his only response.
For most Registry workers, that was the day after the closing. Workers interviewed at the time said they had not been given any advance notice and, in fact, had been assured just before the hotel was closed that their jobs were safe.
WARN took effect Feb. 4, just 3 days before the closing of the posh hotel, which is across MacArthur Boulevard from John Wayne Airport.
Basically, the law requires 60 days’ advance notice of most business shutdowns or “mass layoffs” involving 50 or more full-time workers. It subjects violators to fines of up to $30,000 and payment of up to 60 days’ back wages and fringe benefits for affected workers.
But the hotly debated law contains several exemptions for financially troubled businesses and fails to define the earliest date on which advance notifications are to begin.
Two of Three Interpretations
In the Registry’s case, two of three possible interpretations of the notification process would find the hotel in violation of the law, said a senior attorney with the federal Department of Labor
Supporters and opponents of the law agreed that only future court decisions can hash out the ambiguities.
The National Assn. of Manufacturers, a major trade group that fought bitterly to keep WARN from being enacted, said the law is riddled with inconsistencies and unclear language.
And WARN does not receive high marks for clarity from some federal Labor Department officials, either.
Even the law’s principal author, Sen. Howard Metzenbaum (D-Ohio), expects it to end up in court. Nancy Coffey, a spokeswoman for Metzenbaum, said uncertainty over when the 60-day advance notice period begins “will probably go to court.”
She said, however, that Metzenbaum has been consistent in insisting that companies cannot go ahead with layoffs that are governed by the law without a full 60-day notice.
‘Err on the Side of Fairness’
“So a company that had a Feb. 6 layoff should have filed notice on Dec. 6,” Coffey said. “We told people to err on the side of fairness and live by the spirit of law--which is to give people a fair and humane amount of notice so they have a shock absorber and can get retraining or find new jobs.”
That is the same advice that the National Assn. of Manufacturers has been giving its 13,500 members since the law was passed in July.
Balcer, the regional labor department official, called the measure “poorly written.” He said that in drafting the regulations, department officials “left it up to the courts to decide” some key issues, including when the 60-day notification begins.
A Labor Department attorney in Washington, who spoke on condition that his name not be used, said there is “a lot of vagueness in the law, and there is no way we can define all possible circumstances” in the implementing regulations.
Only Measure of Enforcement
Several Labor Department officials also criticized the law for making a civil suit the only measure of enforcement.
An attorney in Metzenbaum’s office said that was done to keep from creating a new government bureaucracy to enforce the law.
For its part, the manufacturers’ association “didn’t like any of the language in the law,” said Renee Reymond, director of legislative affairs.
The Department of Labor is reviewing comments on its interim WARN regulations, including a manufacturers association brief that Reymond described as “a 27-page document pointing out 17 areas” that should be clarified.
“We see problems with it being enforced by the courts,” she said. “It will lead to overloading the court system because it contains all kinds of undefined terms and phrases . . . including the effective date.”
The Labor Department attorney said that while the law became effective Feb. 4, there is no consensus on when companies had to begin giving notice.
When Do 60 Days Begin?
“The law says you can’t close (or lay off a substantial number of employees) unless you give 60 days’ notice,” he said. “But for the early cases, the question is whether that 60 days began even before Feb. 4, or is it 60 days from Feb. 4, or just as much notice as you can give between Feb. 4 and the time you close? We did not take a position in the regulations; we left it to the courts to decide.”
In the Registry case, the Labor Department attorney said, the hotel would be in clear violation of the law and liable for 60 days of back pay and fines of $500 per day if the notice period began before Feb. 4, or would be liable for 3 days of fines and back pay if a truncated advance notice was given Feb. 4.
But if a court holds that only closures and layoffs occurring 60 days or more from the Feb. 4 effective date are covered, he said, then there will be no liability.
The Registry case includes one other wrinkle that illustrates the vagaries of the new law: The hotel’s owners had filed for protection from creditors under Chapter 11 of the Federal Bankruptcy Code in November and were in Chapter 11 proceedings when the hotel was closed.
‘Reasonably Foreseeable’
One section of WARN says companies are excused from the 60-day advance notice requirement when a layoff or plant closure is the result of “business circumstances that were not reasonably foreseeable as of that time that notice would have been required.”
A second exemption, called the “faltering company” clause, says that notice of less than 60 days is permissible if the full notice would have squelched arrangements for new capital or new business that would have enabled the company to avoid or postpone the layoff.
Because of its bankruptcy proceedings, the Registry could not claim that its demise was caused by unforeseen circumstances, the Labor Department attorney said; the faltering-company clause still requires companies to file notice as soon as practical.
The hotel owners, according to an earlier interview with sources involved in the bankruptcy proceedings, failed to meet a Feb. 1 deadline to arrange for new financing.
So even if the partnership met the other tests of the faltering-business exemption, the Labor Department attorney said, the management still let 6 days elapse without filing the required notifications before finally shutting the hotel’s doors.
Related story, Page 13.
