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Colleges Sued for Violation of WARN Act


The Education Corporation of America (ECA) has been sued by several of its employees for closing its operations without prior notice to its employees.  Advance warning is required by the Worker Adjustment and Retraining Notification Act (WARN)[1].    

The ECA is a privately held company headquartered in Alabama that operates colleges throughout the country.  Included are 31 campuses plus one online school and four affiliated businesses.  The closures occurred abruptly following denial of the school’s accreditation on December 4, 2018.  Closings became effective December 7th.  The schools had been licensed by the Accrediting Council for Independent Colleges and Schools, a national accrediting body, to issue diplomas, associate degrees, and certificates.  Some campuses were also authorized to offer bachelors and masters degrees.  However, the accrediting body suspended the schools’ accreditation with intent to withdraw it permanently effective December 22, 2018.  This development predictably frustrated the company’s ability to acquire needed capital to operate its schools.

WARN is a federal law adopted in 1988 that recognizes businesses sometimes close or reorganize, resulting in workers losing their jobs.  With early notice, workers can seek new jobs or pursue training to prepare for other opportunities.  The law requires covered employers (generally, businesses that employ 100 or more full time workers) to provide written notice 60 calendar days before the date of a plant closing or mass layoff.  If the employer terminates jobs without the notice, workers may be entitled to pay and benefits for that two month period.

There are three exceptions to the notice requirement.  The first, called a “faltering company,” refers to the situation where a firm is actively seeking capital or business which, if secured, would avoid or postpone the layoff, and advance notice would hurt the company’s ability to obtain the capital or business it needs.

The second exception applies where layoffs are due to a sudden, dramatic and unexpected circumstance outside the employer’s control such as the unexpected cancellation of a major order.

The third is where a layoff is the direct result of a natural disaster such as a flood, earthquake, hurricane, or similar natural circumstance.

The ECA may try to argue that the suspension of its accreditation was a sudden unexpected circumstance and therefore advance notice of the shut downs was not required. The argument may be a hard sell because usually, long before an accreditation is cancelled, the accrediting body will work with the under-performing  school over a period of time in an effort to address deficiencies and avoid the suspension. 

Which if any of the three defenses ECA might assert will not become known until it submits its answer (responsive pleading issued by a defendant following service of a complaint).  The time within which a defendant must file an answer varies from state to state and court to court but typically is 20-30 days.  Not infrequently the parties will agree to extend the period to respond.


What was the goal of Congress when imposing the 60 day notice rule?

Why do you think employers with less than 100 full time employees are exempt from the notice requirement?





[1] 29 U.S.C. Section 2101 et seq.