Chicago Reduction in Workforce Considerations & the Worker Adjustment Act

A Chicago employment lawsuit has been filed against an employee of a financial company, claiming that the company, which is teetering on the verge of bankruptcy, did not give appropriate notice to employees before letting them go.

Our Chicago employment lawyers know that the issue here is whether the company violated the Worker Adjustment and Retraining Act, often referred to as WARN. This is a federal law, passed in 1988, that mandates how much advance notice a company has to give its workers if it expects a closing or mass layoffs.

The idea here is to protect workers - and ultimately their families and communities - from showing up to work one day, only to learn that they no longer have a job because the company is closing.

Under this statute, a company that has 100 or more employees must give at least 60 days notice to workers regarding any closings or layoffs. The notice has to be given either to the affected employees directly or to some representative of theirs, such as their labor union.

The employees covered are both salaried and hourly workers, as well as supervisors and managers.

In this case, the former employee of Peregrine Financial Group, has filed a federal lawsuit and is seeking class-action status.

Media reports have indicated that the company shut down the Chicago branch immediately following the attempted suicide of its founder and the company's petition for bankruptcy protection.

The employee who filed suit reportedly worked at the company's West Monroe Street office and says he arrived to work to learn he was terminated without cause.

The bankruptcy comes after the U.S. Commodity Futures Trading Commission filed suit against it for a $200 million shortfall in client funds. In its Chapter 7 filing in U.S. Bankruptcy Court, the company says it has assets of more than $500 million and debt exceeding $100 million. However, assets were frozen after a U.S. District Judge ruled that there seems to be good cause indicating that the company and its executives violated the Commodity Exchange Act by falsifying certain bank records.

The company reportedly has more than 100 employees, and more than 50 workers were laid off as a result of the company's financial and internal struggles. The lawsuit is seeking to hold the company accountable for unpaid wages and commissions, as well as accrued holiday and vacation pay and retirement contributions for those 60 days.

Whatever financial struggles a company is going through do not excuse it from complying with federal law. The truth of the matter is there are many potential pitfalls involved in the layoff process, including:

-Severance pay and its impact on unemployment obligations.

-Benefits issues, including medical benefits and benefits owed at severance.

-Complex issues involving race, age, sex and disability discrimination, which must all be considered as part of a reduction-in-workforce strategy.

-Tax implications.

-Competitive concerns, non-compete clauses, protection of trade secrets and preservation of tangible and intangible business assets.

Consulting an experienced business law firm on the front end, can save your business significant hassle when a restructure is necessary.

Jeremy A. Gibson & Associates is a law firm dedicated to business litigation in Chicago and elsewhere in Illinois. Call 877-452-4529 for a free consultation.

Additional Resources:
Employee files lawsuit against PFG, By Jeff Reinitz, WCF Courier

The Worker Adjustment and Retraining Notification Act, U.S. Department of Labor