Termination Notification Liability Depends on Date of Asset Purchase

April 21, 2005 (PLANSPONSOR.com) - A federal judge has issued a tentative ruling against a group of employees who claim that their former employer should have given them 60 days termination notice or, alternatively, 60 days severance benefits.

>Senior US District Judge William Schwarzer has issued a tentative ruling in the case involving former employees of Brobeck, Phleger & Harrison, whose assets were purchased by Morgan, Lewis & Bockius. The employees claim that under the Worker Adjustment and Retraining Notification (WARN) Act, the former is liable for not giving notice or severance benefits since the firm hired dozens of Brobeck lawyers and staff, took over its office space and purchased part of its assets after Brobeck shut down.

Schwarzer ruled that the liability depends on the date of the purchase of furniture and equipment, according to The Recorder.

“Assuming a jury were to find that there was a sale of part or all of Brobeck’s business, Morgan Lewis’ liability under the Act turns on whether it became responsible for giving notice of their termination of employees,” Schwarzer wrote in the ruling, according to The Recorder. “The Act provides that the seller shall be responsible ‘up to and including the effective date of the sale.'”

Since the date that the purchase became effective was February 14, 2003, and the employees were let go on the same day, Schwarzer ruled that Brobeck was responsible for giving notice, not Morgan, Lewis.

>The employees had contended that the Department of Labor interprets the act to mean the buyer becomes responsible to notify employees at the time of the sale, not the effective date of the sale. Schwarzer, however, disagreed.

Other Claims Dismissed

The judge also dismissed employees’ claims that Morgan Lewis is a successor to Brobeck under the California Labor Code, ruling that the firm did not purchase Brobeck’s principal assets, assume Brobeck’s debts or liabilities or pay an inadequate sum for the limited assets it did purchase.

This is not the first time this ruling has been handed down. A year ago, US District Judge Claudia Wilken ruled that Morgan Lewis was not a successor to Brobeck. However, she ruled that it was up to a jury to decide whether the firm purchased part or all of Brobeck’s business. The case was then assigned to Schwarzer.