The Three Exceptions and How Narrowly They Are Read

The statute sets out three conditions under which the notification period may be reduced to less than sixty days. None of them removes the obligation. Where one applies, the employer must give as much notice as is practicable and must, at the time notice is actually given, provide a brief statement of the reason for reducing the period in addition to the ordinary contents. The regulation states plainly that the employer bears the burden of proof that the conditions for an exception have been met.

Faltering company, and its four conditions

The first exception applies where, at the time notice would have been required, the employer was actively seeking capital or business which, if obtained, would have enabled it to avoid or postpone the shutdown, and the employer reasonably and in good faith believed that giving notice would have precluded it from obtaining that capital or business. The regulation confines the exception to plant closings, excludes mass layoffs, and directs that it be narrowly construed.

It then breaks the exception into four conditions, all of which must hold. The employer must have been actively seeking capital or business, through financing or refinancing by loans, the issuance of stocks or bonds, internally generated financing, or additional money, credit or business by any other commercially reasonable method, and must be able to identify specific actions taken. There must have been a realistic opportunity to obtain what was sought. What was sought must have been sufficient, if obtained, to avoid or postpone the shutdown, and the employer must be able to demonstrate objectively that the amount would have kept the facility, unit or site open for a reasonable period. And the employer must have reasonably and in good faith believed that giving notice would have defeated the effort.

The fourth condition is the one that most often fails, because it asks the employer to demonstrate objectively what a third party would have done. The regulation offers a route: the condition may be satisfied where the employer can show that the financing or business source would not choose to deal with a troubled company or with one whose workforce would be looking for other jobs. It also adds a limit that catches larger organizations. The employer's actions are viewed in a company-wide context, so a company with access to capital markets or with cash reserves cannot rely on the exception by looking only at the finances of the site being closed.

Unforeseeable business circumstances

The second exception applies to plant closings and mass layoffs alike, where the action is caused by business circumstances that were not reasonably foreseeable at the time notice would have been required. The regulation supplies an indicator rather than a definition: an important sign of a circumstance that is not reasonably foreseeable is that it is caused by some sudden, dramatic and unexpected action or condition outside the employer's control.

Four examples follow, each qualified by the word might or may. A principal client's sudden and unexpected termination of a major contract. A strike at a major supplier. An unanticipated and dramatic major economic downturn. And a government ordered closing of an employment site occurring without prior notice. None of these qualifies automatically; each illustrates the standard.

The test itself is framed around judgment. The employer must exercise such commercially reasonable business judgment as a similarly situated employer would in predicting the demands of its particular market, and is not required to accurately predict general economic conditions that may also affect demand. The comparison is with a peer, and the subject is the employer's own market rather than the economy.

Natural disaster, and the gap beneath it

The third exception applies where a closing or mass layoff is due to any form of natural disaster. The statute names a flood, an earthquake and a drought; the regulation adds storms, tidal waves or tsunamis and similar effects of nature. To qualify, the employer must be able to demonstrate that the closing or layoff is a direct result of the disaster.

The directness requirement creates a gap that the regulation itself identifies and fills. Where a closing or mass layoff occurs as an indirect result of a natural disaster, this exception does not apply, but the unforeseeable business circumstances exception may. A plant destroyed by a flood falls in the first category; a plant closed because a flood elsewhere destroyed its only supplier falls in the second, and has to satisfy the sudden and dramatic test rather than simply pointing at the weather.

Even here, notice is not dispensed with. The regulation states that while a disaster may preclude full or any advance notice, such notice as is practicable, containing as much of the required information as is available in the circumstances, must still be given, whether in advance or after the fact of an employment loss caused by the disaster.

What actually carries the burden

All three exceptions are proved with material created before the decision, not after it. For the faltering company exception, that means the record of who was approached for capital or business, when, on what terms and with what response, together with the analysis showing the amount sought would have kept the site open. For unforeseeable circumstances it means the contemporaneous record of what the employer knew about its market and when the triggering event became known. For natural disaster it means the causal chain between the event and the shutdown.

Two further provisions soften the consequences without changing the tests. Where an exception applies, the shortened notice still has to be given and still has to say why, which is treated in giving as much notice as possible when an exception applies. And where a violation is established, a court may in its discretion reduce the liability or penalty if the employer proves the act or omission was in good faith and that it had reasonable grounds for believing it was not a violation, a discretion examined in damages an employer owes for a short notice. Neither of those helps an employer that decided the sixty days were impossible without recording why, and the ordinary rule remains the one described in the sixty days and when the clock starts.