Court upholds no-warning mass layoff

May 27, 1993|By New York Times News Service

A federal court has ruled that General Dynamics Corp. did not violate a law requiring most employers to notify workers in advance of a mass layoff when it furloughed 3,000 workers in 1991 after the Navy canceled a $57 billion warplane program.

The ruling appears to reduce the protection for workers and expand a loophole that employers, particularly military contractors, may use to avoid issuing warning notices, legal and industry experts said yesterday.

Judge Jean C. Hamilton of the U.S. District Court in St. Louis ruled Monday that General Dynamics was not liable for an estimated $12 million in back-pay claims by 1,200 for mer employees who had filed suit.

Even though General Dynamics executives knew the program was over budget and irrevocably delayed, the judge ruled that "in the unique context of defense contracting, a contractor exercising commercially reasonable business judgment would not necessarily conclude on the basis of this information that the A-12 contract would be canceled."

The ruling "does not bode well for defense workers," said Julie Hurwitz, director of the National Lawyers Guild's Sugar Law Center for Economic and Social Justice in Detroit.

The group has monitored an estimated 100 cases filed since the Worker Adjustment and Retaining Notification Act, known as the Warn Act, became law in 1989. The law requires employers to warn employees 60 days before a mass layoff instead of simply giving them severance pay. Companies are exempt if the warning would result in a business failure or if the layoff was not foreseeable.

"It creates a larger loophole than had already existed for companies to get around giving notice," Ms. Hurwitz said. "It also reduces worker protection that the Warn Act had afforded."

The $57 billion A-12 Avenger warplane program ultimately cost General Dynamics and McDonnell Douglas Corp. about 9,000 jobs.

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