Kalwaytis v. Preferred Meal Systems, Inc. ( 1996 )

Opinions of the United
1996 Decisions States Court of Appeals
for the Third Circuit
3-11-1996
Kalwaytis v. Preferred Meal Systems, Inc.
Precedential or Non-Precedential:
Docket 95-7191
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Recommended Citation
"Kalwaytis v. Preferred Meal Systems, Inc." (1996). 1996 Decisions. Paper 214.
http://digitalcommons.law.villanova.edu/thirdcircuit_1996/214
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
____________
No. 95-7191
____________
MARIE A. KALWAYTIS; PEGGY JACKSON; LYDIA T.
HREBEN; SHIRLEY MUSTICH,
Appellees
v.
PREFERRED MEAL SYSTEMS, INC.,
Appellant
____________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
(D.C. No. 93-cv-00371)
____________
Argued January 10, 1996
Before: SCIRICA, ALITO, and WEIS, Circuit Judges.
Filed: March 11, 1996
____________
Elliot J. Mandel, Esquire (ARGUED)
Kaufman, Naness, Schneider & Rosensweig
390 North Broadway
Jericho, NY 11753
Attorneys for Appellant
James A. Diamond, Esquire (ARGUED)
Handler, Gerber, Johnston & Aronson
Suite 100, 150 Corporate Center Drive
Post Office Box 98
Camp Hill, Pennsylvania 17001-0098
Attorney for Appellees
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OPINION OF THE COURT
____________
WEIS, Circuit Judge.
In this WARN Act case, the principal issue is the
amount of damages payable to employees who were on seasonal
layoff at the time the employer announced what amounted to a
permanent layoff. The workers received letters sent less than
the 60 days required by the statute before the permanent layoff
began. The district court awarded damages for 60 days, as if no
notice had been sent. We conclude that the notice was untimely,
and that the violation period began on either the day each
employee reasonably expected to return to work after the seasonal
break or the permanent layoff date set by the employer, whichever
was earlier. Accordingly, we will remand for a recalculation of
damages.
Plaintiffs are former employees of Preferred Meal
Systems, Inc., which prepared pre-packaged meals for schools at a
plant in Moosic, Pennsylvania. Because of the seasonal nature of
its business, the company had a practice of laying off employees
during schools' summer vacation months. In May and June 1992,
eighty-five of Preferred's approximately 124 employees began
their summer layoffs.
On June 26, 1992, the company sent a letter to the
employees advising them that "[o]n August 1, 1992," it would be
"ceasing direct food service employment" at the Moosic plant, and
"laying off its food service employees." "This letter is your
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notice of layoff as of August 1, 1992." Noting that this was
"the normal time" when "seasonal lay-offs would occur," the
letter explained that in the future, Preferred would "contract
with Culi-Services, Inc. to provide food service employees at
this location." The letter continued, "Culi-Services, Inc. has
an immediate offer of employment to make to you. If you are
interested . . . you must contact them directly."
On the same day, Culi sent a communication to the
Preferred employees informing them that it would be "recruiting"
for certain positions. Culi also placed ads in the local
newspapers seeking applicants for the jobs. Culi's announced
wages were lower than those Preferred had paid for the same work.
In a letter dated July 10, 1992, Preferred wrote again
to its employees, stating:
"The June 26 letter may have incorrectly
conveyed the impression that Culi-Services,
the new employer, has an offer of employment
to make to you. We are sorry for any
confusion this letter may have created, but
Culi-Services does not have an offer of
employment for you at this time. Any offer
of employment will depend upon your
application and Culi Services discretionary
judgement as to the best applicants available
for the limited number of positions
available."
3
Preferred ultimately retained a small number of its employees and
Culi hired some, but not all, of the remainder.
Plaintiffs, consisting of a class of sixty-nine former
Preferred employees, filed a complaint against the company,
asserting a failure to give them 60 days notice of the mass
layoff as required by the Worker Adjustment and Retraining
Notification Act (WARN), 29 U.S.C. §§ 2101-2109. Preferred
defended on the basis that it was a "joint employer" with Culi.
Preferred also contended that the time between the seasonal
layoff in May and the sub-contracting with Culi in late June 1992
should not be considered as a WARN Act violation period.
Finding that the size of the work force at Moosic and
the number of employees affected brought the matter within the
scope of the WARN Act, the district court granted summary
judgment to the plaintiffs and awarded damages in the amount of
$253,337.43. The court rejected Preferred's joint employer
defense, observing that the WARN Act did "not define the term
``employer' to encompass separate business entities which enjoy a
simple contractual relationship to produce the goods previously
produced by one of the entities." The court also held that the
plaintiffs' expectations of returning to employment with
Preferred were destroyed on June 26, 1992, when the temporary
layoff became permanent. Accordingly, because they had not
received a notice 60 days before that date, the plaintiffs were
entitled to 60 days wages.
Preferred has appealed, reiterating its joint employer
contention and also asserting that the damages should be
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recalculated because the plaintiffs would have been unemployed in
any event during the summer season.
I.
Preferred's joint employer defense is based on the
proposition that if the number of employees who took positions
with Culi is taken into account, the threshold number of
employees required to bring the WARN Act into play, 29 U.S.C.
§ 2101(a)(2), is not met. As Preferred sees it, if it and Culi
are considered as a single enterprise, when eighty-five employees
were laid off and fifty-four were re-employed by Culi, less than
the statutory minimum of fifty employees were adversely affected.
See 29 U.S.C. § 2101(a)(6).
Preferred's only evidence that a joint employment
relationship existed is that a union, attempting to secure an
election at the Moosic plant, contended in a July 1993 letter to
the National Labor Relations Board that Preferred was a joint
employer with Culi. Apparently, that case has not been resolved
and its res judicata effect, if any, is not before us. Nor
need we consider whether there is a distinction between the
policies established by the National Labor Relations Act, with
respect to various employer alignments, and situations arising
under the WARN Act. See United Steelworkers of America v. Crown
Cork & Seal Co., 32 F.3d 53, 59 (3d Cir. 1994), aff'd 115 S. Ct.
1927 (1995) (noting "vast" policy differences). The union's bare
contention is simply not an adequate basis for a finding on the
issue in the case before us.
5
Similarly, because of the lack of any factual
development, we need not explore the analogies that Preferred
relies upon in its citation of Headrick v. Rockwell Int'l Corp.,
24 F.3d 1272 (10th Cir. 1994) and International Alliance of
Theatrical and Stage Employees v. Compact Video Services, Inc.,
50 F.3d 1464 (9th Cir. 1995). Those cases discussed the sales of
businesses and the continuation of employment.
In the summary judgment context here, Preferred had the
burden of producing evidence to support its claim of joint
employment. It did not do so, and consequently, the district
court did not err in rejecting that defense.
II.
The second issue raised by Preferred is the damages
assessment. Although not sharply delineated by the parties, we
see the point in dispute to be the district court's determination
that the employment relationship ended on June 26, 1992, when the
first letter was sent, and that 60 days pay was due beginning on
that day. Preferred contends that the layoffs beginning in May
and early June were customary and anticipated by the affected
workers. Consequently, the argument goes, when they left for the
summer, the employees had no expectation of working until the
autumn, and calculation of WARN damages should take into account
the customary recall date in late August or early September.
29 U.S.C. § 2102(a) provides:
"An employer shall not order a plant closing
or mass layoff until the end of a 60-day
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period after the employer serves written
notice of such an order --
. . . to each affected employee . . . and to
the State dislocated worker unit . . . and
[to] the chief elected official of the unit
of local government within which such closing
or layoff is to occur."
An employer failing to notify the governmental units is
subject to a civil penalty. 29 U.S.C. § 2104(a)(3). Preferred
did not file a report with the appropriate governmental units,
but no claims for the civil penalties are presented here.
Moreover, they are severable from those asserted by the
employees. We will therefore not consider the civil penalties
further.
Section 2104(a)(1) provides that an employer who orders
a "mass layoff" in violation of the notice provision is "liable
to each aggrieved employee who suffers an employment loss" as the
result of such layoff for "back pay for each day of violation"
and for employee benefits as well. In United Steelworkers of
America v. North Star Steel Co., 5 F.3d 39, 43 (3d Cir. 1993), we
concluded that "WARN uses the term ``back pay' simply as a label
to describe the daily rate of damages payable." Hence, that case
establishes the upper limit of damages applicable here as 60
calendar days wages. Contra Frymire v. Ampex Corp., 61 F.3d 757,
771-72 (10th Cir. 1995) (damages calculated on number of working
days lost during the violation period); Carpenters Dist. Council
v. Dillard Dep't Stores, Inc., 15 F.3d 1275, 1286 (5th Cir. 1994)
7
(same). Because the termination date of employment was not
pertinent in North Star Steel, we did not address the point and
that case does not control the resolution of the issue here.
The statute defines "mass layoff" as a reduction in
force which "results in an employment loss." 29 U.S.C.
§2101(a)(3)(B). "Affected employees" are those "who may
reasonably be expected to experience an employment loss as a
consequence of a proposed . . . mass layoff." 29 U.S.C.
§2101(a)(5). Thus, an employer is liable when it fails to give
notice of a mass layoff that may be expected to cause a work loss
to employees.
Also pertinent to this case is 29 U.S.C. § 2102(c),
which states: "A layoff of more than 6 months which, at its
outset, was announced to be a layoff of 6 months or less shall be
treated as an employment loss . . . " unless the extension is
caused by unforeseeable business circumstances and notice is
given when it becomes reasonably foreseeable that the layoff will
extend beyond six months.1
1
The district court rejected Preferred's assertions that the
layoff extension was not foreseeable. We find no basis to
disturb that ruling on this record. 29 U.S.C. § 2102(c)
establishes a basis for finding liability on the part of
Preferred, but it provides no guidance on the date the employment
loss began or on the measure of damages as discussed in Parts A
and C, infra.
8
A. When Did Employees Suffer a "Work Loss?"
It appears that as of June 25, 1992 (the day before the
first letter), the employees, who were then in the usual summer
status, had no reasonable expectation of working for Preferred
until the end of the seasonal layoff in the fall of 1992. The
summer shutdown in prior years did not cause compensable work
losses under the WARN Act. It was the conversion of the seasonal
layoff into a permanent one that constituted the triggering
event, which required Preferred to give notice.
The difference between the situation in 1992 and that
of former years was that the workers would not be returning to
their regular jobs at the usual time, but instead would be on
indefinite layoff as of August 1, 1992. At that point, further
employment was no longer available, just as in the more common
situation when persons steadily employed throughout the year are
removed from a company's payroll on a specified date.
The letter of June 26, 1992 stated that the layoff was
effective on August 1, 1992. This is inconsistent with
Preferred's argument, which instead would have us look to the
date in September when the seasonal layoffs usually ended. We
believe that Preferred should be held to the terms in its letter.
Moreover, Preferred treated the workers as "former employees" as
of August 1, 1992 in connection with termination of benefits
coverage, including health insurance.
The starting point of the violation period, therefore,
should be August 1, 1992 (the day specified in the employer's
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notice) unless based on Preferred's previous recall practice, an
employee reasonably expected to be recalled before that date.
B. When Was Notice Given?
We must also consider whether the letters sent by
Preferred qualified as notice under the WARN Act. Pursuant to
statutory direction, see 29 U.S.C. § 2107, the Secretary of Labor
promulgated regulations governing the content of the notice. The
regulations do not specify the use of a special form, but they do
require that certain information be included in understandable
language. The notice should tell the employees whether the
planned action is to be permanent or temporary; the expected date
when the layoff will begin; when the individual employees will be
separated; when bumping rights exist; and the name and telephone
number of a company official who may be contacted. 20 C.F.R.
§ 639.7(d).
Flexibility in the notice requirement, however, is
recognized by the provision that the notice is to be based on the
best information available to the employer at the time the notice
is served. "It is not the intent of the regulations, that errors
in the information provided in a notice that occur because events
subsequently change or that [ ] minor, inadvertent errors are to
be the basis for finding a violation of WARN." 20 C.F.R.
§639.7(a)(4).
Fairly read, the regulations require a practical and
realistic appraisal of the information given to affected
employees. We therefore examine the correspondence sent to the
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employees to determine if it provided adequate notification of
the mass layoffs.
The recipients of Preferred's letters could reasonably
assume that they would suffer an employment loss. The June 26,
1992 letter, however, was ambiguous about the employees' future
prospects with Culi. Preferred recognized this problem and
clarified the lack of guaranteed employment with Culi in its
letter of July 10, 1992.
Giving a reasonably pragmatic interpretation of the two
letters, we conclude that, read together, they do meet the
statutory requirements of notice. However, because the ambiguity
in the first letter was not resolved until July 10, 1992, that
later date should be the effective date of the notice.
C. Damages Calculation
In Dillard Dep't Stores, the Court of Appeals said
"[t]he violation period is comprised only of those ``days after
the shutdown or layoff in violation of [the WARN Act] and extends
for the number of days that notice was required but not given.'"
15 F.3d at 1286 (citing H.R. Conf. Rep. No. 576, 100th Cong., 2d
Sess. 1052 (1988), reprinted in 1988 U.S.C.C.A.N. 2078, 2085).
Further, the Court commented that if an employee was actually
terminated within the 60 day notice period "such that the
employee actually received less than the full sixty days notice,
then the violation period would range from the actual date of
termination until the end of the sixty-day notice period." Id.
at 1286-87.
11
We agree with the reasoning of the Dillard court. It
is the date when the employment loss could be expected to occur
that marks the starting point, not the date on which the employee
learns that a loss will occur in the future. Ordinarily, the
starting point will be the end of the seasonal layoff, but here,
Preferred set the date by stating in its letter that the work
loss would commence on August 1st.2 Preferred's notice period
began on July 10, 1992 and the 60 calendar days needed to avert a
violation would extend to September 8, 1992. Because the
indefinite layoff began on August 1, the employees therefore
would be entitled to damages for thirty-nine calendar days
(August 1 to September 8). If, however, any employee reasonably
expected his or her seasonal recall to end before August 1,
additional damages would be due so as to account for the full 60
days period. For example, a worker whose seasonal layoff would
have ended on July 29 would be entitled to forty-one days.
This method of calculation is consistent with the
purpose Congress had in mind when it enacted the WARN Act. The
regulations capture the spirit of the legislation in stating that
the 60 day notice "provides workers and their families some
transition time to adjust to the prospective loss of employment,
to seek and obtain alternative jobs" or to obtain training for
further employment. See 20 C.F.R. § 639.1.
2
Because of the timing of Preferred's notice, employees may
receive what might, in other circumstances, be regarded to some
extent as a "windfall" by obtaining wages for days they otherwise
would have been on seasonal layoff. As we noted earlier,
however, Preferred selected the date as August 1 and employee
benefits were phased out as of that date.
12
By using the formula adopted here, employees who were
not actually working when the layoff extension was imposed
receive the same amount of time to seek employment and make the
necessary adjustments as workers who were on the job at the time
the indefinite layoff was imposed. In the only published opinion
in which an analogous situation was presented, a district court
came to a similar conclusion. See Marques v. Telles Ranch, Inc.,
867 F. Supp. 1438 (N.D. Cal. 1994).
Accordingly, the order of the district court holding
Preferred liable under the WARN Act will be affirmed. The case
will be remanded to the district court for recalculation of the
damages due under the Act in accordance with this Opinion.
_____________________________________
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