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Wednesday, July 09, 2008

Facility Closing

Is a company required to disclose to an employee that it has plans to close the facility at which they were hired to work? I was recruited by a company, that after 4 months of employing me, announced plans to close the facility. In the all-employee meeting when the closure announcement was made it was stated that the decision to close this facility had been made more than 6 months earlier. It seems to me that at the very least common decency would dictate they tell me, but does the law? I’m a bit irritated as I left a position that I could still be working at.

Quick, short answer: No. Longer also true answer: Because it is a facility closure, it would be covered by the Worker Adjustment and Retraining Notification Act (WARN), which means they either have to give you 60 days notice, or pay you for 60 days following notice, or a combination of the two.

Now my long, drawn out answer. Things like this make my blood boil. It's entirely possible that the person/people who hired you had no idea. Senior Management wasn't ready to tell anyone their plans so they set out to ruin people's lives. Hello, you can do a hiring freeze without telling everyone your secret plant closing plans. It's also entirely possible that they did know and didn't care. A third possibility is that the decision had been made to close the facility if they didn't sell it--and they were operating in the hopes that they would sell it.

I am of the opinion that part of the reason this company has to shut down a facility is that their management is so concerned about covering their own behinds that they forget about the people who work for them. If you take a look at the Fortune Top 100 Companies to Work For you'll also notice that these companies are profitable. Treat your people right, they'll treat your customers right, and you'll all make money together.

So, is there anything you can do about this? Probably not. You could sue for breech of contract, but undoubtedly your offer letter specifically mentioned that you are an "at will" employee, so no contract implied. I hope you get a nice severance package, but I wouldn't hold my breath waiting for one. Do know that they need to give you an official WARN notice 60 days before your last day at work OR pay you for at least 60 days after you quit working. If they don't do that, then you could sue. (There are exceptions to WARN, but from what you've told me, this company wouldn't qualify-except perhaps on size, which my brilliant commenter just reminded me of.)

And now, polish up your resume and hit the pavement. It stinks. It's unfair. It's even unethical (in my never to be humble opinion). But, it's life.


Daniel said...

Just to clarify: Not all plant closings are actually covered by WARN. There are minimum numbers of employees that trigger the WARN requirements; for a shutdown, it must affect 50 or more employees. For more information, check out:

Evil HR Lady said...

Curses! I forgot about size of facility. Daniel is right.

Katherine said...

Also, the questioner worked there less than 6 months in the past 12, so they aren't covered.

Evil HR Lady said...


I thought the time frame applied towards determining is WARN is implicated--not who is covered. That's how I've always applied it, anyway.

Rafal Konopka, SPHR said...

Actually EHRL you're absolutely dead-wrong on the breach of contract claim. "When an employer lies about an existing or past fact with the intent
to induce a prospective employee to accept employment, that employee
may seek redress by pursuing a common law action for fraudulent
misrepresentation." (quoted from the law review article below).

Especially in recruiting, if you make representations to a recruit that are false (say along the lines of, inticing someone to join a department the recruiter knew was going to be closed down shortly), you are opening yourself up to be sued for "promissory fraud".

For more info see: "Deceitful Employers: Intentional Misrepresentation
in Hiring and the Employment-at-Will Doctrine" by Richard Perna in the 7/2006 volume of the Kansas Law Review

Evil HR Lady said...


I disagree. Unless the offer letter stated a guaranteed time frame, then there is no contract. The employee is an at will employee and can be terminated at any time. The only thing required is that if WARN applies, they must give notice. If there was intent to defraud, then you may have something, but if there was no intent, there is no case.

There is also a good probability in cases like this that the hiring manager wasn't aware of the impending layoff either. Sr. types tend to like to leave line managers out of such decision processes.

Rafal Konopka, SPHR said...

I guess we'll have to agree to disagree then. Employment at will isn't absolute - there are several public policy exemptions that have been recognized by the courts such as the implied contract doctrine or the covenant of good faith and fair dealing.

Existing case law supports the fact that employment at will does not protect employers from hiring employees under false pretenses.

For example, in Clement-Rowe v. Michigan Health Care Corp., "the Michigan Court of Appeals upheld a claim for fraudulent inducement involving untrue statements about the financial stability of
the employer. In addressing the employment-at-will issue, the court concluded that the economic
well being and financial stability of a potential employer was an important factor in the plaintiff
accepting a job offer . . . The court was clear in asserting that an employer who successfully touted its economic health to attract a qualified employee knowing that the assertions
were not true “may not later hide behind an at-will employment contract.”"

Even where a contract does in fact exist, if the employee accepts a job predicated on false or misleading information, courts have found the employer liable.

For example in Patten v. Alfa Mutual Insurance Co. "the Alabama Supreme Court held that the [employee] could maintain an action for fraud based upon false statements concerning the location of his employment even though his contract specifically allowed the [employer] to re-assign the plaintiff to a new location"

There are plenty of more examples in the article I citied above (where all of the quotes in my post come from).

EffortlessHR said...

I think the long and short answer are no for Arizona, being an at-will state.. unless someone can correct me?

Jill HR said...

Rafal-I think the point of those cases is that there were false statements that the company made. According to the info we have from the OP, the company did not make any false statements since they did not explicitly claim that the employee would have a job for x years, nor that they were not closing, etc. You'd have to prove that they knew the location was closing and deliberately mislead the employee - not sure an omission of what potentially could maybe happen would count, since all companies could potentially close if they don't meet their numbers

Rafal Konopka, SPHR said...

Jill, the cases I cited are part of a much broader framework of law in this area. The two cases were an example of misrepresentation. A more "on-point" example would of "fraudulent concelement" . Onge good example is Walsh v. Ingersoll-Rand, Co., 656 F.2d 367 (8th Cir. 1981). In that case two salesman (Roberts and Walsh) accepted sales jobs for a subsidiary of Ingersoll-Rand in St. Louis, MO in July and August of 1978. In mid-August both were asked to move to the Dallas office from St. Louis. Critically, on August 9th, I-R entered into negotiations to sell the product line manufactured by the subsidiary to another company and to close the subsidiary. After Roberts and Walsh were terminated on December 31st of that year they both sued and won a large award.

On appeal (from I-R) the court found that:

"Our view of the record indicates that sufficient evidence was introduced at trial for the jury to find that: (1) negotiations for the sale of the hoist product line commenced prior to the time Walsh commenced working for I-R and before Roberts was transferred to Dallas; (2) I-R, by keeping the negotiations confidential, intended to deceive Walsh and Roberts about the future of the hoist product line; (3) I-R had superior knowledge of the negotiations which gave rise to a duty to disclose; and (4) Walsh and Roberts suffered some amount of damages due to I-R's fraudulent concealment. "

I think you would agree that the fact-pattern in this case is very similar to the one the OP presented.

Employment at will is not a be-all and end-all, and it's important for HR practitioners not to be cavalier about it.

Evil HR Lady said...


I think you make good points. From an HR standpoint, I would never terminate someone in this situation without offering severance above and beyond the WARN requirements. In exchange for this severance I would require a general release. No way would I just say, "everyone leave."

However, would I counsel this employee to sue? No. There is a good chance he'd lose and even winning won't be worth the anguish.

Rafal Konopka, SPHR said...

EHRL - I couldn't agree more with your last post. :)

Effortless HR - You're absolutely right. Until 1996 the Arizona Supreme Court was very adept at discovering new exceptions to employment at will. That year the state legislature passed the Employment Protection Act - which closed almost all of the loopholes created by the Supremes and turned AZ into one of the most pro-employer friendly states in the country.

A good overview of the law is here:

jmm43 said...

EHRL lady is right regarding anguish of lawsuit. Suing can be incredibly destructive emotionally and financially. I like to think of it as gambling, you may have a better understanding of the odds, but it sure costs a lot more to ante up.

Ibn Tumart said...

To Evil HR Lady: You're right that there may be no employment contract, and that even if there is, there's probably an at-will provision. But a court *could* find promissory estoppel and essentially imagine a contract for sake of providing the plaintiff a remedy.

Does that ever happen? Sure, but very, very rarely. Still, any employment law attorney worth his or her salt can help the OP better guage the odds during an initial consultation.

To jmm43: Being screwed over without a job or references takes its toll emotionally and financially, too. One should never just decide not to sue simply because it's not a quick and easy process. It has to be a very careful decision, weighing the potential outcomes and figuring out what you envision asyour ideal outcome.

Olivia said...

The fact of the matter is that almost anyone can sue almost anyone for least they can try. Winning such a suit, of course, is much harder.

In this case, unless the aggreived employee can point out where the company INTENTINALLY deceived her in their negotiations, by either making false claims, or a de-facto verbal contract (which are technically as binding as written, but unless she had a tape recorder, harder to prove) the at-will understanding trumps all other considerations.

But yes, if the people who hired you knew, it was a very crummy thing to do. Likely that they didn't, though, or they might have tried to find a contractor, etc., which is what I do whenever I know I have jobs of a limited duration. (terms of which I disclose, of are people too!) :)