United States: Connecticut Sues Tech Company For Improper Layoff Notice

A recently filed suit illustrates a major problem faced by technology companies if they are forced to layoff employees or close facilities as a result of slower growth in the technology sector. On January 11, 2001, the Connecticut Attorney General filed suit against technology company Walker Digital for alleged violations of the federal Worker Adjustment and Retraining Notification Act. The suit was filed in the United States District Court for the District of Connecticut. The suit alleges that Walker Digital laid off 106 workers at its headquarters, without giving the workers or the state the 60 days advance notice required by WARN. Walker Digital, a software maker, conducted the layoffs after it failed to "complete a contemplated round of financing." The company contends that the abbreviate notice was appropriate in light of the unexpected failure to obtain the financing.

The State contends that Walker Digital’s lack of financing should have been contemplated, and that the company failed to demonstrate that it had exhausted other financing options, such as loans from related companies. In a press conference, the state attorney general stated, "Cutting edge technology does not give a company the right to cut jobs without proper notice to employees. These layoffs clearly violate the spirit and letter of the law designed to protect workers and our economy from layoffs without any warning or notice."

We can expect to see more of these cases as those technology companies, which have over-expanded, attempt to reduce their workforces as the result of slower than anticipated growth and reduced financing opportunities. Often, companies are reluctant to announce possible future layoffs out of concern that they might lose talented workers needed to give the company a chance to survive. Those companies should plan and analyze their workforce reductions to ensure compliance with WARN and related state laws. If the company intends to give abbreviated notice of a layoff or site closing, it should carefully and fully document the reasons supporting its claim of an exemption under the WARN Act.