1996 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

3-11-1996

Kalwaytis v. Preferred Meal Systems, Inc.

Precedential or Non-Precedential:

Docket 95-7191

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Recommended Citation

"Kalwaytis v. Preferred Meal Systems, Inc." (1996). 1996 Decisions. Paper 214.

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UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

____________ 

No. 95-7191 

____________ 

 MARIE A. KALWAYTIS; PEGGY JACKSON; LYDIA T. 

 HREBEN; SHIRLEY MUSTICH, 

 Appellees

v. 

 PREFERRED MEAL SYSTEMS, INC., 

 Appellant

____________ 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE MIDDLE DISTRICT OF PENNSYLVANIA 

(D.C. No. 93-cv-00371) 

____________ 

Argued January 10, 1996 

Before: SCIRICA, ALITO, and WEIS, Circuit Judges. 

 Filed: March 11, 1996 

____________ 

Elliot J. Mandel, Esquire (ARGUED) 

Kaufman, Naness, Schneider & Rosensweig 

390 North Broadway 

Jericho, NY 11753 

Attorneys for Appellant

James A. Diamond, Esquire (ARGUED) 

Handler, Gerber, Johnston & Aronson 

Suite 100, 150 Corporate Center Drive 

Post Office Box 98 

Camp Hill, Pennsylvania 17001-0098 

Attorney for Appellees
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____________ 

OPINION OF THE COURT 

____________ 

WEIS, Circuit Judge. 

 In this WARN Act case, the principal issue is the 

amount of damages payable to employees who were on seasonal 

layoff at the time the employer announced what amounted to a 

permanent layoff. The workers received letters sent less than 

the 60 days required by the statute before the permanent layoff 

began. The district court awarded damages for 60 days, as if no 

notice had been sent. We conclude that the notice was untimely, 

and that the violation period began on either the day each 

employee reasonably expected to return to work after the seasonal 

break or the permanent layoff date set by the employer, whichever 

was earlier. Accordingly, we will remand for a recalculation of 

damages. 

 Plaintiffs are former employees of Preferred Meal 

Systems, Inc., which prepared pre-packaged meals for schools at a 

plant in Moosic, Pennsylvania. Because of the seasonal nature of 

its business, the company had a practice of laying off employees 

during schools' summer vacation months. In May and June 1992, 

eighty-five of Preferred's approximately 124 employees began 

their summer layoffs. 

 On June 26, 1992, the company sent a letter to the 

employees advising them that "[o]n August 1, 1992," it would be 

"ceasing direct food service employment" at the Moosic plant, and 

"laying off its food service employees." "This letter is your 
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notice of layoff as of August 1, 1992." Noting that this was 

"the normal time" when "seasonal lay-offs would occur," the 

letter explained that in the future, Preferred would "contract 

with Culi-Services, Inc. to provide food service employees at 

this location." The letter continued, "Culi-Services, Inc. has 

an immediate offer of employment to make to you. If you are 

interested . . . you must contact them directly." 

 On the same day, Culi sent a communication to the 

Preferred employees informing them that it would be "recruiting" 

for certain positions. Culi also placed ads in the local 

newspapers seeking applicants for the jobs. Culi's announced 

wages were lower than those Preferred had paid for the same work. 

 In a letter dated July 10, 1992, Preferred wrote again 

to its employees, stating: 

"The June 26 letter may have incorrectly 

conveyed the impression that Culi-Services, 

the new employer, has an offer of employment 

to make to you. We are sorry for any 

confusion this letter may have created, but 

Culi-Services does not have an offer of 

employment for you at this time. Any offer 

of employment will depend upon your 

application and Culi Services discretionary 

judgement as to the best applicants available 

for the limited number of positions 

available." 
4 

Preferred ultimately retained a small number of its employees and 

Culi hired some, but not all, of the remainder. 

 Plaintiffs, consisting of a class of sixty-nine former 

Preferred employees, filed a complaint against the company, 

asserting a failure to give them 60 days notice of the mass 

layoff as required by the Worker Adjustment and Retraining 

Notification Act (WARN), 29 U.S.C. §§ 2101-2109. Preferred 

defended on the basis that it was a "joint employer" with Culi. 

Preferred also contended that the time between the seasonal 

layoff in May and the sub-contracting with Culi in late June 1992 

should not be considered as a WARN Act violation period. 

 Finding that the size of the work force at Moosic and 

the number of employees affected brought the matter within the 

scope of the WARN Act, the district court granted summary 

judgment to the plaintiffs and awarded damages in the amount of 

$253,337.43. The court rejected Preferred's joint employer 

defense, observing that the WARN Act did "not define the term 

`employer' to encompass separate business entities which enjoy a 

simple contractual relationship to produce the goods previously 

produced by one of the entities." The court also held that the 

plaintiffs' expectations of returning to employment with 

Preferred were destroyed on June 26, 1992, when the temporary 

layoff became permanent. Accordingly, because they had not 

received a notice 60 days before that date, the plaintiffs were 

entitled to 60 days wages. 

 Preferred has appealed, reiterating its joint employer 

contention and also asserting that the damages should be 
5 

recalculated because the plaintiffs would have been unemployed in 

any event during the summer season. 

I. 

 Preferred's joint employer defense is based on the 

proposition that if the number of employees who took positions 

with Culi is taken into account, the threshold number of 

employees required to bring the WARN Act into play, 29 U.S.C. 

§ 2101(a)(2), is not met. As Preferred sees it, if it and Culi 

are considered as a single enterprise, when eighty-five employees 

were laid off and fifty-four were re-employed by Culi, less than 

the statutory minimum of fifty employees were adversely affected. 

See 29 U.S.C. § 2101(a)(6). 

 Preferred's only evidence that a joint employment 

relationship existed is that a union, attempting to secure an 

election at the Moosic plant, contended in a July 1993 letter to 

the National Labor Relations Board that Preferred was a joint 

employer with Culi. Apparently, that case has not been resolved 

and its res judicata effect, if any, is not before us. Nor 

need we consider whether there is a distinction between the 

policies established by the National Labor Relations Act, with 

respect to various employer alignments, and situations arising 

under the WARN Act. See United Steelworkers of America v. Crown 

Cork & Seal Co., 32 F.3d 53, 59 (3d Cir. 1994), aff'd 115 S. Ct. 

1927 (1995) (noting "vast" policy differences). The union's bare 

contention is simply not an adequate basis for a finding on the 

issue in the case before us. 
6 

 Similarly, because of the lack of any factual 

development, we need not explore the analogies that Preferred 

relies upon in its citation of Headrick v. Rockwell Int'l Corp., 

24 F.3d 1272 (10th Cir. 1994) and International Alliance of 

Theatrical and Stage Employees v. Compact Video Services, Inc., 

50 F.3d 1464 (9th Cir. 1995). Those cases discussed the sales of 

businesses and the continuation of employment. 

 In the summary judgment context here, Preferred had the 

burden of producing evidence to support its claim of joint 

employment. It did not do so, and consequently, the district 

court did not err in rejecting that defense. 

II. 

 The second issue raised by Preferred is the damages 

assessment. Although not sharply delineated by the parties, we 

see the point in dispute to be the district court's determination 

that the employment relationship ended on June 26, 1992, when the 

first letter was sent, and that 60 days pay was due beginning on 

that day. Preferred contends that the layoffs beginning in May 

and early June were customary and anticipated by the affected 

workers. Consequently, the argument goes, when they left for the 

summer, the employees had no expectation of working until the 

autumn, and calculation of WARN damages should take into account 

the customary recall date in late August or early September. 

 29 U.S.C. § 2102(a) provides: 

"An employer shall not order a plant closing 

or mass layoff until the end of a 60-day 
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period after the employer serves written 

notice of such an order -- 

. . . to each affected employee . . . and to 

the State dislocated worker unit . . . and 

[to] the chief elected official of the unit 

of local government within which such closing 

or layoff is to occur." 

 An employer failing to notify the governmental units is 

subject to a civil penalty. 29 U.S.C. § 2104(a)(3). Preferred 

did not file a report with the appropriate governmental units, 

but no claims for the civil penalties are presented here. 

Moreover, they are severable from those asserted by the 

employees. We will therefore not consider the civil penalties 

further. 

 Section 2104(a)(1) provides that an employer who orders 

a "mass layoff" in violation of the notice provision is "liable 

to each aggrieved employee who suffers an employment loss" as the 

result of such layoff for "back pay for each day of violation" 

and for employee benefits as well. In United Steelworkers of 

America v. North Star Steel Co., 5 F.3d 39, 43 (3d Cir. 1993), we 

concluded that "WARN uses the term `back pay' simply as a label 

to describe the daily rate of damages payable." Hence, that case 

establishes the upper limit of damages applicable here as 60 

calendar days wages. Contra Frymire v. Ampex Corp., 61 F.3d 757, 

771-72 (10th Cir. 1995) (damages calculated on number of working 

days lost during the violation period); Carpenters Dist. Council 

v. Dillard Dep't Stores, Inc., 15 F.3d 1275, 1286 (5th Cir. 1994) 
8 

(same). Because the termination date of employment was not 

pertinent in North Star Steel, we did not address the point and 

that case does not control the resolution of the issue here. 

 The statute defines "mass layoff" as a reduction in 

force which "results in an employment loss." 29 U.S.C. 

§2101(a)(3)(B). "Affected employees" are those "who may 

reasonably be expected to experience an employment loss as a 

consequence of a proposed . . . mass layoff." 29 U.S.C. 

§2101(a)(5). Thus, an employer is liable when it fails to give 

notice of a mass layoff that may be expected to cause a work loss 

to employees. 

 Also pertinent to this case is 29 U.S.C. § 2102(c), 

which states: "A layoff of more than 6 months which, at its 

outset, was announced to be a layoff of 6 months or less shall be 

treated as an employment loss . . . " unless the extension is 

caused by unforeseeable business circumstances and notice is 

given when it becomes reasonably foreseeable that the layoff will 

extend beyond six months.1

 

1The district court rejected Preferred's assertions that the 

layoff extension was not foreseeable. We find no basis to 

disturb that ruling on this record. 29 U.S.C. § 2102(c) 

establishes a basis for finding liability on the part of 

Preferred, but it provides no guidance on the date the employment 

loss began or on the measure of damages as discussed in Parts A 

and C, infra. 
9 

A. When Did Employees Suffer a "Work Loss?" 

 It appears that as of June 25, 1992 (the day before the 

first letter), the employees, who were then in the usual summer 

status, had no reasonable expectation of working for Preferred 

until the end of the seasonal layoff in the fall of 1992. The 

summer shutdown in prior years did not cause compensable work 

losses under the WARN Act. It was the conversion of the seasonal 

layoff into a permanent one that constituted the triggering 

event, which required Preferred to give notice. 

 The difference between the situation in 1992 and that 

of former years was that the workers would not be returning to 

their regular jobs at the usual time, but instead would be on 

indefinite layoff as of August 1, 1992. At that point, further 

employment was no longer available, just as in the more common 

situation when persons steadily employed throughout the year are 

removed from a company's payroll on a specified date. 

 The letter of June 26, 1992 stated that the layoff was 

effective on August 1, 1992. This is inconsistent with 

Preferred's argument, which instead would have us look to the 

date in September when the seasonal layoffs usually ended. We 

believe that Preferred should be held to the terms in its letter. 

Moreover, Preferred treated the workers as "former employees" as 

of August 1, 1992 in connection with termination of benefits 

coverage, including health insurance. 

 The starting point of the violation period, therefore, 

should be August 1, 1992 (the day specified in the employer's 
10 

notice) unless based on Preferred's previous recall practice, an 

employee reasonably expected to be recalled before that date. 

B. When Was Notice Given? 

 We must also consider whether the letters sent by 

Preferred qualified as notice under the WARN Act. Pursuant to 

statutory direction, see 29 U.S.C. § 2107, the Secretary of Labor 

promulgated regulations governing the content of the notice. The 

regulations do not specify the use of a special form, but they do 

require that certain information be included in understandable 

language. The notice should tell the employees whether the 

planned action is to be permanent or temporary; the expected date 

when the layoff will begin; when the individual employees will be 

separated; when bumping rights exist; and the name and telephone 

number of a company official who may be contacted. 20 C.F.R. 

§ 639.7(d). 

 Flexibility in the notice requirement, however, is 

recognized by the provision that the notice is to be based on the 

best information available to the employer at the time the notice 

is served. "It is not the intent of the regulations, that errors 

in the information provided in a notice that occur because events 

subsequently change or that [ ] minor, inadvertent errors are to 

be the basis for finding a violation of WARN." 20 C.F.R. 

§639.7(a)(4). 

 Fairly read, the regulations require a practical and 

realistic appraisal of the information given to affected 

employees. We therefore examine the correspondence sent to the 
11 

employees to determine if it provided adequate notification of 

the mass layoffs. 

 The recipients of Preferred's letters could reasonably 

assume that they would suffer an employment loss. The June 26, 

1992 letter, however, was ambiguous about the employees' future 

prospects with Culi. Preferred recognized this problem and 

clarified the lack of guaranteed employment with Culi in its 

letter of July 10, 1992. 

 Giving a reasonably pragmatic interpretation of the two 

letters, we conclude that, read together, they do meet the 

statutory requirements of notice. However, because the ambiguity 

in the first letter was not resolved until July 10, 1992, that 

later date should be the effective date of the notice. 

C. Damages Calculation 

 In Dillard Dep't Stores, the Court of Appeals said 

"[t]he violation period is comprised only of those `days after 

the shutdown or layoff in violation of [the WARN Act] and extends 

for the number of days that notice was required but not given.'" 

15 F.3d at 1286 (citing H.R. Conf. Rep. No. 576, 100th Cong., 2d 

Sess. 1052 (1988), reprinted in 1988 U.S.C.C.A.N. 2078, 2085). 

Further, the Court commented that if an employee was actually 

terminated within the 60 day notice period "such that the 

employee actually received less than the full sixty days notice, 

then the violation period would range from the actual date of 

termination until the end of the sixty-day notice period." Id. 

at 1286-87. 
12 

 We agree with the reasoning of the Dillard court. It 

is the date when the employment loss could be expected to occur 

that marks the starting point, not the date on which the employee 

learns that a loss will occur in the future. Ordinarily, the 

starting point will be the end of the seasonal layoff, but here, 

Preferred set the date by stating in its letter that the work 

loss would commence on August 1st.2 Preferred's notice period 

began on July 10, 1992 and the 60 calendar days needed to avert a 

violation would extend to September 8, 1992. Because the 

indefinite layoff began on August 1, the employees therefore 

would be entitled to damages for thirty-nine calendar days 

(August 1 to September 8). If, however, any employee reasonably 

expected his or her seasonal recall to end before August 1, 

additional damages would be due so as to account for the full 60 

days period. For example, a worker whose seasonal layoff would 

have ended on July 29 would be entitled to forty-one days. 

 This method of calculation is consistent with the 

purpose Congress had in mind when it enacted the WARN Act. The 

regulations capture the spirit of the legislation in stating that 

the 60 day notice "provides workers and their families some 

transition time to adjust to the prospective loss of employment, 

to seek and obtain alternative jobs" or to obtain training for 

further employment. See 20 C.F.R. § 639.1. 

 

2Because of the timing of Preferred's notice, employees may 

receive what might, in other circumstances, be regarded to some 

extent as a "windfall" by obtaining wages for days they otherwise 

would have been on seasonal layoff. As we noted earlier, 

however, Preferred selected the date as August 1 and employee 

benefits were phased out as of that date. 
13 

 By using the formula adopted here, employees who were 

not actually working when the layoff extension was imposed 

receive the same amount of time to seek employment and make the 

necessary adjustments as workers who were on the job at the time 

the indefinite layoff was imposed. In the only published opinion 

in which an analogous situation was presented, a district court 

came to a similar conclusion. See Marques v. Telles Ranch, Inc., 

867 F. Supp. 1438 (N.D. Cal. 1994). 

 Accordingly, the order of the district court holding 

Preferred liable under the WARN Act will be affirmed. The case 

will be remanded to the district court for recalculation of the 

damages due under the Act in accordance with this Opinion. 

_____________________________________ 

 

 
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