Maryland WARN Act Does Not Provide a Private Right of Action to Terminated Workers

On Aug. 26, 2024, the U.S. District Court for the District of Maryland decided in Teamsters Local Union No. 355 v. Total Distribution Services Inc. that the Maryland Economic Stabilization Act (“the Maryland WARN Act”) does not provide individuals with the right to file suit in their personal capacity to enforce a legal claim under the act. However, the Maryland WARN Act may still be enforced by the state Department of Labor. The act is based, in part, on its federal counterpart, the Worker Adjustment and Retraining Notification (WARN) Act, though there are important differences between the two acts. 

Background

The individual plaintiff formerly worked for the defendants at an automobile distribution facility near Jessup, Md., in an unincorporated community known as Annapolis Junction. During this time, Teamsters Local Union 355 represented employees, including the plaintiff, working at that location in negotiations to establish an updated collective bargaining agreement for the bargaining unit. On May 10, 2023, the defendants terminated 60 employees at that location—which included all 47 unionized employees at this facility—without providing any written notice before the terminations commenced.

The Maryland WARN Act requires qualifying employers to provide at least 60 days’ notice to qualified employees, collective bargaining representatives, and certain government entities before a covered reduction in operations occurs.

Teamsters Local Union No. 355 and the individual plaintiff filed suit against the defendants, alleging violation of the Maryland WARN Act for failing to provide 60 days’ written notice of the terminations. The defendants filed respective motions to dismiss the complaint, claiming that the act does not provide a private right of action to the union or individual employees. In response, the plaintiffs filed opposition briefs alleging that the Maryland WARN Act provides an implied right of action for them to sue.

Analysis

A private right of action allows individuals to bring an action in their personal capacity to enforce a legal claim. Maryland courts do not read an implied private right of action into a statute without a clear indication that the legislature intended to provide such a right of action.

In determining whether an implied private right of action exists in a given statute, Maryland courts consider the following: 1) whether the plaintiff is part of the class for whose special benefit the statute was enacted; 2) whether there is any indication of legislative intent—explicit or implicit—to create such a remedy or deny one; and 3) whether it is consistent with the underlying purposes of the legislative scheme to imply such a remedy for the plaintiff.

On the first point, the court held that the plaintiffs are members of the class of individuals and organizations that the Maryland WARN Act was enacted to protect because it specifically provides protections for workers who are employed by qualifying employers by requiring such employers to provide 60 days’ advance notice of certain larger layoffs referred to in the statute as “reductions in operations.”   

On the second point, the court held that there is no evidence in the legislative history of the Maryland WARN Act of the intent to create a private right of action. Specifically, the court found that the act focused on administrative enforcement only—to the exclusion of private enforcement—when addressing such mechanisms. Accordingly, the court concluded that the Maryland legislature intended for the Maryland WARN Act to be enforced by a regulatory scheme and not by a private right of action. In contrast, the federal WARN Act contains an explicit private right of action, which allows plaintiffs to file civil actions for damages.

Lastly, the court held that an implied private right of action in the Maryland WARN Act is not consistent with the overall legislative scheme of the act. The act contains a robust administrative enforcement mechanism but is silent on any private right of action—indicating that the Maryland legislature did not intend to provide such remedy under the act. Accordingly, the court acknowledged that reading a private right of action into the act may create challenges when enforcing its provisions.

The court concluded that the Maryland WARN Act does not provide individuals with the right to file suit in their personal capacity to enforce a legal claim under the act.

Recommendations

The federal district court’s holding that the Maryland WARN Act does not provide a private right of action is an important limitation on the enforcement of the act. This act is particularly concerning for employers in many respects because it requires notice for as few as 15 employees laid off in a reduction in operations at a covered establishment. 

In addition, the act includes the largest potential penalty of any federal or state WARN Act. Employers may be liable for penalties of up to $10,000 a day (up to $600,000 for a full 60-day period) for failure to comply with the Maryland WARN Act notice obligations. 

The Maryland Department of Labor may enforce the statute, and employers should not assume that this decision precludes any legal challenge for failure to comply with the terms of the Maryland WARN Act, including the potential $600,000 penalty. 

Moreover, should this issue be presented to a state court in Maryland, it is possible that the state court might reach a different conclusion than the federal court in this case. For this reason, employers should consider taking the following steps:

• Review the Maryland WARN Act notice requirements to ensure compliance with its provisions well in advance of any reduction in force that might trigger notice obligations under the act.
• Explore the definitions, options, and exceptions to the Maryland WARN Act to determine if there may be reasons that notice is not required.
• Consult with counsel experienced with these statutes prior to any planned group termination action, as the federal and state WARN Acts are notoriously complicated to understand and administer. 

Kerry E. Notestine is an attorney with Littler in Houston. Chad J. Kaldor is an attorney with Littler in Columbus, Ohio. Shawn Matthew Clark and Garrick D. Josephs are attorneys with Littler in New York City. © 2024 Littler. All rights reserved. Reposted with permission.