Carpenters Dist. Council of New Orleans & Vicinity v. Dillard Dept. Stores, Inc. ( 1994 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
Nos. 92-3419
92-3613
_____________________
CARPENTERS DISTRICT COUNCIL OF
NEW ORLEANS & VICINITY, ET AL.,
Plaintiffs-Appellees,
Cross-Appellants,
versus
DILLARD DEPT. STORES, INC., Etc.,
ET AL.,
Defendants-Appellants,
Cross-Appellees.
*****************************************************************
STEPHEN J. PLESCIA, Etc., ET AL.,
Plaintiffs-Appellees,
versus
DILLARD DEPT. STORES, INC., ET AL.,
Defendants-Appellants.
_________________________________________________________________
Appeals from the United States District Court for the
Eastern District of Louisiana
_________________________________________________________________
( February 22, 1994 )
Before POLITZ, Chief Judge, REYNALDO G. GARZA, and JOLLY, Circuit
Judges.
E. GRADY JOLLY, Circuit Judge:
For the first time, this court is called upon to address the
Worker Adjustment and Retraining Notification Act ("WARN Act"), 29
U.S.C. § 2101 et seq. (Supp. 1993). It requires some employers--
generally those who are curtailing or closing an operation--to
provide sixty days notice to those employees who will be laid off
or whose hours will be substantially reduced. In 1989, D.H. Holmes
Co., Ltd. merged with Dillard Department Stores, Inc., resulting in
the layoff of a large number of people--mostly former Holmes
employees--whose job functions had become redundant. These former
employees sued Dillard, alleging that in the course of the ongoing
merger efforts, Holmes and Dillard had failed to provide adequate
notice of the pending terminations. The district court generally
ruled for the former employees and awarded some damages to them.
Both Dillard and the former employees appeal, raising various
issues that in turn we will address. We begin with the relevant
facts.
I
In 1988, as a result of steadily declining profits and
revenues, Holmes, a long-established and time-honored retail
department store headquartered in New Orleans, Louisiana, hired
investment counselors to find a solution to its financial problems.
Through the investment counselor's efforts, Holmes and Dillard
entered into negotiations in the latter part of 1988 for the merger
of the two corporations. A merger agreement was ultimately reached
between representatives of the two parties. Under this agreement,
Holmes would merge with DDS Acquisitions Corporation ("DDS"), a
wholly-owned transient subsidiary of Dillard, with Holmes
-2-
continuing as the surviving wholly-owned subsidiary of Dillard.1
On March 3 and 6, 1988, the agreement was approved by the
respective boards of directors of both Dillard and Holmes. Still,
it was not yet a done deal. One of the conditions of the agreement
was that no less than eighty percent of Holmes's stockholders must
approve the merger. Before any vote by the stockholders, however,
Dillard and Holmes were required to furnish Holmes's stockholders
with registration statements outlining the parties' respective
financial conditions. Further yet, the Securities and Exchange
Commission ("SEC") required that such registration statements must
be pre-approved by the SEC before issuance. Pursuant to SEC
regulation, Dillard and Holmes filed the proposed registration
statement with the SEC on or about March 7, 1989. Efforts were
made to have the SEC expedite its decision concerning the
registration statement; however, neither Holmes nor Dillard could
anticipate precisely when the SEC would approve the registration
statement. Approximately one month after the statement was filed,
the SEC approved the registration statement. Having received SEC
approval, Holmes then scheduled a stockholders' meeting for May 9,
1989.
1
In corporate tax parlance, this is known as a "reverse
triangular merger." See 26 U.S.C. § 368(a)(2)(E) (Supp. 1993); see
also BORIS I. BITTKER & JAMES S. EUSTICE, FEDERAL INCOME TAXATION OF
CORPORATIONS AND SHAREHOLDERS, § 14.15(1) (5th ed. 1987). See infra
note 12. Although technically, Holmes merged with DDS, for ease of
reference we will refer to this merger as the merger between Holmes
and Dillard unless specifically referred to otherwise.
-3-
On April 19, 1989, at the direction of Dillard's personnel,
Holmes notified its employees assigned to the corporate planning
division and the warehouse facilities that they would be terminated
as of May 9 if Holmes's stockholders approved the proposed merger
with Dillard. Certain "transitional" employees at the warehouse
facilities and the corporate offices received notification between
April 21 and 28, informing them that they would be laid off
sometime between May 9 and July 1. Finally, on May 12, employees
in the Canal Street retail store were notified that they would be
laid off between June 10 and July 8.
Because it was clear that the WARN Act sixty-day notice
requirement would not be met with respect to certain employees,
Dillard2 made efforts to comply with WARN's damages provision.
First, Dillard determined which employees were entitled to payments
under the WARN Act, and as to those employees, the amount owed.
Under Dillard's interpretation of the statute, part-time employees
were not entitled to the notice, and, as such, they were not
entitled to any damages in lieu of notice. Dillard further
determined that the sixty-day penalty period in 29 U.S.C. §
2104(a)(1)(A) referred to the number of work days within that
period rather than the number of actual calendar days. This
interpretation meant that each full-time employee who had not
2
In respect to events that occurred after the merger, a
reference to Dillard should be interpreted as including Holmes,
unless Holmes is specifically discussed separately.
-4-
received the full sixty-day notice would be entitled to payment for
those days the employee would have worked had the full sixty-day
notice been given. Relying on the provisions of § 2104(a)(2) of
the Act, Dillard also concluded that it could deduct from this
amount any severance pay or vacation pay that Dillard owed the
employee.
After the two companies merged, and as a direct result of the
merger, numerous employees were involuntarily terminated between
May 8 and August 9, 1989. These former employees3 sued a number of
defendants, arguing that Dillard violated the WARN Act when it
failed to provide the "affected employees" the required sixty-day
notice of termination. In addition, the employees argued that
Dillard failed to pay them the proper amount of damages in lieu of
notice.
II
Initially, the employees sued Dillard and Holmes. Later,
however, the employees amended their complaint, adding as
defendants individual officers and directors of both Holmes and
Dillard, as well as the Federal Insurance Company ("Federal
3
The former employees constitute a class that we will refer to
as "the former employees" or simply "the employees." That class is
composed of "all former employees of either D.H. Holmes Co., Ltd.
(Holmes) and or Dillard Department Stores, Inc. (Dillard) who were
involuntarily terminated from employment between May 8, 1989, and
August 9, 1989, as a result of the acquisition of Holmes by Dillard
and who did not receive sixty (60) days written notice of said
termination either personally or through their representative."
Carpenters Dist. Council v. Dillard Dep't Stores, Inc., 778 F. Supp.
297, 300 (E.D. La. 1991).
-5-
Insurance"), Holmes's and Dillard's fiduciary liability insurer.
As this lawsuit progressed, a number of motions were filed and
ruled upon, and some of these rulings form the basis of this appeal
and cross-appeal. First, in February 1991, the employees moved for
partial summary judgment on the issue of liability under the WARN
Act. In turn, Dillard moved for partial summary judgment, seeking
to exclude from the plaintiff class certain groups of individuals
that Dillard argued were not "affected employees"4 under the
statute. Dillard further sought to dismiss the employees' claim
against the individual officers and directors of both Holmes and
Dillard. Ultimately, the court granted the employees' motion for
partial summary judgment, stating that Dillard violated the WARN
Act. As to Dillard's motion, the district court granted partial
summary judgment, dismissing the claims against the individual
officers and directors. The court, however, did not exclude any of
the contested members from the plaintiff class. In addition,
because the officers and directors had been essentially dismissed
from the suit, the court dismissed Federal Insurance from the suit
because its only liability was tied to the possible liability of
the officers and directors who had also been dismissed. See
Carpenters Dist. Council v. Dillard Dep't Stores, Inc., 778 F. Supp.
297 (E.D. La. 1991).
4
The WARN Act defines "affected employees" as "employees who
may reasonably be expected to experience an employment loss as a
consequence of a proposed plant closing or mass layoff by their
employers." 29 U.S.C. § 2101(a)(5) (Supp. 1993).
-6-
In addition to its motion for summary judgment, Dillard had
also filed a cross-claim against Federal Insurance and a third-
party complaint against Liberty Mutual Insurance Company ("Liberty
Mutual"). Dillard alleged that both insurance companies owed
Dillard coverage, defense, and indemnity pursuant to a fiduciary
liability insurance policy issued by Federal Insurance, and
commercial general liability policies issued by Liberty Mutual. In
response to Dillard's cross-claim, Federal Insurance moved for
summary judgment, arguing that no coverage existed under its
policies based on the allegations contained within the plaintiffs'
complaint. Liberty Mutual also moved for summary judgment,
asserting lack of coverage. The court granted summary judgment for
both insurance companies. Id.
In September 1991, Dillard filed a second motion for summary
judgment, this time alleging that the WARN Act is unconstitutional.
The district court, in a separate opinion, denied Dillard's motion,
holding that the WARN Act did not suffer any constitutional
infirmities. See Carpenters Dist. Council v. Dillard Dep't Stores,
Inc., 778 F. Supp. 318 (E.D. La. 1991).
In November 1991, the damages issue was tried to the district
court, and the court awarded damages to employees. Following the
trial, the employees sought prejudgment interest on the damage
award, which the district court granted. In February 1992, the
employees, in a separate civil action, further sought costs and
attorneys' fees. Following an evidentiary hearing, the court
-7-
ordered Dillard to pay attorneys' fees and costs to the employees
for both the original action as well as for the subsequent action
seeking the attorneys' fees and costs. See Carpenters Dist.
Council v. Dillard Dep't Stores, Inc., 790 F. Supp. 663 (E.D. La.
1992).
III
Dillard raises four issues on appeal. First, Dillard
challenges the district court's determination that the WARN Act is
constitutional.5 Next, Dillard argues that the district court
erred in holding that Dillard violated the WARN Act. However, even
if Dillard did in fact violate the Act, Dillard contends that the
district court improperly calculated the amount of damages Dillard
owed its former employees. Finally, Dillard asserts that the
district court erroneously granted summary judgment in favor of
Federal Insurance and Liberty Mutual.6
5
Dillard makes several arguments in support of its contention
that the WARN Act is unconstitutional. Their arguments are
meritless, and we affirm the district court's order denying
Dillard's motion for summary judgment on that basis. See
Carpenters Dist. Council v. Dillard Dep't Stores, Inc., 778 F. Supp.
318 (E.D. La. 1991).
6
Dillard argues that the district court erred in granting
summary judgment in favor of Federal Insurance and Liberty Mutual
because the plain language of the policies provide coverage, or
alternatively, if the language of the policies was ambiguous, the
policies should be construed in favor of coverage. Both policies,
however, clearly do not provide coverage for liability imposed by
the WARN Act. With respect to Federal Insurance, the policy in
question provided coverage only for specifically defined "wrongful
acts," of which violation of the WARN Act was not included. As to
Liberty Mutual, their policy provided coverage for liability
(continued...)
-8-
In their cross-appeal, the former employees raise four issues
for our consideration. First, the employees contend that the
district court mistakenly determined that certain employees--the
Bienville employees--were not "affected employees" as defined by
the statute, and, as a result, those employees were erroneously
denied benefits under the Act. Next, the employees argue that the
district court erroneously concluded that the notices of
termination that did not designate a specific date of termination
constituted notice. Third, the employees contend that the district
court improperly calculated the amount of attorneys' fees Dillard
owed the employees. And, finally, the employees argue that the
district court erred in applying regulations retroactively to a
specific employee to deny her pay.
IV
We review a grant of summary judgment de novo. FDIC v. Myers,
955 F.2d 348, 349 (5th Cir. 1992). Summary judgment is appropriate
"if the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show that
there is no genuine issue as to any material fact and that the
moving party is entitled to a judgment as a matter of law." FED.
R. CIV. P. 56(c). We examine the record independently to determine
6
(...continued)
arising out of errors in the administration of an employee benefit
program, or in connection with providing improper advice concerning
such programs. Thus, we affirm the district court's grant of
summary judgment on this issue.
-9-
if the movant is entitled to judgment as a matter of law, drawing
any factual inferences in the light most favorable to the non-
movant. Degan v. Ford Motor Co., 869 F.2d 889, 892 (5th Cir.
1989). Questions of law are subject to de novo review, United
States v. Long, 996 F.2d 731, 732 (5th Cir. 1993), while findings
of fact will be disturbed only if we find that they are clearly
erroneous. FED. R. CIV. P. 52(a).
A. Did Dillard Violate the WARN Act?
Although Dillard and Holmes acknowledge that certain affected
employees did not receive the full sixty days notice of
termination,7 they argue that they were excused from the notice
requirements because they fell within one of the two statutory
exemptions. Under the facts of this case, Dillard and Holmes can
escape WARN Act liability only if either the "faltering company"
exception or the "unforeseen business circumstances" exception
applies.
To fall within the "faltering company" exemption, an employer
must meet four requirements. The Act states that
an employer may order the shutdown of single site of
employment before the conclusion of the 60-day period if
as of the time that notice would have been required the
employer was actively seeking capital or business which,
7
Dillard does not challenge the fact that it initially falls
within the general scope of the WARN Act. Dillard does not assert
that it is not an "employer" within the meaning of WARN. 29 U.S.C.
§ 2101(a)(1) (Supp. 1993). Likewise, Dillard concedes that the
layoffs and closings of the facilities at issue here fall within
the WARN Act definition of "plant closing" and "mass layoff." 29
U.S.C. §§ 2101(a)(2), (3) (Supp. 1993).
-10-
if obtained, would have enabled the employer to avoid or
postpone the shutdown and the employer reasonably and in
good faith believed that the giving the notice required
would have precluded the employer from obtaining the
needed capital or business.
29 U.S.C. § 2102(b)(1) (Supp. 1993). This exception applies only
when a layoff is caused by the employer's failure to obtain
sufficient capital. See 54 Fed. Reg. 16061 (April 20, 1989) ("The
need for notice will only be triggered if the employer fails to
obtain the business or financing it seeks."). In this case,
however, there is no causal connection between Holmes's8 search for
capital and the ultimate reduction in work force. Although it is
true that at the time notice should have been provided Holmes was
actively searching for a new line of credit, the actual cause of
the mass layoff was not a failure to obtain an adequate line of
credit; instead, the cause of the layoff was the merger between
Holmes and Dillard. Because there was no causal relationship
between Holmes's search for additional capital and the reduction in
its work force, the "faltering company" exception does not apply to
exempt it from liability for failing to give notice for the
ultimate layoff, which was in fact caused by the merger.
Next, Dillard contends that its failure to provide the full
sixty days notice was excused under the "unforeseen business
circumstances" exemption. This exemption provides that "[a]n
employer may order a plant closing or mass layoff before the
8
Dillard, a financially healthy organization, has never argued
that it was entitled to "faltering company" status.
-11-
conclusion of the 60-day period if the closing or mass layoff is
caused by business circumstances that were not reasonably
foreseeable as of the time that notice would have been required."
29 U.S.C. § 2102(b)(2)(A) (Supp. 1993). According to the proposed
rules, an unforeseeable circumstance is "caused by some sudden and
unexpected action or condition outside the employer's control."9
20 C.F.R. § 639.9(b)(2) (1988)(proposed regulations).10 As with the
"faltering company" exception, this exception to the general rule
is to be narrowly construed. 20 C.F.R. § 639.9(a) (1989)(final
regulations).
Dillard argues that there was some uncertainty as to when, or
even if, the SEC would approve the registration statement, and as
to whether Holmes's stockholders would approve the merger.
Therefore, it asserts, the resulting merger was an "unforeseen
business circumstance." We cannot agree. For several months prior
to March 9--the date notice should have been given for the May 9
9
Examples provided by the regulations include "a principal
client's sudden and unexpected termination of a major contract with
the employer, a strike at a major supplier of the employer, and an
unanticipated and dramatic major economic downturn." 20 C.F.R. §
639.9(b)(2) (1988)(proposed regulations).
10
The WARN Act was enacted on August 4, 1988, and it took
effect on February 4, 1989. The Department of Labor ("DOL")
promulgated proposed regulations in December 1988, and later issued
final regulations on April 20, 1989, which took effect on May 22.
See 54 Fed. Reg. 16042-01 (1989). In many respects, the proposed
regulations are identical to the final regulations. In those
cases, we will cite to the final regulations. However, in those
instances where the final regulations differ from the proposed
regulations, we will cite to those regulations in effect at the
time in question. See infra note 19.
-12-
layoff--Dillard and Holmes had been intensely negotiating an
agreement that would allow the two companies to merge. On March 6,
three days before notice should have been given, a tentative
agreement was reached. Both companies then sought SEC approval,
and both companies actively promoted the merger. It is difficult
to see how two companies that were busy promoting their merger can
now argue that the resulting merger was unforeseeable. The fact
that there were some uncertainties in the merger process does not
make the resulting merger unforeseeable. We conclude that the
merger was in fact foreseeable. Consequently, we hold that neither
the merger itself nor any of the individual steps taken to effect
the merger constitute "unforeseen business circumstances."11
Because Dillard and Holmes are unable to satisfy the requirements
of either exception under the WARN Act, sixty days notice of
termination was required.12
11
Even if Dillard and Holmes had fallen within the scope of
either the "faltering company" exemption or the "unforeseen
business circumstances" exemption, both failed to provide proper
notice under the DOL regulations. If an employer is providing less
than sixty days notice pursuant to one of the statutory exemptions,
the employer must "provide a brief statement of the reasons for
reducing the notice period. . . ." 20 C.F.R. § 639.9 (1989)(final
regulations). None of the notices provided to employees contained
a brief statement of the reasons for providing less than sixty days
notice.
12
Dillard also argues that the district court erred in
determining that Dillard and Holmes were jointly and severely
liable because the "merger" between Holmes and Dillard was not a
"sale" as contemplated by the Warn Act. Carpenters Dist. Council,
790 F. Supp. at 666-67; see also 29 U.S.C. § 2101(b)(1) (Supp.
1993). We disagree, and we affirm the district court's holding on
(continued...)
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B. Work Days vs. Calendar Days
The next issue concerns whether the district court erred by
calculating damages on the basis of calendar days instead of work
days. Dillard contends that the district court improperly included
in the damage award payment for non-work days i.e., Saturdays,
Sundays, and holidays. The district court held that "the time
period for which penalty payments would be due are 60 individual
work days and not the number of work weeks contained within a 60
day period." Carpenters Dist. Council, 778 F. Supp. at 308.
The absolute starting point for interpreting a statute is the
language of the statute itself. United States v. Sosa, 997 F.2d
1130, 1132 (5th Cir. 1993); In re Hammers, 988 F.2d 32, 34 (5th
Cir. 1993). If the language is clear and unambiguous, then the
court may end its inquiry. United States v. Sosa, 997 F.2d at
1132. If, however, a statute is susceptible to more than one
reasonable interpretation, then the reviewing court must look
beyond the language of the statute in an effort to ascertain the
intent of the legislative body. In re Hammers, 988 F.2d at 34.
12
(...continued)
this issue except to the extent that the district court held that
the "merger" between Dillard and Holmes was not a "merger" under
Louisiana law. Carpenters Dist. Council, 790 F. Supp. at 666, n.7.
As the district court correctly noted, this "merger" consisted of
a transaction among three corporate entities--Holmes, Dillard, and
DDS Acquisition Corporation, a wholly owned subsidiary of Dillard.
After the respective stockholders of each corporation approved the
merger plan, DDS and Holmes merged, with Holmes continuing in
existence as the surviving wholly-owned subsidiary of Dillard. In
corporate tax parlance, this is known as a "reverse triangular
merger." See supra note 1.
-14-
Section 210413 spells out in some detail the amount of damages
an employer must pay if it does not provide its employees with
13
Section 2104 provides in pertinent part:
(a) Civil actions against employers
(1) Any employer who orders a plant closing or mass
layoff in violation of [the WARN Act] shall be liable to
each aggrieved employee who suffers an employment loss as
a result of such closing or layoff for--
(A) back pay for each day of violation at a rate
of compensation not less than the higher of--
(i) the average regular rate received by such
employee during the last 3 years of the
employee's employment; or
(ii) the final regular rate received by such
employee; * * *
Such liability shall be calculated for the period of the
violation, up to a maximum of 60 days, but in no event
for more than one-half of the number of days the employee
was employed by the employer.
(2) The amount for which an employer is liable under
paragraph (1) shall be reduced by--
(A) any wages paid by the employer to the employee
for the period of violation;
(B) any voluntary and unconditional payment by the
employer to the employee that is not required by
any legal obligation; * * *
(3) Any employer who violates [the WARN Act] with
respect to a unit of local government shall be subject to
a civil penalty of not more than $500 for each day of
such violation * * *
(6) In any such suit, the court, in its discretion, may
allow the prevailing party a reasonable attorney's fee as
part of the costs. * * *
29 U.S.C. § 2104 (Supp. 1993).
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adequate notice of a mass layoff or a plant closing. If an
employer violates the notice provision, the employer must pay the
aggrieved employee "back pay for each day of the violation
[period]." 29 U.S.C. § 2104(a)(1)(A) (Supp. 1993). On one hand,
the term "back pay" connotes a remedy that would require the
payment of a sum such that the employees would be put in the same
position they would have been had the violation never occurred. On
the other hand, "each day of the violation" appears to require
payment of "back pay" damages for each calendar day within the
violation period, which would put the employees in a significantly
better position than they would have enjoyed had the employer
provided the full sixty-day notice. See United Steelworkers of
America v. North Star Steel Co., 5 F.3d 39 (3d Cir. 1993), petition
for cert. filed, 62 U.S.L.W. 3429 (U.S. Dec. 13, 1993)(No.
93-936)(holding that the statute requires payment of damages based
upon the number of calendar days within the violation period);
Jones v. Kayser-Roth Hosiery, Inc., 748 F. Supp. 1292, 1296 (E.D.
Tenn. 1990)(holding that the statute requires payment of damages
based upon the number of work days within the violation period).
Because the statute is susceptible to more than one reasonable
interpretation, we will examine all available materials to
determine the intent of Congress. Our starting point, however, is
the statute.
Interpreting WARN's damage provision as requiring payment for
work days only is well supported by the language of the section.
-16-
First, the term "back pay" commonly means pay, i.e., wages,
benefits, etc., that an employee would have earned, or to which she
would have otherwise been entitled, if the event that affected such
job related compensation had not occurred. Indeed, the Supreme
Court has said that "back pay" requires "payment . . . of a sum
equal to what [the employees] normally would have earned" had the
violation never occurred. Phelps Dodge Corp. v. NLRB, 313 U.S.
177, 197, 61 S. Ct. 845, 854, 85 L. Ed. 1271 (1941). Further, the
Supreme Court has explained that "back pay" suggests a remedy such
that the damaged employee is restored "as nearly as possible, to
that which would have [been] obtained but for the [violation]."
Id. at 194. If aggrieved employees are paid only for days they
ordinarily would have worked during the sixty-day notice period,
then those employees are placed in the position they would have
occupied had the violation never occurred.14 But see United
14
The Third Circuit, however, provides two arguments for
interpreting the term "back pay" as requiring payment for each
calendar day within the violation period, and in doing so, they
have, in our view, essentially written the term out of the statute.
See United Steelworkers of America v. North Star Steel Co., 5 F.3d
at 41-43 (holding that "WARN uses the term `back pay' simply as a
label to describe the daily rate of damages payable"). In
Steelworkers, North Star Steel argued that the term "back pay"
should connote a "lost earnings" concept. Under the "lost
earnings" concept, an employee would receive payment for time he or
she would have worked during the sixty-day notice period, but was
not allowed to. The Third Circuit rejected this argument because
of the effect the "lost earnings" concept would have on other
sections of the statute. They reasoned that the lost earnings
concept would render superfluous § 2104(a)(2)--the damage provision
that allows an employer to reduce damages by wages paid for work
performed during the violation period. See supra note 13.
(continued...)
-17-
14
(...continued)
According to the Third Circuit, adopting the "lost earnings"
concept would render § 2104(a)(2) superfluous because "lost
earnings" reflect a net earnings figure; in other words, the "lost
earnings" calculation would by definition subtract wages an
employer had already paid the employee for work performed during
the violation period, and as such, there would be no need for §
2104(a)(2). This argument, however, is based upon a flawed reading
of the statute that disregards the statutory distinctions between
termination of an employee and reduction of an employee's work
hours. As the Conference Report clearly states, the violation
period is composed of those days after the employee has been
terminated or after the employee's hours have been substantially
reduced without adequate notice. H.R. CONF. REP. No. 100-576, 100th
Cong., 2nd Sess. 1052 (1988), reprinted in 1988 U.S.C.C.A.N. 2078,
2085. Section 2104(a)(2) allows an employer to deduct wages earned
for work performed during the violation period. This section is
effective only in those instances where the "employment loss" is a
substantial reduction in hours, as opposed to complete termination.
See 29 U.S.C. § 2101(a)(6)(C) (Supp. 1993). Where an employee's
hours are reduced without proper notice, the employee will continue
to work during the violation period. Where, as here, the employee
is terminated, § 2104(a)(2) is inapplicable because by definition
an employee who has been terminated cannot earn any wages during
the violation period. The Third Circuit mistakenly concluded that
employees who have been terminated can earn wages during the
violation period. They further concluded that § 2104(a)(2) allows
an employer to deduct wages earned before the violation period--
something that § 2104(a)(2) expressly disallows. Thus, the Third
Circuit's argument against using the lost earnings concept for
"back pay" fails to withstand scrutiny.
The Third Circuit further reasoned that there would be an
additional "conflict between Subsections 2104(a)(1) and
2104(a)(2)(A)" if "back pay" were interpreted as meaning "lost
earnings". United Steelworkers, 5 F.3d at 43. Under WARN, an
employer is entitled to reduce its liability to aggrieved employees
only by those payments within the categories set forth in §
2104(a)(2) that an employer paid to its employees. According to
the Third Circuit, the concept of lost earnings, which is remedial,
is inconsistent with the statutory scheme; a true lost earnings
scheme would allow the employer to reduce its liability by any
earnings that the employees received during the period of
violation, even if those earnings were received from a subsequent
employer. Id. The WARN Act, however, does not include a provision
that would allow an employer to deduct wages earned by an employee
from other sources. Consequently, the Third Circuit concluded,
(continued...)
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Paperworkers Int'l Union v. Specialty Paperboard, Inc., 999 F.2d
51, 55 (2d Cir. 1993)(stating in dicta that a WARN Act claim is not
a true claim for back pay because it does not compensate for past
services, but nevertheless stating damages "are measured as two
months pay and benefits").
Second, the legislative history makes it clear that Congress
intended the "back pay" language in WARN to connote the traditional
back pay remedy as discussed in Phelps Dodge Corp. v. NLRB, 313
U.S. 177, 197, 61 S. Ct. 845, 854, 85 L. Ed. 1271 (1941)(damages "of
a sum equal to what [the employees] normally would have earned" had
the violation never occurred). The Senate Report states that
[f]or violations of the notice provisions, damages are to
be measured by the wages . . . the employee would have
received had the plant remained open or the layoff had
been deferred until the conclusion of the notice period,
less any wages or fringe benefits received from the
violating employer during that period. This is in effect
a liquidated damages provisions [sic], designed to
penalize the wrongdoing employer, deter future
14
(...continued)
"back pay" could not have been intended to connote a lost earnings
concept. Id. We find this argument unpersuasive. Although we
agree that the lost earnings concept creates a remedy that is
generally remedial in nature, we are untroubled by the fact that
the statutory scheme fails to provide a remedy that is something
other than a pure "make whole" remedy. There are plausible reasons
why Congress could choose not to include a provision that would
make the WARN compensation provisions purely remedial, e.g., the
desire to avoid placing a burden on a terminated employee to
mitigate damages by taking any job offered, the desire to give a
terminated employee a window of time to readjust without
immediately having to search for a job, the desire for simplicity
in the statutory scheme, etc. Without express language or
legislative history directing us to a reason or other motivation
behind this decision, we will not speculate as to the hidden
significance, if any, behind the lack of such a provision.
-19-
violations, and facilitate simplified damages
proceedings.
S. R EP. NO. 62, 100th Cong., 1st Sess. 24 (1987)(emphasis added).
Damages calculated by measuring the wages the employee would have
received had the employee continued working requires a calculation
using the number of work days in the violation period rather than
the number of calendar days. To use calendar days would provide an
employee with damages in excess of what he or she would have
received had the plant remained open, or had the layoff been
deferred until the conclusion of the notice period.
Finally, unlike the "calendar-day" approach advocated in
United Steelworkers of America v. North Star Steel Co., 5 F.3d 39,
43 (3d Cir. 1993), petition for cert. filed, 62 U.S.L.W. 3429 (U.S.
Dec. 13, 1993)(No. 93-936), the "work-day" interpretation of WARN's
damages provision does not lead to anomalous results. A well-
accepted canon of statutory construction requires the reviewing
court to avoid any interpretation that would lead to absurd or
unreasonable outcomes. Birdwell v. Skeen, 983 F.2d 1332, 1337 (5th
Cir. 1993). In United Steelworkers, defendant North Star Steel Co.
provided the court with a hypothetical situation which, they
argued, demonstrated the inequities inherent in the "calendar-day"
approach. United Steelworkers of America v. North Star Steel Co.,
5 F.3d at 43. The Third Circuit, however, dismissed North Star's
-20-
argument,15 but we find North Star's hypothetical to be a good
example of why the "calendar-day" approach cannot be the approach
Congress intended. In this hypothetical situation, an employer
violates the WARN Act by terminating employees without providing
any advance notice. Thus, the violation period contains sixty
days. Employee "A" is a full-time employee who works a regular
eight-hour shift each weekday. However, employee "B" is a part-
time employee who works just one ten-hour shift each Saturday.
Under the Third Circuit's calendar-day approach, employee "A" would
receive 480 hours pay in lieu of notice (eight hours per day times
sixty days), while part-time employee "B" would receive 600 hours
pay (ten hours per day times sixty days). As North Star Steel
argued, it would be anomalous for the one-day-per-week part-time
employee to receive 120 hours pay over and above that paid to the
five-days-per-week full-time employee. Under this calendar-day
system, not only is the employer severely penalized for choosing to
pay damages in lieu of notice, but the full-time employee is
15
The Third Circuit dismissed North Star Steel's hypothetical
situation because it was unwilling to discuss the method of
calculating daily damages under §§ 2104(a)(1)(A)(i) and (ii).
United Steelworkers of America v. North Star Steel Co., 5 F.3d at
43. We find it unnecessary to discuss the method of calculating
daily damage rates under those provisions before discussing the
hypothetical situation presented by North Star Steel; indeed, the
precise method of calculation raises many questions. It is clear,
however, that those provisions require the calculation of damages
based on the daily amount an employee earns, and regardless on how
the amount of daily damages is reached, North Star Steel's
hypothetical situation illustrates the anomalous results that
emanate from the calendar day approach.
-21-
treated inequitably, and the part-time employee gets a windfall.16
Under the "work-day" approach, however, such bizarre results do not
occur. Employee "A" is paid for the number of work days Employee
"A" would have worked within the sixty-day period, which would work
out approximately to eight hours per day times five days per week
times eight weeks. Employee "B", on the other hand, would receive
payment in lieu of notice that would reflect the employee's part-
time status, i.e., approximately ten hours per week times eight
weeks. This is a plain-sense result in a day and time when it is
common to find employees with work schedules that vary from the
traditional eight-hour day, forty-hour work week. It is for the
foregoing reasons that we now hold that damages in lieu of the WARN
Act notice are to be calculated using on the number of work days
within the violation period.
16
The number of examples demonstrating the inequitable effects
of the "calendar-day" approach are seemingly never ending. For
example, a similarly inequitable result is achieved if one full-
time hourly-wage employee works eight hours per day, five days per
week, while another full-time hourly-wage employee works ten hours
per day but only four days per week. Under the calendar day
approach, the first employee would be entitled to 480 hours worth
of pay over a sixty-day violation period while the second employee
would be entitled to 600 hours of pay, notwithstanding that each
was paid the same wages, and worked the same number of hours per
week.
-22-
C. Which Employees Are Entitled to Damages
Next, Dillard contends that the district court erred in
determining which employees were "aggrieved employees"17 because the
court included certain employees who actually received sixty days
notice of termination prior to their actual termination. To notify
its employees of their termination dates, Dillard sent out three
sets of notices. Because Dillard was unable to predict with
absolute precision the number of employees needed during the
transition period, the last two sets of notices provided the
employees with a range of dates in which the termination would
likely occur.18 Although Dillard anticipated that the employees
would be terminated within the estimated range of dates, in
actuality, some of the employees continued working past the
estimated termination dates such that they actually received the
entire sixty days notice prior to termination. So, even though the
original notice dates provided less than sixty-days notice, those
employees who continued working had the benefit of full notice.
The district court, however, determined that
17
The term "aggrieved employee" means "an employee who has
worked for the employer ordering the plant closing or mass layoff
and who, as a result of the failure by the employer to comply with
[the WARN Act] did not receive timely notice either directly or
through his or her representative as requires by [the Act]." 29
U.S.C. § 2104(a)(7) (Supp. 1993).
18
Between April 21 and 28, 1989, Dillard informed certain
affected employees that they would be laid off between May 9 and
July 1. Notices were also issued on May 12 to a third group of
employees informing the employees that they would be terminated
between June 10 and July 8.
-23-
in those instances where an employee was advised that he
would be terminated between two set dates, and the
earliest set date was less than 60 days from the date
notice was received, the employer has failed to comply
with the Act . . . even if . . . the employee was
actually discharged more than 60 days from receiving
notice. Notice that sets the earliest date an employee
could be discharged, at less than 60 days from receipt of
notice, by its very terms, fails to meet the requirements
of the Act.
Carpenters Dist. Council, 778 F. Supp. at 312. The effect of the
district court's ruling was that Dillard was required to pay
damages to some employees who actually were afforded sixty days of
notice as required by the WARN Act.
Dillard argues that the district court's interpretation is
inconsistent with both the language and the purpose of the Act, and
we agree. The WARN Act only requires that employers provide sixty
days notice of any plant closing or mass layoff. 29 U.S.C. §
2102(a) (Supp. 1993); 20 C.F.R. § 639.1(a) (1989)(final
regulations). As noted above, if an employee receives less than
sixty days notice, then the employee is entitled to back pay for
each day of the violation period. The 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." H.R. CONF. REP. NO. 100-576,
100th Cong., 2nd Sess. 1052 (1988), reprinted in 1988 U.S.C.C.A.N.
2078, 2085. Thus, if an employee was provided with a range of
possible termination dates, some before the sixty-day period ended
and some beyond the sixtieth day, and the employee was terminated
-24-
beyond that sixty-day period, such that he actually worked
throughout the entire notice period, then there is no violation
period. Because there is no violation period, "back pay for each
day of violation" would amount to zero damages. See 29 U.S.C. §
2104(a)(1)(A) (Supp. 1993). However, if that employee was actually
terminated within the sixty-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. In such
a case, the employee would then be entitled to damages for "each
day of violation." We hold, therefore, that those employees who
actually received sixty days notice before their termination are
not entitled to "back pay" damages.19 Because we reverse the
19
The employees argue that the second and third sets of
notices, which provided a range of estimated termination dates,
should be treated as no notice, rather than defective notice. They
argue that under the final regulations, the range of estimated
termination dates must be fourteen days or less, and because the
range provided by Dillard greatly exceeded fourteen days, the
notice provided amounted to no notice. See 20 C.F.R. § 639.7(b)
(1989)(final regulations). We disagree. First, as the district
court correctly noted, neither the regulations nor the Act itself
addresses how the courts are to treat notices that are determined
to be defective or inadequate. Carpenters Dist. Council, 778
F. Supp. at 312, n.16. As such, neither the Act nor the regulations
suggest that defective notice is automatically to be treated as
though no notice had been provided at all. Moreover, we are not
persuaded that the regulations require such. Although the final
regulations, which became effective on May 22, 1989, require that
a range of estimated termination dates cannot exceed fourteen days,
the interim regulations did not address the matter. See 20 C.F.R.
§ 639.7 (1988)(proposed regulations). Thus, at the time Dillard
provided notice to its employees, the proposed regulations were in
effect, although the layoffs occurred after May 22, after the final
(continued...)
-25-
district court's holding with respect to the number of compensable
days within the violation period and the number of employees who
are entitled to damages, we must remand this case for a
determination of damages consistent with this opinion.
D. Good Faith Reduction of Damages
Dillard argues that the district court abused its discretion
by not reducing its liability because Dillard acted in good faith
and reasonably believed that it had complied with the Act. Any
assessment of an employer's good faith or grounds for its belief in
the legal propriety of his conduct is necessarily a finding of
fact, to be disturbed on appeal only if clearly erroneous. Laffey
v. Northwest Airlines, Inc., 567 F.2d 429, 464 (D.C. Cir. 1976),
19
(...continued)
regulations became effective. The employees argue, however, that
the date of the layoffs, rather than the date of the notices, ought
to determine which regulations applied to Dillard's notices. They
rely upon a district court case, Finnan v. L.F. Rothschild & Co.,
726 F. Supp. 460, 463 (S.D.N.Y. 1989), in which the court was faced
with a question far different from the question posed here. In
Finnan, the employer terminated employees within the sixty-day
period after the WARN Act was first enacted. Thus, the court was
faced with the question of whether a layoff or plant closing that
occurs within the first sixty days of the enactment of WARN was
subject to the Act. In determining whether the Act applied at all,
the court noted that the "language of the statute focuses on the
closing or layoff as the affected event." Id. at 463. In the case
at bar, we are faced with the question of when the proposed
regulations versus the final regulations apply. The Department of
Labor's regulations are designed to help employers determine when
notice is required, what that notice should contain, and what
constitutes a violation of the Act. Because the WARN Act focuses
upon employer notification of employees concerning impending mass
layoffs and plant closings, we find that the regulations in effect
at the time the notices were provided controls.
-26-
cert. denied, 434 U.S. 1086, 98 S. Ct. 1281. 55 L. Ed. 2d 792 (1978).
The WARN Act states that
[i]f an employer which has violated this chapter proves
to the satisfaction of the court that the act or omission
that violated [the WARN Act] was in good faith and that
the employer had reasonable grounds for believing that
the act or omission was not a violation of this chapter
the court may, in its discretion, reduce the amount of
the liability or penalty provided for [in the Act].
29 U.S.C. § 2104(a)(4) (Supp. 1993).
In this case, after the damages issues were tried to the
court, the district court held that no good faith reduction of
damages was warranted. First, the court found that Dillard did not
subjectively believe that it complied with the notice requirements
of the Act. The court noted that there was evidence that at the
time the WARN Act requirements were discussed with Dillard's legal
advisors, Dillard knew that it was well within the sixty-day notice
period based on the projected date of the layoffs, and Dillard
conceded that it was not relying on the two exceptions to establish
its qualification for a reduction in damages based on its good
faith. Moreover, throughout the process of calculating the WARN
Act damages, when faced with any arguable point of law, Dillard
consistently resolved any questionable issue in its favor. Dillard
concluded, for example, that it could deduct from damages any
vacation pay it already owed its employees, a conclusion that
Dillard's own legal advisors characterized as "aggressive" or "on
tenuous grounds." The district court concluded that at some point,
Dillard's conclusions concerning the calculation of damages become
-27-
objectively unreasonable, and as such, Dillard was not entitled to
a "good faith" reduction in damages. Although we are mindful that
Dillard was caught in a difficult position with respect to the
notification requirements, and although we recognize that Dillard
made significant WARN payments to a significant number of
employees, we cannot say that the district court's refusal to
reduce damages is clearly erroneous.
E. Prejudgment Interest
Dillard argues that the district court's award of prejudgment
interest was improper. See Carpenters Dist. Council, 790 F. Supp.
at 673-75. We disagree. As the district court noted, federal law
governs the range of remedies, including the allowance and rate of
prejudgment interest, where a cause of action, as in this case,
arises out of federal statute. F.D. Rich Co. v. United States ex
rel. Industrial Lumber Co., 417 U.S. 116, 127, 94 S. Ct. 2157, 2164,
40 L. Ed. 2d 703 (1974); Hansen v. Continental Ins. Co., 940 F.2d
971, 983 (5th Cir. 1991). Federal law provides, inter alia, that
interest "shall be allowed on any money judgment in a civil case
recovered in a district court." 28 U.S.C. § 1961(a) (Supp. 1993);
see also Guidry v. Booker Drilling Co., 901 F.2d 485, 488 (5th Cir.
1990)(holding that when a federal court's jurisdiction is
predicated upon a federal question, § 1961 does not preclude the
award of prejudgment interest). The determination of whether
prejudgment interest should be awarded requires a two-step
analysis: does the federal act creating the cause of action
-28-
preclude an award of prejudgment interest, and if not, does an
award of prejudgment interest further the congressional policies of
the federal act. Hansen v. Continental Ins. Co., 940 F.2d at 984
n.11; Guidry v. Booker Drilling Co., 901 F.2d at 488. If
prejudgment interest can be awarded under the two-prong test,
whether such interest is awarded in any given case is within the
court's discretion. Calderon v. Presidio Valley Farmers Ass'n, 863
F.2d 384, 392 (5th Cir. 1989) cert. denied, 493 U.S. 821, 110 S. Ct.
79, 107 L. Ed. 2d 45 (1989); Oil, Chemical & Atomic Workers Int'l
Union v. American Cyanamid Co., 546 F.2d 1144, 1144 (5th Cir.
1977).
In this case, the district court's award of prejudgment
interest was not an abuse of discretion. First, the WARN Act does
not preclude an award of prejudgment interest. Although § 2104(b)
states that "[t]he remedies provided for in this section shall be
the exclusive remedies for any violation of this chapter[,]" the
Act also states that "[t]he rights and remedies provided to
employees by this chapter are in addition to and not in lieu of,
any other contractual or statutory rights and remedies of the
employees, and are not intended to alter or affect such rights and
remedies. . . ." 29 U.S.C. §§ 2104(b), 2105 (Supp. 1993). Thus,
the "back pay" remedy provided under § 2104, while the only remedy
provided to employees under the WARN Act, does not preclude the
award of prejudgment interest under 28 U.S.C. § 1961. Moreover,
given our holding that back pay damages essentially are wages to
-29-
which employees would have received had proper notice been
provided, an award of prejudgment interest furthers the
congressional purpose behind the WARN Act--providing compensation
to employees in lieu of proper notice such that the employees would
be put in the same position as if the full sixty days notice had
been provided. As the district court accurately detailed,
prejudgment interest will fully compensate employees for the lost
use of wages that should have been paid if an employer fails to
provide adequate notice. Prejudgment interest will also provide an
incentive for employers to settle meritorious claims of aggrieved
employees quickly, fairly, and without unnecessary delay. See
Carpenters Dist. Council, 790 F. Supp. at 674. Therefore, we hold
that a trial court may, in its discretion, award prejudgment
interest to aggrieved employees for the WARN Act violations. We
further hold that the district court in this case did not abuse its
discretion in awarding prejudgment interest.20
20
Dillard's chief argument against the award of prejudgment
interest centers upon the district court's award of back-pay
damages based upon the number of calendar days within the violation
period. Dillard argues that the penalty effect of the calendar-day
approach makes the WARN Act an inappropriate vehicle for
prejudgment interest, since the purpose of such interest is to
compensate the victim, rather than punish the wrongdoer. See,
e.g., Illinois Cent. R.R. Co. v. Texas E. Transmission Corp., 551
F.2d 943, 944 (5th Cir. 1977). In the light of the fact that we
have reversed the district court's ruling concerning the use of
calendar days rather than working days to calculate the amount of
back pay owed each employee, thus, removing the penalty effect of
the back-pay damage award, Dillard's point is essentially moot.
-30-
F. The "Bienville" Employees
In its cross-appeal, the employees contend that the district
court erred in determining that certain employees who were
terminated on May 9 were not entitled to WARN notice. These
employees made up part of Holmes's corporate division, although
they were not based in the "regular" corporate office in the Canal
Street site.21 Instead, because of space considerations, they were
located some distance away from the Canal Street location in
offices known as the "Bienville site." The district court held
that the Canal Street corporate division and the Bienville site did
not comprise a "single site of employment" under the WARN Act.
Further, the district court held that "there were insufficient
numbers of employees assigned to [the Bienville site] to [bring the
Bienville site itself] within the Act." Carpenters Dist. Council,
790 F. Supp. at 667. As such, the district court held that those
Bienville site employees were not entitled to notice of
termination. The employees have appealed this decision, contending
that the two offices constituted a "single site of employment"
under the WARN Act.
As a preliminary matter, we must determine the standard of
review to be applied. Neither Dillard nor the employees endorse a
particular standard of review, and we have been unable to locate
21
At the same location on Canal Street were two "sites" of
employment for the purposes of the WARN Act: the Canal retail
store and Holmes's corporate division. We are concerned here only
with Holmes's corporate division.
-31-
any existing case law on this particular WARN Act question. Upon
reflection, we conclude that the question of whether multiple work
locations constitute a "single site of employment" under the WARN
Act is a mixed question of fact and law. Federal Rule of Civil
Procedure 52(a) prescribes the clearly erroneous standard for
findings of underlying fact. Whether multiple locations constitute
a "single site" under the WARN Act, however, is a legal conclusion
to be drawn from the underlying historical facts. The underlying
facts relevant to a determination of the "single site" issue in
this case are largely undisputed, and as such, we have no occasion
to apply the clearly erroneous standard. As a conclusion of law,
however, the issue of whether the two employment locations
constitute a "single site of employment" is reviewed de novo by
this court. Cf. Radio WHKW, Inc. v. Yarber, 838 F.2d 1439, 1442
(5th Cir. 1988). We now turn to the merits of the employees'
argument.
Under the WARN Act, notice of mass layoffs or plant closings
is required if there is a sufficiently large "plant closing" or
"mass layoff" at a single site of employment. See 29 U.S.C. §§
2101(a)(2) and (3) (Supp. 1993). If the threshold requirements are
met, the employer is required to provide notice of termination to
all affected employees at that "single site of employment."
Although the statute itself does not define the term "single site
of employment," the regulations promulgated by the Department of
Labor provides some guidance. The proposed regulations stated that
-32-
(1) A single site of employment can refer to either
a single location or a group of contiguous locations.
Groups of structures which form a campus or industrial
park, or separate facilities across the street from one
another, may be considered a single site of employment.
(2) Separate buildings or areas which are not
directly connected or in immediate proximity may be
considered a single site of employment if they are in
reasonable geographic proximity, used for the same
purpose, and share the same staff and equipment. An
example is an employer who manages a number of warehouses
in an area but who regularly shifts or rotates the same
employees form one building to another.
(3) Non-contiguous sites in the same geographic
area which do not share the same staff or operational
purpose should not be considered a single site. For
example, assembly plants which are located on opposite
sides of town and which are managed by a single employer
may be considered separate sites if they employ different
workers.
(4) The term "single site of employment" may also
apply to unusual organizational situations where the
above criteria do not reasonably apply.
20 C.F.R. § 639.3(i) (1988)(proposed regulation). Dillard argued,
and the district court held, that Holmes's corporate division at
the Canal Street location and the employees at the Bienville site
were two separate and distinct sites of employment under WARN.
Specifically, the court noted that the two sites were several miles
apart, that the personnel assigned to the Bienville site--those
employees who performed construction facilities management, energy
management and store planning--performed functions different from
the functions provided by the workers in the Canal Street corporate
division. The court noted that although the Bienville site
employees' payroll checks were issued from the Canal Street
-33-
location, "this was an insufficient connection by itself to view
the Bienville location and the Canal Street store as one site."
Carpenters Dist. Council, 790 F. Supp. at 667.
On appeal, the employees contend that the Bienville site and
the Canal Street corporate division were a "single site of
employment" because the job functions of the Bienville employees
were closely integrated with the job functions of the Canal Street
corporate division. A complete review of the underlying facts
leads us to agree with the employees' contention. The evidence
before the district court demonstrated that up until 1980 or 1981,
the Bienville site employees were housed along with all other
corporate employees at the Canal Street corporate division office.
As the corporate division grew, it could no longer be comfortably
housed in the Canal Street corporate division offices. In an
effort to relieve overcrowding in those offices, certain
divisions--including construction facilities management, energy
management, and store planning--were relocated to the Bienville
site. Once moved to the Bienville site, those employees continued
to perform precisely the same company-wide functions they provided
when housed in the Canal Street location. The Bienville site
employees remained integrated with the Canal Street corporate
division after the move. The Bienville site had no support staff,
and the Bienville employees continued to rely upon the support
staff at the corporate division office. In spite of the move to
the Bienville site, the employees nevertheless considered
-34-
themselves part of the corporate division, and Holmes continued to
consider them corporate employees for payroll purposes. It is not
irrelevant that the employees--precisely, like the Canal Street
employees--were made redundant and lost their jobs directly because
of the merger.22 These factors lead us to conclude that the
Bienville site and the Canal Street corporate division were merely
one site of employment that was separated because of space
considerations. In our view, this situation may be classified as
"an unusual organizational situation" under the DOL regulations.
See 20 C.F.R. § 639.3(i)(4) (1988)(proposed regulations). These
employees were entitled to the WARN Act notice of termination, and,
consequently, Dillard is liable for any damages associated with
providing inadequate notice.23
G. Retroactive Application of Regulations
Finally, the employees in their cross-appeal argue that the
district court erroneously applied final regulations retroactively
to deny a former Holmes employee back pay damages in lieu of
notice. The former Holmes employee, Mary S. Krajcer, was a retail
22
It appears that Dillard also considered the Bienville site
employees part of the Canal Street corporate division. Employees
at both sites were terminated on May 9, the layoff letters sent to
both sites specifically stated that the layoff was occurring as a
result of the discontinuance of the corporate functions at the
Canal Street store.
23
It is unclear from the record whether the Bienville site
employees received no notice of termination, or whether they
received less than sixty days notice. On remand, the district
court will be required to determine what notice, if any, each
affected employee received, and to calculate damages accordingly.
-35-
buyer for Holmes. As a buyer, she worked a regular forty-hour
week, and as a rule, she worked weekends only a few times a year
while on buying trips. She had no administrative duties, and she
earned $36,000 per year plus bonuses. On April 18, 1989, Dillard
offered Krajcer a position as a merchandising manager in one of its
retail outlets. That position would have placed her second in
command at that location, requiring her to hire and fire personnel,
open and close the store each day, and work some nights, every
Saturday, and some Sundays. Although the base salary was
comparable to her position with Holmes, Krajcer would not be
eligible for bonuses, and she would be required to work longer
hours. When Krajcer refused Dillard's offer, Dillard terminated
Krajcer on May 9 without providing any advance notice of
termination.
Before the district court, the employees argued that Krajcer
should have been paid back pay damages in lieu of notice. The
district court, however, held that Krajcer was not entitled to such
damages because she refused Dillard's offer of employment as a
merchandising manager. Essentially, the district court held that
the position offered by Dillard did not amount to a "constructive
discharge," and as such, her refusal to accept the new position
amounted to a voluntary termination of employment, which does not
require WARN notice. Carpenters Dist. Council, 790 F. Supp. at 669-
70; see also 20 C.F.R. § 639.5(b)(2) (1989)(final regulations). In
arriving at this determination, the district court applied the
-36-
final regulations, which became effective on May 22, 1989, see 54
Fed. Reg. 16042-01 (1989), rather than the proposed regulations
that were in effect at the time Krajcer was terminated. The
proposed regulations required that the new job must be
"substantially equivalent in terms of pay and working conditions."
20 C.F.R. § 639.5(b)(2) (1988)(proposed regulations). On the other
hand, the final regulations merely required that "the offer of
reassignment to a different site of employment not be deemed a
`transfer' if the new job constitutes a `constructive discharge.'"
20 C.F.R. § 639.5(b)(2) (1989)(final regulations). Because
administrative rules should not be construed as having retroactive
effect unless their language requires that result, see, e.g.,
Sierra Medical Ctr. v. Sullivan, 902 F.2d 388, 392 (5th Cir. 1990),
we hold that the district court erred in applying the final
regulations. Therefore, without expressing any view as to the
merits, we remand this matter to the district court to determine
whether, under the interim rules, Krajcer is entitled to back-pay
damages.
V
For the foregoing reasons, we AFFIRM the district court's
ruling on the constitutionality of the WARN Act, the summary
judgment in favor of Federal Insurance and Liberty Mutual, the
finding that Dillard violated the WARN Act, the refusal to reduce
damages for good faith, and the award of prejudgment interest. We
REVERSE the district court's ruling that damages are to be
-37-
calculated using calendar days, the decision that the Bienville
site and the Canal Street corporate division were not a "single
site of employment," the finding that employees who were actually
provided sixty days notice are entitled to damages because notice
of termination contained a range of dates, and the retroactive
application of regulation to employee Mary Krajcer. As a result,
we REMAND this case to the district court with instructions to
calculate damages in a manner consistent with this opinion.
Because this opinion affects the amount of damages Dillard will be
required to pay the employees, the district court should also
reconsider the award of attorney's fees accordingly.
AFFIRMED in Part, REVERSED in Part, and REMANDED.
-38-