Appellate Team Wins Fifth Circuit Reversal of District Court Ruling in Bayou Steel WARN Act Case
October 2, 2023
On September 27, 2023, U.S. Fifth Circuit Judges Jerry E. Smith, Edith Brown Clement, and Cory T. Wilson reversed a district court order that Black Diamond Capital Management (BDCM), the parent corporation of Bayou Steel, could not be held liable for damages under the Worker Adjustment and Retraining Notification (WARN) Act. The opinion comes after Fishman Haygood partner Jason Burge argued before the panel in February 2023 that BDCM should be held liable because it exercised de facto control over the steel mill’s decision to close and layoff its employees. Click here to read the full opinion. The reversal is also covered by Law360.
In this case, it is undisputed that hundreds of former Bayou Steel employees were terminated without notice when their plant was shuttered and placed into bankruptcy. The Federal WARN Act (29 USC § 2101) was designed to protect employees by requiring that certain employers provide appropriate notice of at least 60 days prior to a mass layoff or plant closing. Employees not given notice by their employers may be entitled to damages in the form of the wages and benefits they would have received during the 60-day period. Click here to read more about our WARN Act litigation experience.
However, who is potentially liable when notice is not given is at the heart of this case. As the Fifth Circuit noted, in circumstances including closure and bankruptcy, “…plaintiffs sometimes seek WARN Act damages from other corporations that are legally distinct from but related to the defunct employer. Such companies may be found liable only if they acted as a ‘single employer’ with the plaintiffs’ employer.” Finding that there is a genuine dispute of material fact regarding whether BDCM actually controlled Bayou Steel and ordered the mill’s closure and the terminations, the Fifth Circuit reversed the district court’s earlier ruling of summary judgment and remanded the case for further proceedings.
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