WARN Act Déjà Vu? Dom’s & Foxtrot Close on the Heels of Major Signature Room Penalty

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Chicagoans were stunned when all locations of Dom’s Kitchen and Market and Foxtrot Market suddenly shut their doors on Tuesday, April 23rd. The two Chicago grocers had just merged 6 months prior.

The closure was total and abrupt: every location was closed, including those in other states, deliveries from suppliers were stopped, and the grocers’ mobile apps ceased functioning. All workers were immediately terminated and were given no prior official notice. Many recount arriving to work only to find a note posted to the door indicating they were out of a job.

Many commentators are drawing parallels with the closure of the iconic Signature Room in late September 2023 and the simultaneous mass layoff of over 100 of its workers. Shortly after, the restaurant’s workers filed a lawsuit under the WARN Act, which recently resulted in a significant judgment for the workers.

In an interview with CBS Chicago, and within hours of the news of the Dom’s and Foxtrot layoffs, Laura Feldman of The Prinz Law Firm stated that there was potential of a WARN Act violation in the way the organizations closed so abruptly, similar to the Signature Room. Coincidentally, a former employee of Foxtrot filed a lawsuit the next day through a different law firm.

What Is the WARN Act?

The WARN Act is a federal law that obligates employers to provide a minimum of 60 days’ notice of certain location closures or mass layoffs to their workers, associated labor unions, and local government officials. Broadly, the law is applicable to employers with 100 or more workers and to layoffs of 50 or more workers lasting more than 6 months, subject to various caveats.

Giving notice is not the only requirement, however. Businesses must continue to compensate workers and provide benefits as usual during the notice period. Failure to do so can result in liability for back pay, a civil penalty of up to $500 for each day it fails to notify government officials, and responsibility for attorneys’ fees in the case of a lawsuit.

A complete guide for employers published by the U.S. Department of Labor’s Employment and Training Administration (ETA) can be found here.

Some states have their own versions of the federal law. Illinois’ WARN Act similarly requires a 60-day notice period for workers and unions. The list of government officials to be noticed is broader, and employers must further notify the Illinois Department of Commerce and Economic Opportunity.

The Illinois requirements are triggered for employers with 75 or more full-time employees when a) at least 25 employees and at least 33% of the full-time workforce at a single site are being let go, or b) at least 250 full-time employees will be let go overall. Illinois’ law contains penalties similar to those in the federal law. More information can be found here.

There are several exceptions to WARN Act stipulations under federal and state law. For instance, notice is not required under the federal law if a) the company was seeking a capital infusion or new business at the time of closure or layoff and sending notice of such would have impeded obtaining the capital or business, b) major business circumstances that were not reasonably foreseeable led the to closure or layoffs, or c) a natural disaster has occurred.

What’s Next for These Grocers?

The union representing workers of the Signature Room, UNITE HERE Local 1, sued the former employer for WARN Act violations, requesting back pay and benefits. A federal court recently awarded 140 former employees roughly $1.5 million in back pay, health insurance coverage and other benefits, and about $27,000 in attorneys’ fees. The judgment in favor of the workers demonstrates that an employer’s responsibilities do not end when it closes it doors, and an improper cessation of operations can indeed be costly. And now former workers at the Chicago-area grocers have taken notice.

Within 24 hours of the closure, a former Foxtrot worker filed a class action lawsuit alleging violations of both federal and state WARN Acts. The former employee who initiated the suit said he was terminated from Foxtrot’s Old Town location mid-shift, at around 11:30 a.m. on Tuesday. The suit alleges that potentially 1,000 former employees could become part of the lawsuit, which was filed against Outfox Hospitality, the parent company of Dom’s and Foxtrot. A sign posted to one Foxtrot location claimed that the organization is $180 million in debt, although it does not appear the organization has filed for bankruptcy.

The Illinois Department of Labor (IDOL) is “looking into” the circumstances of the mass layoff and closure and has created a layoff assistance page for former Foxtrot employees. Moreover, the Chicago Department of Business Affairs and Consumer Protection has confirmed that it has received a labor complaint against Foxtrot.

One would have assumed that Outfox would be aware of the Signature Room lawsuit and other past cases of WARN violations, but perhaps they were not. It remains to be seen if the organization will claim some sort of exception to providing WARN notices.

In any case, an organization’s management and human resources department should always ensure they are familiar with all labor and employment requirements, including those governing location closures and mass layoffs. If you or your organization have questions, reach out to experienced employment counsel. Doing so could save relationships with former workers, a public reputation, and the hefty financial costs of litigation.