Court Rules Restaurant Employees May Have Been Entitled to WARN Act Notice

​Workers at a buffet restaurant within a casino in Queens, N.Y., who were laid off without notice can go forward with their claims under the federal Worker Adjustment and Retraining Notification (WARN) Act, which requires employers to give employees advance warning when a site or unit is to be closed, a federal appeals court recently ruled.

The trial court had dismissed the claims before trial after concluding that the buffet was neither an operating unit nor a single site of employment as required for the notice requirements to apply. The 2^nd U.S. Court of Appeals , however, ruled that because the evidence did not clearly establish that the buffet was not an operating unit, the question should go to a jury.

When the casino opened in 2011, it offered guests more than 30 food and beverage options, including outlets in a food court, two gourmet restaurants, a coffee shop and the buffet. All the food outlets, including the buffet, were run by the casino's food and beverage department.

A wide selection of hot and cold foods was available at the buffet. While hot items were prepared in the buffet's own kitchen, refrigerated ingredients for hot foods were brought to the buffet from the casino's centralized cold kitchen. The buffet did not purchase its own food, but instead ordered ingredients from the casino's centralized warehouse.

The casino's HR department hired employees for the buffet, trained them and worked with a vendor to process payroll.

On Jan. 6, 2014, the casino closed the buffet, laying off 177 employees and notifying affected employees of their layoffs through letters dated the same day. The following week, some of the laid-off employees filed a lawsuit against the casino, alleging that its failure to provide notice violated the WARN Act.

The trial court dismissed the action before trial, concluding that the buffet was not an operating unit or single site of employment whose closure would trigger the WARN Act's notification requirements. The employees appealed.

WARN Act Requirements

The WARN Act requires employers to give employees 60 calendar days' notice in advance of plant closings and mass layoffs. The requirement generally applies to employers that employ 100 or more full-time employees. A plant closing is defined as "the permanent or temporary shutdown of a single site of employment, or one or more facilities or operating units within a single site of employment."

A covered employer violates the WARN Act when it fails to provide the required notice and is liable to each affected employee for that employee's compensation for each day the required notice was not provided, up to 60 days of pay and benefits.

The WARN Act gives the U.S. Department of Labor (DOL) authority to enact regulations to carry out the statute. DOL regulations define an operating unit as "an organizationally or operationally distinct product, operation or specific work function."

The employees alleged on appeal that the trial court erred when it concluded that the buffet's closing was not a plant closing on the ground that the buffet was neither a single site of employment nor an operating unit.

The appeals court concluded that, while there were facts supporting the trial's court conclusion, other facts supported the employees' arguments that the buffet was sufficiently distinct, both organizationally and operationally, to constitute an operating unit and thus come within the protection of the WARN Act. Because a jury could decide that the buffet was an operating unit, the appellate court concluded that the lawsuit should not have been dismissed before trial.

In determining whether an operating unit exists, no single consideration is dispositive, the appeals court said. The trial court stressed the buffet's dependence on other entities within the casino in reaching its conclusion, the court noted. 

Although the casino did provide the buffet with centralized services, including purchasing, warehousing and human resource management, the buffet's reliance on these centralized services was not fatal to a determination that it was an operating unit, the court said. The examples of operating units given by the DOL include an assembly line at an automobile manufacturing plant, a data-processing department, a housekeeping department, a clerical pool and a product department at a department store. The DOL concluded that all of these could be operating units, even though none could reasonably be considered an independent, subsidiary company.

The appeals court noted that factors that jurors might consider in determining that the buffet was organizationally distinct include:

• It occupied an area separate from other retail outlets and amenities and did not share space with any other restaurant.
• The buffet's kitchen prepared the bulk of the hot items it served. 
• The managers of the buffet's kitchen and front-of-house area worked there full time, had the word "buffet" in their job titles and oversaw the design of employee work schedules.
• Considerations in support of the argument that the buffet was not organizationally distinct include:
• The collective bargaining agreement between the casino and the union representing its employees did not identify the buffet as a separate department, division or unit.
• Prospective employees applied to a centralized human resource office, not to a particular restaurant.
• After being hired, food and beverage employees such as cooks, servers and cashiers were provided a common orientation and were given a single employee handbook. 

Roberts v. Genting, 2nd Cir., No. 21-cv-833 (May 15, 2023).

Joanne Deschenaux, J.D., is a freelance writer in Annapolis, Md.