WARN Act Liability For Private Equity Funds

There is a recent tendency for workers who lose employment at a private equity fund's portfolio company as a result of a plant closing or a layoff to sue the private equity fund for violations of the federal Worker Adjustment and Retraining Notification Act (WARN Act) and similar state statutes. Since it is likely a portfolio company that takes such actions may be failing financially, the terminated employee often looks to the private equity firm as the "deep pocket" source of compensation, claiming that the private equity firm is liable because it made the termination decision with the portfolio company as a "single employer" under the WARN Act. As discussed below, courts will typically apply a test to determine potential "single employer" liability to the specific facts of the case.