Davis v. Signal International Texas GP, L.L.C , 728 F.3d 482 ( 2013 )

Case: 12-41262 Document: 00512356242 Page: 1 Date Filed: 08/28/2013
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
August 28, 2013
No. 12-41262 Lyle W. Cayce
Clerk
PHILIP A. DAVIS; BYRON DAY,
Plaintiffs-Appellees
v.
SIGNAL INTERNATIONAL TEXAS GP, L.L.C.; SIGNAL
INTERNATIONAL, L.L.C.; SIGNAL INTERNATIONAL TEXAS, L.P.,
Defendants-Appellants
Appeals from the United States District Court
for the Eastern District of Texas
Before REAVLEY, ELROD, and GRAVES, Circuit Judges.
REAVLEY, Circuit Judge:
This appeal involves the Worker Adjustment and Retraining Notification
Act (“WARN Act”), 29 U.S.C. §§ 2101 et seq. The WARN Act requires that
certain employers provide written notice within 60 days in advance of any “mass
layoff” at “a single site of employment.” In 2009, Defendant-Appellant Signal
International, a Gulf Coast marine services and shipbuilding company, fired a
number of its workers without providing advance written notice. Plaintiffs-
Appellees allege that Signal’s reduction in employment constituted a mass layoff
under the WARN Act, and thus that Signal violated the Act by failing to provide
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proper notice. The district court held that there was a mass layoff and entered
judgment against Signal. We AFFIRM.
Defendant-Appellant Signal International1 is “a leading Gulf of Mexico
provider of marine and fabrication services, including new construction, heavy
fabrication, [and] offshore drilling rig and ship overhaul, repair, upgrade, and
conversion.”2 From July to September 2009, Signal permanently laid off 159 of
its full-time workers at its two facilities in Orange, Texas,3 including Plaintiffs-
Appellees Phillip A. Davis and Byron Day.
The central issue before the district court was whether there had been a
mass layoff under the WARN Act. The district court first concluded that Signal’s
two facilities in Orange, Texas, constituted a single site of employment because
the facilities fell into a regulatory exception for “truly unusual organizational
situations,” and thus that workforce levels were to be measured across both
facilities. The district court further concluded that the proper “snapshot” for
measuring Signal’s workforce levels was July 24, 2009, the date of the first layoff
alleged by Plaintiffs. Based on these two conclusions, the court ruled that there
had been a mass layoff during the 90-day period following July 24, 2009. The
court entered a final judgment against Signal. Signal timely appealed.
1. “Single site of employment” and the unusual organization exception
On appeal, Signal asserts two errors by the district court. Signal first
argues that the district court erred in concluding that the company’s two
facilities in Orange constituted a single site of employment. Whether Signal’s
1
We will refer to the three Defendants-Appellants in the collective singular.
2
About, SIGNAL INTERNATIONAL, http://www.signalint.com/about (2012). The record
also states that “Signal International is engaged in the building, refurbishing, and repair of
Derricks, Platforms, Rigs, and Vessels on a project basis.”
3
Signal also has locations in Mobile, Alabama, and Pascagoula, Mississippi. Locations,
SIGNAL INTERNATIONAL, http://www.signalint.com/contact/locations (2012).
2
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two facilities constituted a single site of employment under the WARN Act is a
mixed question of fact and law. Carpenters Dist. Council of New Orleans &
Vicinity v. Dillard Dep’t Stores, Inc., 15 F.3d 1275, 1289 (5th Cir. 1994). We
review the district court’s findings of underlying fact for clear error. Id. We
review the legal question of whether there was a single site of employment based
on the underlying historical facts de novo. Id.The WARN Act does not define what constitutes a single site of
employment, but the Department of Labor’s regulations provide guidance. See
Viator v. Delchamps Inc., 109 F.3d 1124, 1127 (5th Cir. 1997). The general rule
is that “separate facilities are separate sites.” 54 Fed. Reg. 16042, 16050 (Apr.
21, 1989); see Viator, 109 F.3d at 1127. Labor Department regulations provide
some exceptions to that rule, including 20 C.F.R. § 639.3(i)(8), which states, “The
term ‘single site of employment’ may also apply to truly unusual organizational
situations where the [preceding paragraphs] do not reasonably apply.” The
district court ruled that although Signal’s facilities were non-contiguous, they
nevertheless fell under the unusual organization exception and thus constituted
a single site of employment.
There is a dearth of case law on what constitutes a “truly unusual
organizational situation” within the meaning of § 639.3(i)(8). The only decision
in this circuit interpreting the exception is Carpenters, 15 F.3d 1275, on which
the district court relied. There we held that two facilities constituted a single
site of employment where the company’s operations were once housed together
in one corporate office but were later separated due to overcrowding. However,
in Carpenters we relied specifically on the version of § 639.3(i)(8) from the Labor
Department’s proposed regulations, rather than the final, adopted regulations
that govern the present appeal.4 Whereas the proposed regulations used the
4
The alleged WARN Act violations at issue in Carpenters took place in 1989 when the
proposed regulations were still in effect because the final regulations had not yet been
3
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phrase “unusual organizational situations,” the final regulations use the phrase
“truly unusual organizational situations.” Compare 53 Fed. Reg. 49076, 49083
(1988) (proposed regulations), with 54 Fed. Reg. 16042, 16066 (1989) (final rule),
and 20 C.F.R. § 639.3(i)(8) (1995) (current version) (emphasis added). We do not
need to determine the significance of that distinction, because we now rely on
the current language of § 639.3(i)(8).5
The relevant facts regarding Signal’s facilities are as follows. Since
October 2008, Signal has had two facilities located in Orange, Texas, one
primarily dedicated to fabrication and the other primarily to administration.
Signal’s fabrication facility covers 77 acres and is located at 91 West Front
Street, where it has been located since Signal’s incorporation. It is sometimes
referred to as “the Orange yard,” or simply “the yard.”
From 2003 to 2008, Signal’s administrative office was housed in Port
Arthur, Texas, 35 miles from the Orange yard. Signal acquired the Port Arthur
office pursuant to a lease that it assumed from its predecessor, which lease was
set to expire in May 2008. Signal permitted the lease to expire and moved
administration to Orange in order to, among other things, consolidate support
and have personnel closer to the shipyard operation. Signal began housing its
administrative personnel in mobile office units located at the periphery of the
Orange yard. It is disputed whether the mobile units were meant to be
adopted. See 15 F.3d at 1291 (“Because administrative rules should not be construed as
having retroactive effect unless their language requires that result, . . . we hold that the
district court erred in applying the final regulations.”). Because the alleged WARN Act
violations in the case at bar took place in 2009, the final regulations govern here.
5
See McClain v. Laurel Street Art Club, Inc., 106 F.3d 401, at *2 (6th Cir. 1997)
(unpublished) (rejecting the reasoning in Carpenters on the ground that it is based on outdated
regulatory language, but remarking, “We cannot say how the Fifth Circuit would have ruled
had it applied the more restrictive language, but it is for us to ask whether it is ‘truly unusual’
for space constraints to cause employees originally working in a unitary facility to be
redeployed under separate roofs.”).
4
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temporary or permanent, although we agree with the district court’s finding that
Signal intended to keep its administrative employees at that location for “longer
than a few months.”
About three months later, Hurricane Ike struck the Gulf Coast, causing
severe damage to the Orange yard. In October 2008, because of the
unprecedented damage from Ike and because a rental space had become
available a mile away, Signal moved the bulk of its administrative employees
there to what is now the Administration Building. The Administration Building
is a two-story office complex located at 905 Pier Road. It is sometimes referred
to as “the Administration Annex,” or simply “the annex.”
The record demonstrates that after the October 2008 move to the annex,
a large number of administrative employees remained housed at the Orange
yard. Rodney Meisetschlaeger, General Manager of Texas Operations, testified
that “approximately two dozen” administrative employees continued to be
housed at the yard after Ike. The record further demonstrates that at the time
of the alleged layoffs, employees housed in the annex regularly carried out
business in the yard, and vice versa. In particular, a mandatory meeting was
held at the annex each Monday and was attended by many employees who were
housed in the yard. Some employees who were housed in the annex would
regularly—even daily—visit the yard to perform management and/or production
duties. Some employees maintained offices at both the annex and the yard. It
is undisputed that Meisetschlaeger, as General Manager, managed both
facilities’ day-to-day operations. Signal employees who were shared by and
carried out daily duties for both facilities included security, health and safety,
quality control, custodial services, payroll, IT, and maintenance personnel.
Based on these facts, we conclude that Signal’s two facilities in Orange
constituted a single site of employment under § 639.3(i)(8), in particular because
the situation presented here is one of the “truly unusual organizational
5
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situations” contemplated by that Labor Department regulation.6 To begin with,
there was regular sharing of staff between the annex and the yard. The Labor
Department has explicated that in considering exceptions to the general rule
that separate sites are separate facilities, any sharing of staff between separate
facilities must be regular rather than occasional. See 20 C.F.R. § 639.3(i)(3)
(referring to an employer who “regularly shifts or rotates the same employees
from one building to another”); Viator, 109 F.3d at 1128 (quoting § 639.3(i)(3)
and stating that “occasional intermingling of various employees is insufficient
to place an employer within the act’s coverage”); see also Int’l Union, United
Mine Workers v. Jim Walter Res., Inc., 6 F.3d 722, 726 (11th Cir. 1993) (“[T]he
essence of WARN [is] the day-to-day management and personnel.”). Here, the
sharing of staff between the yard and annex was not merely occasional but in
fact regular, with certain employees maintaining offices at both buildings,
regular visits by personnel from one facility to the other, and use of the same
security, payroll, and other staff.7
We are unconvinced by Signal’s argument that the annex and yard had
different operational purposes. Of course it is true that different units within
the same operation will have different purposes if one dissects those purposes
finely enough. However, what matters in determining whether separate
facilities constitute a single site of employment is not the immediate purpose of
this or that facility, but rather what ultimate operational purpose is served by
the facilities. See § 639.3(i)(4) (“Non-contiguous sites in the same geographic
area which do not share the same staff or operational purpose should not be
6
Moreover, we conclude that the paragraphs preceding § 639.3(i)(8) “do not reasonably
apply” because of the unique dynamic that existed between Signal’s two facilities.
7
We do not rely on § 639.3(i)(3) or Viator, where the court analyzed only § 639.3(i)(3)
and (4), for our conclusion that the two facilities constituted a single site of employment. We
conclude, however, that the sharing of staff—a factor identified in § 639.3(i)(3) and expounded
upon in Viator—is integral to our determination that the situation is “truly unusual.”
6
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considered a single site.” (emphasis added)); Rifkin v. McDonnell Douglas Corp.,
78 F.3d 1277, 1280 (8th Cir. 1996) (quoting 9A Ind. Empl. Rights Man. (BNA)
595:954 (1988), which stated that “geographically separate buildings (i.e. several
blocks or miles apart) would not appear to constitute a single site unless they
were part of a single operation” (emphasis added)).
This is not a situation where the plaintiffs argue that Signal’s facilities are
a single site of employment simply because the facilities create the same
product. See Int’l Union, 6 F.3d at 726 (rejecting argument that “four mines
share the same ‘operational purpose’ and thus must be considered a single site,”
where the four mines were independently operated with separate management
and “[t]he only shared ‘operational purpose’ is that all the mines produce coal,”
which “alone is insufficient to classify several non-contiguous sites as one”). Nor
is this a situation where the facilities are simply local, independent sites of a
large, commonly owned corporation. See Rifkin, 78 F.3d at 1280 (“Sites need not
be contiguous in order to be considered a ‘single site’, but in order for non-
contiguous sites to be deemed a ‘single site’, there must be some connection
between the sites beyond that of common ownership.”); id. at 1281–82 (holding
that the St. Louis County, MO and St. Charles County, MO locations for
McDonnell Douglas did not constitute a “truly unusual organizational situation”
under § 639.3(i)(8) because “[a]ny connection between the two sites is nothing
more than that present in most large corporate organizations”); see also 54 Fed.
Reg. at 16050 (in interpreting what is now § 639.3(i)(8), stating that “individual
plants should be treated individually,” especially where they span a several
hundred square mile area). Here, the annex and yard constitute a single
operation. Signal’s administrative activities make sense only in relation to the
fabrication activities that they support; conversely, fabrication requires the
support of administration at all times. It is not as if the administration and
fabrication facilities are each stand-alone, independent operations. Rather, they
7
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constitute one joint, integrated operation to serve the same operational purpose:
the production and supply of platforms, rigs, and vessels.
Finally, geographic proximity is important. Teamsters Local Union 413
v. Driver’s, Inc., 101 F.3d 1107, 1109 (6th Cir. 1996). “Contiguous facilities or
those in close geographic proximity are generally single sites of employment and
geographically separate facilities are generally separate sites. . . . The statute
and regulations plainly focus on whether the resulting job loss will be
concentrated in one geographic area.” Id. (emphasis added); see 54 Fed. Reg. at
16049 (“Even where several distinct operations are performed at a
geographically connected site, that building or complex will be counted as a
single site of employment.”). Here, the annex and the yard are located only one
mile from each other.8 See, e.g., Carpenters, 15 F.3d at 1290 (holding that there
was an “unusual organizational situation” where “the two sites were several
miles apart”). Although we agree that the annex and the yard are non-
contiguous, the two facilities are so close to one another as to be essentially one
site where the joint endeavor exists.
The Labor Department included § 639.3(i)(8) as a “catchall clause” in order
“to maintain some flexibility in the definition of ‘single site of employment’, [sic]
to provide for truly unusual organizational situations which [the Department]
could not anticipate.” 54 Fed. Reg. at 16050. We believe that Signal’s facilities
in Orange are one such “truly unusual organizational situation.” Accordingly,
the facilities constitute a single site of employment for the purposes of the
WARN Act.
2. Proper “snapshot” date to determine employment levels
Next, Signal asserts that the district court erred in concluding that there
was a mass layoff under the WARN Act, because the court chose July 24, 2009,
8
That is, as measured by the distance between the facilities’ postal addresses.
8
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as the “snapshot” date for measuring employment levels to determine whether
Signal’s reduction in force was sufficiently large to trigger the WARN Act’s
requirements—in this case, whether Signal permanently laid off at least 33% of
its full-time employees. We review the district court’s interpretation of the
WARN Act and related Labor Department regulations de novo. Teemac v.
Henderson, 298 F.3d 452, 456 (5th Cir. 2002). We review the district court’s
findings of underlying fact for clear error. See, e.g., Carpenters, 15 F.3d at 1281.
According to Signal, Labor Department regulations dictate that the proper
snapshot date was May 25, 2009, and thus the district court erred in using
employment numbers for a different date—July 24, 2009—to conclude that there
was a mass layoff. Signal’s argument hinges on the Labor Department
regulation contained in 20 C.F.R. § 639.5(a)(2), which provides:
The point in time at which the number of employees is to be
measured for the purpose of determining coverage is the date the
first notice is required to be given. If this “snapshot” of the number
of employees employed on that date is clearly unrepresentative of
the ordinary or average employment level, then a more
representative number can be used to determine coverage. . . . A
more representative number may be an average number of
employees over a recent period of time or the number of employees
on an alternative date which is more representative of normal
employment levels. Alternative methods cannot be used to evade
the purpose of WARN, and should only be used in unusual
circumstances.
(Emphasis added.) Here, “the date the first notice is required to be given” was
May 25, 2009, which was 60 days prior to the first alleged layoff on July 24,
2009. Therefore, Signal argues, May 25, 2009, was the proper snapshot date and
the district court erred in using a different date.
The district court chose July 24, 2009, as its snapshot date based on two
grounds. First, the court looked to a “very specific example” contained in the
preamble to the WARN Act that is essentially identical to the case at
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bar—namely, where rolling layoffs are made by a hypothetical employer over a
90-day period. The Labor Department stated that in such a situation,
Assuming that no notice was given, the company is liable to all . . .
employees [laid off during the 90-day period] because the mass
layoff threshold has been reached through separate actions which
did not occur for separate and distinct causes within a 90-day
period. All employees terminated within the 90-day period have
suffered a mass layoff and all are entitled to 60 days’ notice before
the date of their termination. For this purpose, the date on which
the company size is measured is Day 1 [i.e., the day immediately
preceding the first layoff].
54 Fed. Reg. at 16053 (emphasis added). The district court viewed the preamble
comment as an interpretation of § 639.5(a)(2), stating that “the . . . concern of the
court is which controls or how should I view this. And generally when one looks
at a statute, one just looks at the plain language of the statute and doesn’t worry
about other materials such as legislative history. But it turns out that with
CFRs, the rule is just a little bit different.” Then, applying judicial deference to
the agency’s interpretations of its own regulations, the district court concluded
that July 24, 2009, was an appropriate snapshot date, and that the employment
numbers available for that date were more representative.
Second, the district court noted that § 639.5(a)(2) itself permits divergence
from “the date the first notice is required to be given.” As noted above, the
provision expressly provides that where “the date the first notice is required to
be given . . . is clearly unrepresentative of the ordinary or average employment
level, then a more representative number can be used to determine coverage.”
§ 639.5(a)(2). The provision further provides that such “[a]lternative methods
. . . should only be used in unusual circumstances.” Id. The district court
reasoned that there was no evidence available to provide a snapshot of Signal’s
workforce levels on May 25, 2009. Previously, the court had excluded evidence
related to Signal’s employment levels on May 25, 2009, because Signal had
presented that evidence more than two years after the start of discovery. Thus,
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the employment numbers available for July 24, 2009, were more representative.
The court also noted that even with Signal’s purported employment numbers for
May 25, 2009, the company would be able to show only that there was a 32.5%
layoff—a mere 0.5% shy of the minimum percentage required to constitute a
mass layoff under the WARN Act. As the court stated, “obviously you’re
reaching and pulling and stretching for every possible number here. We’re not
involved in a case where in one case it was going to be barely 33 percent to the
plaintiffs and in the other case it was just a mere 2 or 3 percent.”
We agree with the district court, especially taking both of its rationales
together. As a starting point for analysis, we emphasize that Signal is not
challenging the district court’s decision to exclude Signal’s May 25, 2009-related
evidence.9 Thus, we must take as given that there was no such evidence
available. See Swindle v. Livingston Parish Sch. Bd., 655 F.3d 386, 392 n.6 (5th
Cir. 2011) (appellant’s failure to brief an issue on appeal constitutes waiver).
This point, combined with the plain language of § 639.5(a)(2) permitting the use
of an alternative date with “a more representative number,” effectively decides
the issue.
Signal makes three arguments regarding the proper snapshot date:
(1) that the WARN Act preamble comment was not intended to be an
interpretation of § 639.5(a)(2); (2) that § 639.5(a)(2) is unambiguous (and,
implicitly, that the provision unambiguously conflicts with the WARN Act
preamble comment); and (3) that even if § 639.5(a)(2) is ambiguous, the
preamble comment does not warrant any level of deference.10 These arguments
9
Signal explicitly states in its reply brief that it “is not appealing the district court’s
exclusion of the May 25, 2009-employment-level evidence[.]”
10
Signal also argues that Plaintiffs failed to present evidence at trial “establishing a
base denominator number of full-time employees working at Signal’s facilities on May 25,
2009,” and thus that they did not satisfy their burden of proof. This argument is only relevant
if we agree—which we do not—that May 25, 2009, is the only appropriate snapshot date with
11
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are inapposite because they disregard the fact that § 639.5(a)(2) expressly
permits divergence from “the date the first notice is required to be given,”
namely where there are “unusual circumstances” such that that date is “clearly
unrepresentative” of ordinary employment levels. Signal suggests by its
arguments that there is some irreconcilable conflict between the language of
§ 639.5(a)(2) and the preamble comment. However, as demonstrated by a full
reading of § 639.5(a)(2), that conflict is illusory.11
The question is not whether the district court’s use of July 24, 2009, as a
snapshot date “conflicts” with § 639.5(a)(2), but rather whether the district court
was confronted with an “unusual circumstance[]” that permitted it to use “a
more reasonable number” to determine coverage under the WARN Act.12 Here,
it was not merely that evidence for May 25, 2009, failed to reflect ordinary
employment levels at Signal; there was no such evidence for that date. The
absence of employment numbers for May 25, 2009, made the “snapshot” on that
which Plaintiffs could have made their showing.
11
Indeed, following the aforementioned preamble comment, the Labor Department
went on to recognize that the baseline snapshot date was one among other alternative dates:
“The regulation also provides for a ‘snapshot’ test for determining the number of employees in
an employer’s workforce or at a single site of employment for purposes of determining
coverage. The ‘snapshot’ test is simply to look at the employer’s employment levels on the date
notice is due to be given.” 54 Fed. Reg. at 16054 (emphasis added).
12
There is virtually no case law interpreting what constitutes “unusual circumstances”
within the meaning of § 639.5(a)(2), and the cases that exist provide little guidance. See
Hollowell v. Orleans Reg’l Hosp., No. Civ. A. 95-4029, 1998 WL 283298, at *5 n.4 (E.D. La.
May 29, 1998) (stating that § 639.5(a)(2) includes an “alternate method of counting to be used
in ‘unusual circumstances,’” but providing no further analysis on that phrase), aff’d sub nom
Hollowell v. Orleans Reg’l Hosp. LLC, 217 F.3d 379 (5th Cir. 2000); Saxion v. Titan-C-Mfg.,
Inc., 86 F.3d 553, 557 (6th Cir. 1996) (discounting defendant corporation’s argument that it
was a cyclical business and thus entitled to use employment numbers other than those on “the
date the first notice is required to be given,” because the defendant’s supporting evidence was
unreliable); see also Cashman v. Dolce Int’l/Hartford, Inc., 225 F.R.D. 73 (D. Conn. 2004);
Paper, Allied-Indus., Chem. & Energy Workers Int’l Union (Pace) v. Sherman Lumber Co., No.
Civ. 00-57-B, 2000 WL 1029223 (D. Me. July 11, 2000). We therefore interpret the language
by its plain meaning.
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date “clearly unrepresentative of the ordinary or average employment level” at
Signal. § 639.5(a)(2).
Because the district court correctly concluded that the “snapshot” of May
25, 2009, was not representative of ordinary employment levels at Signal, the
court was then permitted to use a different snapshot date with more
representative employment numbers. Here, the district court had plenty of
reasons to determine that July 24, 2009, was an appropriate snapshot date.
First, the court had a specific example from the WARN Act preamble in which
the Labor Department embraced the use of “Day 1” (the date immediately
preceding the first layoff) as a snapshot date. Second, the July 24, 2009, date
was relied on by the court and the parties for over two years; it was not until the
eleventh hour that Signal began to argue for a different snapshot date and to
disclose this purportedly “new” evidence that it should have disclosed at least
two years earlier. Third, Signal’s May 25, 2009-related evidence would have
yielded only a 32.5% employment loss at minimum—likely higher than 33%
because Signal apparently misclassified some of its laid-off employees—which
thus amounted to a mere quibble over whether or not Signal fell under the
requirements of the WARN Act. Taking all of this together, we conclude that
July 24, 2009, was the best snapshot date. Because the parties have stipulated
that there was a mass layoff during the 90-day period following July 24, 2009,
the district court did not err in concluding that there was a mass layoff under
the WARN Act.
AFFIRMED.
13