Third Circuit Rejects Plaintiffs’ “Single Employer” Argument; Related Corporate Entity Not Jointly Liable for WARN Act Violation

In Re: APA Transport Corp. Consolidate Litigation, Civ. A. No. 02-CV-3480 (3d Cir., August 29, 2008) – The Third Circuit Court of Appeals held that defendant APA Transport violated the WARN Act when it closed its facility on one week’s notice after it failed to secure financing necessary to continue operations. The Court rejected plaintiffs’ argument, however, that APA Transport and a related entity, APA Truck Leasing, were a “single employer” for WARN Act purposes, such that APA Truck Leasing was jointly liable for the violation.  Applying the five factors adopted in Pearson v. Component Tech. Corp., 247 F.3d 471 (3d Cir. 2001), the Court determined the companies’ common ownership and officers were an insufficient basis for liability, as: the two companies operated at arm’s length; one played no role in the decision to close the other; they reported tax obligations separately and had separate labor contracts; and their employees were hired and fired independently, reported separately to supervisors at their respective companies and were paid from separate payrolls.  Finally, the companies were not dependent upon one another to continue operation.  The related entity was therefore not liable for the violation.

The Court additionally rejected APA Transport’s claim that it was exempt from the WARN Act’s notice requirements under the “faltering company” exception, because it failed to demonstrate that it was actively seeking financing on the day it was required to provide notice of termination, as required by the DOT regulations.

Note: This article was published in the October 2008 issue of the New Jersey eAuthority.