In the first such decision from a federal appellate court, the U.S. Court of Appeals for the Fifth Circuit has ruled the COVID-19 pandemic is not a 'natural disaster' that exempts employers from providing advance notice of mass layoffs and plant closures under the WARN Act. The court also opined that the natural-disaster exception requires proof of proximate causation, not but-for causation.1
When the COVID-19 pandemic began in March 2020, businesses had to make difficult decisions whether to lay off employees in light of mandatory closures and rapid economic downturn. There was little guidance at the time regarding how to interpret the WARN Act's notice requirements in light of these unprecedented circumstances. In general, the WARN Act requires covered employers to provide 60 days' notice before a plant closing or mass layoff.2 Three exceptions permit employers to avoid or reduce the 60-day notice requirement: (1) the 'faltering company' exception; (2) the 'unforeseeable business circumstances' exception; and (3) the 'natural disaster' exception.3 Employers that violate the WARN Act are required to provide aggrieved employees 'back pay for each day of violation.'4
Like many other businesses, US Well Services Inc. laid off employees at the onset of the COVID‑19 pandemic. By way of background, oil producers hire US Well to perform hydraulic fracturing services (fracking). In early 2020, oil prices hit historic lows due to a price conflict between Saudi Arabia and Russia, which was compounded by a precipitous decline in travel and decreased demand for oil and gas at the inception of the COVID-19 pandemic. Accordingly, several US Well customers curtailed or completely shut down the fracking work that US Well had been performing at multiple well sites in Texas. When crew members returned to US Well from those well sites, they were immediately laid off on March 18, 2020, via letters stating:
Your termination of employment is due to unforeseeable business circumstances resulting from a lack of available customer work caused by the significant drop in oil prices and the unexpected adverse impact that the Coronavirus has caused.
Approximately five months later, on August 26, 2020, three crew members filed a class action lawsuit alleging US Well violated the WARN Act by terminating their employment without providing 60 days' notice. The parties cross-moved for summary judgment. Chief Judge Lee Rosenthal of the U.S. District Court for the Southern District of...
