Orlando-based Red Lobster is hitting choppy legal waters in the wake of their recently initiated Chapter 11 reorganisation. The seafood chain’s bankruptcy proceedings coincide with the implementation of New Jersey’s updated version of the Worker Adjustment and Retraining Notification Act (the WARN Act), creating a litigious headache for the company.
New Jersey employees impacted by the bankruptcy and subsequent restaurant closures, have responded swiftly to the proceedings; filing suits alleging violations of the state’s WARN Act. One noteworthy case involves two former employees of the Ledgewood branch of the chain; they filed a suit in Morris County Superior Court on behalf of all New Jersey Red Lobster employees. Further litigation has also been pursued in the Middle District of Florida by a separate claimant who was also an ex-Ledgewood employee.
The crux of these cases resides primarily in the WARN Act’s amendments. According to federal guidelines, employers are required to provide employees with a 60-day written notice ahead of any mass layoffs or plant closures. However, New Jersey’s refreshed legislation, as of 2023, now necessitates a sizable 90-day notification. The definition of a ‘mass layoff’ has also been redefined reducing the number from 500 employees to 50, with thematic relevance to Red Lobster’s recent proceedings.
The Red Lobster Chapter 11 petition was submitted to the Central District of Florida on May 19, and followed by the closure of 99 of its 646 USA locations as reported by media outlets. The offending company has not responded to press inquiries concerning the suits.
So how does the updated WARN Act affect Red Lobster’s position going forward?
David H. Stein, co-chair of the bankruptcy and creditor’s rights group at Wilentz, Goldman & Spitzer in Woodbridge, offers insight into the situation by suggesting that WARN Act claims would be examined by the bankruptcy court. If these claims can be considered unpaid wages, they would likely be regarded as a priority claim; either covered by insurance or they would understandably come behind secured creditors in prioritization.
As it stands, Red Lobster’s navigation of its turbulent legal seas, amid the bankruptcy storm, will provide an early testing ground for the effectiveness of New Jersey’s revised and stricter WARN Act. Time alone will determine whether the State’s legislative updates will offer sufficient protection for employees affected by the corporate restructuring and layoffs.