Drilling and Service Companies Targeted Under WARN Act

04 March 2015 Publication
Author(s): Rachel Powitzky Steely

While Texas drilling and service companies have seen their fair share of woes with the recent drop in oil prices, plaintiffs’ attorneys in the state now have them in their sights as well. Recently, plaintiffs’ firms have filed lawsuits in the federal district courts in Texas on behalf of a purported classes of individuals against their former employers, pursuant to the federal Worker Adjustment and Retraining Notification Act (“WARN”). Generally, these lawsuits allege that the employer failed to meets its obligations under WARN by giving 60 days advance written notice to plaintiffs and other employees before stacking rigs or laying off employees at or near field offices.

WARN applies to employers of 100 or more employees and is intended to provide protection to workers and their communities by requiring employers to provide advance notice of covered plant closings and mass layoffs. A permanent or temporary shutdown of an entire single site of employment is a “plant closing” covered by WARN if it results in an employment loss during any 30-day period for 50 or more employees (excluding part-time employees). And a reduction in force is a “mass layoff” covered by WARN if it results in the employment loss at a single site of employment in any 30-day period for: (1) at least 33 percent of the employees and at least 50 employees (excluding part-time employees), or (2) at least 500 employees (excluding any part-time employees).

While the application of WARN sounds fairly straight-forward, the concept of a “single site of employment” is difficult to apply in the case of a drilling company with its employees spread out across several rigs in a region. Specifically, the question is whether two or more non-contiguous rigs in a region constitutes a “single site of employment” for WARN purposes. The WARN regulations specify that when an employee is out-stationed or has primary duties that are not on the employers’ property, an employee’s site of employment is (1) the employee’s home base, (2) the place from which their work is assigned, or (3) the place where they report to work. So far, no Texas court has issued an opinion on the applicability of WARN to a drilling company with workers on multiple rigs in a region. Thus, the lawsuits recently filed against drilling companies under WARN may serve as test cases for other similar claims in the future.

To make matters worse, plaintiffs’ attorneys in Texas may also turn their gaze to other sections of the oil and gas industry where companies have instituted layoffs or closed facilities in recent months. If your company has been served with a lawsuit of this nature already, you have only a certain number of days to respond to the lawsuit. You should therefore seek legal assistance as soon as possible.

If you need assistance navigating these issues, please contact Gardere Labor and Employment Attorneys Rachel Powitzky Steely (rsteely@gardere.com; 713.276.5605) and Taylor E. White (twhite@gardere.com; 214.999.4992).

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