United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT July 1, 2003
_______________________
Charles R. Fulbruge III
No. 02-21259 Clerk
_______________________
ADMINISTAFF COMPANIES, INC.,
Plaintiff - Counter Defendant - Appellee,
versus
NEW YORK JOINT BOARD, SHIRT & LEISUREWEAR DIVISION, UNION OF
NEEDLETRADES, INDUSTRIAL AND TEXTILE EMPLOYEES “UNITE”, AFL-CIO,
CLC, etc; ET. AL.,
Defendants,
NEW YORK JOINT BOARD, SHIRT & LEISUREWEAR DIVISION, UNION OF
NEEDLETRADES, INDUSTRIAL AND TEXTILE EMPLOYEES “UNITE”, AFL-CIO,
CLC, as representative of its members who were employees of
TheCustomShop.com Inc and all other similarly-situated former
employees of TheCustomShop.com Inc, whether or not members of the
Union,
Defendant - Counter Claimant - Appellant,
versus
RODNEY TOW, in his capacity as the Chapter 7 Trustee for the
Chapter 7 Bankruptcy Estate of TheCustomShop.com Inc,
Defendant - Appellee.
_________________________________________________________________
Appeal from the United States District Court
for the Southern District of Texas
_________________________________________________________________
Before JONES and CLEMENT, Circuit Judges, and FELDMAN,* District
Judge.
*
District Judge of the Eastern District of Louisiana, sitting by designation.
EDITH H. JONES, Circuit Judge:
The district court granted Administaff Companies, Inc.
(Administaff) summary judgment, concluding that it was not liable
for violations of the Worker Adjustment and Retraining Notification
Act (WARN Act), 29 U.S.C. § 2101 et seq. We affirm.
I. BACKGROUND
Administaff provides personnel management, payroll, and
administrative services for other businesses, essentially operating
as an off-site human resources department. TheCustomShop.com
(TCS), the former owner of a men’s clothing production plant in New
Jersey, contracted for the services of Administaff. In late 2000,
TCS began to encounter financial difficulties. When attempts to
raise capital and to sell the business failed, TCS closed its New
Jersey facility without providing the sixty days notice required by
29 U.S.C. § 2102(a). Administaff did not participate in TCS’s
decision to close its New Jersey plant and was not aware of the
closing until after it occurred.
In April 2001, the Joint Board, the union representing
the employees of the New Jersey facility, demanded that
Administaff, as an employer under the WARN Act, compensate each
member of the bargaining unit for sixty days of pay plus benefits
because the employees did not receive proper WARN Act notice. In
response to the Joint Board’s request, Administaff commenced this
declaratory judgment action. The district court granted
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Administaff’s motion for summary judgment, and we affirm.
II. DISCUSSION
The grant of summary judgment is reviewed de novo and may
be affirmed on any ground raised below and supported by the record.
Yeager v. City of McGregor, 980 F.2d 337, 339 (5th Cir. 1993). We
affirm the district court’s grant of summary judgment on two
grounds. First, based on the plain language of the statute,
Administaff is not liable for failure to give WARN Act notice
because it did not order the closing of the New Jersey facility.
“In a statutory construction case, the beginning point must be the
language of the statute, and when a statute speaks with clarity to
an issue, judicial inquiry into the statute’s meaning, in all but
the most extraordinary circumstance, is finished.” Perrone v. Gen.
Motors Acceptance Corp., 232 F.3d 433, 435 (5th Cir. 2000) (quoting
Estate of Cowart v. Nicklos Drilling, Co., 505 U.S. 469, 475, 112
S. Ct. 2589, 2594, 120 L. Ed. 2d 379 (1992)). The WARN Act
provides that
[a]ny employer who orders a plant closing or mass layoff
in violation of section 3 of this Act [(the 60-day notice
provision)] shall be liable to each aggrieved employee
who suffers an employment loss as a result of such
closing or layoff for [back pay and benefits].
29 U.S.C. § 2104(a)(1) (emphasis added).
Under a plain reading of 29 U.S.C. § 2104(a)(1),
Administaff cannot be liable for the lack of WARN Act notice
because it did not order the closing of TCS’s New Jersey facility.
3
See Local 217, Hotel & Rest. Employees Union v. MHM, Inc., 976 F.2d
805, 811 (2d Cir. 1992) (Mahoney, J., concurring ) (“. . . I would
conclude that in view of [the hotel owner’s] undisputed
responsibility for the closing decision, [the owner], and not MHM,
is the ‘employer’ that ‘ordered’ the Summit Hotel closing within
the meaning of § 2104(a)(1), and is therefore the only party liable
under that statute.”).1 TCS ordered the closing of its New Jersey
facility and informed Administaff of its decision after the fact.
Although the Joint Board argues that this construction of
the statute ignores the broad remedial purposes of the WARN Act and
the statute’s legislative history, it does not point to any
legislative history to support its position. In any event, this
Court only resorts to the rule of lenity and legislative history if
the text of a statute is opaque or ambiguous. Perrone, 232 F.3d at
440. Here, the language of the statute is clear. The statute
imposes liability only on an employer who orders the closing of a
plant.
1
In MHM, laid-off hotel employees sought medical benefits under the WARN Act from
MHM, a hotel management firm. MHM argued that it was powerless to comply with the WARN
Act’s notice provisions because the owner of the hotel had sole control over the timing of and
decision to end the hotel’s operations. The majority concluded that MHM was a WARN Act
employer because it contracted to manage the hotel. We distinguish the majority’s holding for three
reasons. First, MHM ran every aspect of the hotel on a day-to-day basis in the normal commercial
sense, while Administaff did not have the right to manage or make decisions regarding TCS’s New
Jersey facility; second, MHM carried out the closing of the hotel and ultimately laid off the
employees, while Administaff had nothing to do with the closing; third, MHM was a party to the
collective bargaining agreement, while Administaff was not. We also note that the relevant portion
of MHM is dicta; the court ultimately denied the appellants’ request for a preliminary injunction
because the WARN Act provides only a damages remedy.
4
We also affirm summary judgment for the reasons stated by
the district court. The Joint Board argued that Administaff should
be held liable for WARN act violations as a “joint employer” with
TCS, but the district court determined that under the five-factor
test set forth in 20 C.F.R. § 639.3(a)(2) (the DOL factors),2
Administaff’s relationship with TCS did not make it an employer for
WARN Act purposes.
The WARN Act and DOL regulations define an employer as
any business enterprise that employs 100 or more employees. 29
U.S.C. § 2101(a)(1); 20 C.F.R. § 639.3(a)(1). Employers who
violate the WARN Act are liable for back pay and benefits. 29
U.S.C. § 2104(a)(1). Administaff did not employ those who worked
at TCS’s New Jersey facility in the normal business sense; although
Administaff “co-employed” TCS employees so that they could receive
group medical benefits and workmen’s compensation through
Administaff policies, TCS employees did not perform any work or
2
The regulation states:
Under existing legal rules, independent contractors and subsidiaries which are wholly
or partially owned by a parent company are treated as separate employers or as a part
of the parent or contracting company depending upon the degree of their
independence from the parent. Some of the factors to be considered in making this
determination are (i) common ownership, (ii) common directors and/or officers, (iii)
de facto exercise of control, (iv) unity of personnel policies emanating from a
common source, and (v) the dependency of operations.
20 C.F.R. § 639.3(a)(2).
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services for Administaff.3 For Administaff to be liable as an
employer under the WARN Act to those who lost their jobs at TCS’s
New Jersey plant, Administaff must therefore be considered a single
business enterprise with TCS, responsible for TCS’s WARN Act
obligations. Relying primarily on Pearson v. Component Technology
Corp., 247 F.3d 471 (3d Cir. 2001), the district court noted that
courts have applied the DOL factors to determine whether business
entities that are not wholly or partly owned by a parent are
subject to WARN Act liability as an employer; indeed, the DOL
factors specifically address the independent contractor situation,
which we have here.
The first two factors are not at issue in this case. The
third factor, de facto exercise of control, “allows the factfinder
to consider whether the [business in question] has specifically
directed the allegedly illegal employment practice that forms the
basis for the litigation.” Pearson, 247 F.3d at 491. It is
undisputed that Administaff had no role in, or even advance
knowledge of, TCS’s decision to close its New Jersey plant.
With respect to the fourth factor, Administaff and TCS
did not have a unity of personnel policies emanating from a common
source; they had separate responsibilities regarding personnel
issues. Under the Client Service Agreement between Administaff and
3
Administaff may satisfy the statutory definition of “employer” by employing more than 100
employees of its own, but Administaff’s status as a WARN Act employer with respect to its own
employees is not relevant to its relationship with TCS’s employees.
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TCS, Administaff was responsible for the payment of salaries and
wages and the provision of employee benefits. It also reserved the
right to hire and terminate employees, maintain employee records,
and resolve disputes not subject to the collective bargaining
agreement. The Client Service Agreement placed responsibility for
the payment of commissions, bonuses, paid leaves of absence,
severance payments, nonqualified deferred compensation, and equity
based compensation on TCS. TCS alone was responsible for the
operation of its business and the decision to close its New Jersey
plant.
Regarding the fifth factor, dependency of operations,
“courts generally consider the existence of arrangements such as
the sharing of administrative or purchasing services, interchanges
of employees or equipment, and commingled finances.” Id. at 500
(internal citations omitted). While Administaff provided
administrative services to TCS, the companies did not share
administrative services; there was no interchange of equipment or
commingled finances. Administaff “co-employed” TCS’s employees so
that they could receive group medical benefits and workmen’s
compensation through Administaff policies, but TCS’s employees did
not perform any work or services for Administaff.
Like the district court, we reject the Joint Board’s
contention that Administaff should be held liable under the “joint
employer test” used in National Labor Relations Act (NLRA) cases.
Although courts have, in certain circumstances, drawn from NLRA
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case law in interpreting the WARN Act, such an approach would not
be appropriate here. As the Third Circuit explained, “the DOL
factors are the best method for determining WARN Act liability
because they were created with WARN Act policies in mind . . . .”
Pearson, 247 F.3d at 490.4
Finally, that TCS agreed to indemnify Administaff in the
event of a WARN Act violation does not alter our analysis.
Administaff most likely bargained for indemnification to protect
itself in the event it was held liable for its client’s WARN Act
violations. But the indemnification provision in no way suggests
Administaff’s liability.
For the foregoing reasons, we affirm the district court
judgment.
AFFIRMED.
4
The Joint Board points out that in response to a commenter’s suggestion that “the regulation
also should recognize the doctrine of joint employer status, as that doctrine has been developed under
the NLRA,” the Department of Labor explained that the “intent of the regulatory provision relating
to independent contractors and subsidiaries is not to create a special definition of these terms for
WARN purposes; the definition is intended only to summarize existing law that has developed under
State Corporations laws and such statutes as the NLRA . . . . To the extent that exi sting law
recognizes the joint employer doctrine . . . nothing in the regulation prevents application of that law.”
54 Fed. Reg. 16042, 16045 (Apr. 20, 1989). To the extent that the regulations incorporate the joint
employer test, it is inconsistent for the Joint Board to argue that the joint employer test, rather than
the DOL factors, should apply.
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