                                                                                                                           Opinions of the United
1996 Decisions                                                                                                             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Precedential or Non-Precedential: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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"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




                                 1
                            ____________

                        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


                                 2
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."




                                 3
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


                                4
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.




                                5
            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




                                  6
           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)


                                7
(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




1
The 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.


                                 8
          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




                                9
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




                                  10
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.




                                  11
          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.

2
Because 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.

                                12
          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.
_____________________________________




                                13
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