Litigation in Outsourcing: Liability of Corporate Affiliates, Secured Lenders and Venture Capitalists and their Attorneys under WARN Act for Termination of Employees
The Worker Adjustment and Retraining Notification Act, 29 USC § 2101, requires employers to give at least 60 day’s notice to their employees before the effective date of a mass layoff or a plant closing. The Act, adopted in the wake of numerous plant closings in the 1970′s and 1980′s, attempts to soften the blow of job loss to workers and their families by providing them with advance notice to allow for transition time to different employment. The WARN Act imposes a financial obligation on the employer that continues after the employer has given notice of termination of employment.
In February 2004, a New York court ruled that the WARN Act interpreted the meaning of “employer” to include venture capitalists and equity portfolio managers. The case is instructive for startup ventures funded by venture capitalists and for mature service providers acquired by a private equity fund for portfolio investment.