The federal appeals court in Richmond, Va. is poised to decide whether Fluor Corp. workers terminated when construction on the $9-billion VC Summer nuclear power plant project was abandoned are owed 60 days’ pay and benefits—a ruling that would have “far-reaching and destabilizing effect” on the construction industry if it favors the payout, claimed the Associated Builders and Contractors in a case brief filed.
As part of a class action lawsuit filed in 2017, the workers argue that they are due reimbursement under the federal Workers Adjustment and Retraining Notification Act (WARN), which requires that those terminated get 60 days notice before being laid off. About 5,000 workers were terminated at the project on July 31, 2017, when it was abandoned.
The workers now seek to reverse on appeal a January ruling by a federal district court in South Carolina that did not support their argument. Appellate court judges heard new oral arguments on Oct. 27.
The issue is whether an independent contractor should be treated legally as an owner. In the suit, the workers claim plant owner SCANA and contractors Westinghouse Electric Corp. and Fluor essentially all acted as a single employer under the WARN Act and knowingly failed to give employees at least 60 days notice of termination as the law requires.
SCANA opted to end V.C. Summer construction, citing costs. In a major contractor shakeup earlier, Westinghouse had reached agreement with Fluor to shift to it primary responsibility for construction. Fluor had been a Westinghouse subcontractor since 2016 to manage construction and hire craft employees.
Plaintiffs also argued that Fluor should not escape liability under the WARN Act because the shutdown was “reasonably foreseeable.” Fluor knew, as early as April 2017, that SCANA was “seriously considering” halting the project, the plaintiffs contend.
The contractor had argued that the information available to it up until July 31 of that year indicated that work would continue, that the project’s rapid closure was unprecedented, and that site participants expected a winding-down period at the job site. Fluor also maintained it did not order a “plant closing” or “mass layoff” in violation of the law.
A contractor spokesman declined further comment, citing the litigation.
Lower Court Ruled Against Workers
The district court did not dispute that SCANA alone ordered the project shutdown and gave no advance warning to Fluor, but plaintiffs claim the utility became a single employer with its subcontractors after Westinghouse declared bankruptcy in March 2017. Now owned by Dominion Energy, SCANA had contracted with Westinghouse for VC Summer engineering, procurement and construction services and to be project manager.
The court noted that under the WARN Act, an employer “shall not order a plant closing or mass layoff until the end of a 60-day period,” and one that “fails to provide this notice is liable to each affected employee for back pay, benefits and attorney’s fees.”
But its ruling also said that the US Labor Dept. requires that two corporations be highly integrated with respect to ownership and operations before they are considered a single owner. The court found that SCANA’s control of Fluor and Westinghouse was largely within the expected bounds of a principal client’s relationship with its hired contractor or subcontractor.
“To hold otherwise would likely deform the WARN Act well beyond Congress’ intent and could open a floodgate of litigation against principal clients who are wholly independent from a contractor or subcontractor,” the lower court said. “While some evidence of de facto control purportedly exists within the terms of the EPC agreement, it does not outweigh the bulk of evidence to the contrary and falls far short of validating plaintiffs’ claims of wholesale control.”
Workers claim that SCANA had financial control over Fluor that amounted to common ownership because SCANA owned the project and its jobs. But the court said workers did not prove “this innovative theory of financial ownership.”
But the lower court said SCANA and Fluor were wholly independent and unaffiliated companies whose only “past and current” connection was the nuclear project. It said the closure “amounted to unforeseeable business circumstances to Fluor,” which relieves it of WARN liability for failing to send a 60-day notice to its direct employees. “The plain language of the [law] simply does not protect against all plant closures or mass layoffs,” the court said.
In its district court brief in support of Fluor, ABC said no court has ever adopted workers’ novel theory of single-employer liability for unaffiliated, independent businesses in the construction industry, and that such a ruling would have a far-reaching effect never intended by Congress under the WARN Act.
“Congress and the Department of Labor have long understood that the construction industry is unique in its methods and contracting requirements, and the Act’s application to construction is severely limited by the ‘temporary project’ exemption,” ABC said, noting that contractors frequently hire workers for a particular building or project and fall under the exemption if workers understood at time of hire that their work was temporary.
“There is certainly no case in the construction industry where the mere fact that an owner shut down its project without advance notice prior to completion was deemed to impose WARN Act single-employer liability on the owner and any independent contractors/subcontractors on such projects,” ABC contended.
In a filing to the appellate court, the U.S. Chamber of Commerce argued that federal regulations say that a company that contracts for a service is not the employer of the independent contractor’s employees. It added that regulations also provide that a company’s “sudden and unexpected termination of a major contract” may be an unforeseeable business circumstance that excuses the employer from providing 60 days’ advance notice because the “action is outside the employer’s control.”