## Facts

- TheCustomShop.com Inc. (TCS) owned and operated a men’s clothing production facility in New Jersey.
- TCS contracted with Administaff Companies, Inc., a professional employer organization, under a client service agreement for personnel management, payroll, and related administrative services.
- In late 2000, TCS experienced financial distress and ultimately closed the New Jersey facility after unsuccessful efforts to raise capital or sell the business.
- The facility closed without providing the 60-days’ notice required by the Worker Adjustment and Retraining Notification Act (WARN Act), 29 U.S.C. § 2102(a).
- Administaff did not participate in, and did not learn of, TCS’s decision to close the plant until after the closure occurred.
- In April 2001, the New York Joint Board (the union representing the facility’s employees) demanded WARN pay and benefits from Administaff, asserting Administaff was an “employer” under WARN.
- Administaff filed a declaratory-judgment action seeking a ruling that it was not liable under WARN; the union asserted a counterclaim for WARN damages.

## Issues

1. Whether Administaff qualified as an “employer” under the WARN Act for purposes of liability arising from TCS’s plant closing.
2. Whether WARN liability could be imposed on Administaff by applying an NLRA-style joint-employer test or an FLSA-style economic-realities test.

## Decision

- The Fifth Circuit affirmed summary judgment for Administaff.
- Administaff was not liable under WARN because it did not exercise control over the decision to close the plant and lacked authority to order the closing or provide WARN notice.
- The court rejected the union’s effort to impose WARN liability by importing the NLRA joint-employer doctrine.
- The court also declined to apply an FLSA economic-realities analysis to WARN.

## Legal Principles

- WARN “employer” liability turns on which entity has decision-making authority to order the plant closing or mass layoff and thereby control the giving of statutory notice.
- Providing payroll, HR, and administrative services, without control over the closing decision, does not make a service provider a WARN employer for a client’s shutdown.
- WARN analysis does not automatically incorporate NLRA joint-employer standards focused on shared control over terms and conditions of employment.
- WARN analysis does not adopt FLSA economic-realities doctrines given differences in statutory text, purpose, and scope.
- Contractual allocations of authority may be considered to determine whether a service provider had power over strategic business decisions such as plant closures.

## Conclusion

The Fifth Circuit held that a professional employer organization that provided HR and payroll services to a client was not a WARN Act employer responsible for a plant-closing notice or damages where it neither directed nor controlled the decision to close the facility, and the court declined to extend NLRA joint-employer or FLSA economic-realities tests to impose WARN liability.


Administaff Cos. v. N.Y. Joint Bd., Shirt & Leisurewear Div., UNITE, 337 F.3d 454 (5th Cir. 2003)