# Neal v. United Furniture Industries, Inc.

> United States Bankruptcy Court, N.D. Mississippi · June 6, 2025

URL: https://www.frixlaw.com/law-library/cases/11066913

## Case

- **Court:** United States Bankruptcy Court, N.D. Mississippi
- **Decided:** June 6, 2025
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/11066913

## How later opinions describe it (automated extraction)

- stating that applying the well-established meaning of the term “back pay” to its use in the WARN Act corresponds with the legislative history and that adopted by the Fifth Circuit in Carpenters.

## Opinion text

SO ORDERED,
Ro PN eae ;
Ss os
A TI)
□ NN eS Judge Selene D. Maddox
ene □ United States Bankruptcy Judge
The Order of the Court is set forth below. The case docket reflects the date entered.

UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF MISSISSIPPI
IN RE: UNITED FURNITURE INDUSTRIES, INC., et al. CASE NO.: 22-13422-SDM
DEBTORS CHAPTER 11
JOINTLY ADMINISTERED
TORIA NEAL, JAMES PUGH, KALVIN HOGAN, PLAINTIFFS
AND OTHERS SIMILARLY SITUATED

v. ADV. PRO. NO.: 23-01005-SDM!
SUBSTANTIVELY CONSOLIDATED
UNITED FURNITURE INDUSTRIES, INC., e¢ al. DEFENDANTS

MEMORANDUM OPINION AND ORDER ON PRIORITY OF WARN ACT DAMAGES
The issue currently before the Court is whether damages awarded under the WARN Act
qualify for priority under the Bankruptcy Code. The Liquidating Trustee (the “Trustee”) seeks a
determination that the damages awarded in this adversary are not entitled to priority as “wages”

' On August 11, 2023, the Court entered its Order Granting Motion to Appoint Interim Co-
Lead Counsel and Consolidate Adversary Proceedings (A.P. Dkt. #36), which substantively
consolidated all pending adversary proceedings concerning the Worker Adjustment and Retraining
Notification Act, 29 U.S.C. § 2101 et seq. (the “WARN Act’) and other labor laws and claims with
this adversary proceeding. Any reference to the United States Code in this Opinion and Order will
be to Title 29 unless the Court indicates otherwise.
Page | of 14

under 11 U.S.C. § 507(a).2 Conversely, the Plaintiffs and the non-UFI Defendants urge the Court
to find that the WARN Act damages are entitled to priority and should be paid prior to the general
unsecured creditors. After reviewing the parties’ briefs and relevant legal authorities, the Court
concludes that WARN Act damages are entitled to priority under § 507(a) up to the statutory cap
of $15,150.003 for each individual.

I. JURISDICTION
This Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1334 and 28 U.S.C.
§ 157(a). All parties have consented to the entry of final order and judgment, which includes
determination of the priority of WARN damages, by this Court. See Stipulation and Consent, A.P.
Dkt. #100.
II. BACKGROUND
As previously discussed by the Court, UFI and its affiliates were engaged in the
manufacturing and distribution of furniture from its facilities in Mississippi, California, and North
Carolina. This adversary proceeding arises from the abrupt termination of approximately 2,700 of

UFI’s employees on November 21, 2022. The Plaintiffs, individually and on behalf of a certified
class of similarly situated former employees, brought this action primarily under the Worker
Adjustment and Retraining Notification Act (the “WARN Act”), 29 U.S.C. §§ 2101-2109, seeking
damages arising from the Defendants’ failure to provide 60 days’ notice of a mass layoff or plant
closure.

2 The Court will refer to Title 11 of the United States code for any later statutory references
unless it notes otherwise.
3 Each individual’s claim is only given priority to the extent it does not exceed $15,150.00,
the dollar amount applicable to cases commenced between April 1, 2022, and April 1, 2025. See
11 U.S.C. §§ 104 and 507(a)(4).
In addition to UFI, the Plaintiffs alleged that multiple other affiliated entities (the “non-
UFI Defendants”) were jointly and severally liable under the WARN Act. On October 18, 2024,
this Court entered its Memorandum Opinion and Order Granting Plaintiffs’ Partial Motion for
Summary Judgment (A.P. Dkt. #188), finding that UFI’s failure to provide a “brief statement”
explaining why 60 days’ advance notice was not possible as required under 29 U.S.C. § 2102(b)(3)

rendered all statutory defenses to liability unavailable. Then, on April 15, 2025, the Court entered
its Memorandum Opinion and Order Denying in Part and Granting in Part Defendants’ Motion
for Summary Judgment and Denying Plaintiffs’ Motion for Summary Judgment (A.P. Dkt. #248),
concluding that genuine issues of material fact remained for trial. However, prior to
commencement of trial scheduled for May 12, 2025, the parties announced settlement between the
Plaintiffs and the non-UFI Defendants.
As a result of this settlement, the sole issue remaining before the Court is whether damages
awarded under the WARN Act are entitled to priority under the Bankruptcy Code. At the status
hearing on May 12, 2025, the parties requested additional time to submit supplemental briefing

and legal authority concerning the priority issue. The Court granted the request and set a deadline
of May 21, 2025 for submission of additional briefs. Upon receipt of the parties’ submissions, the
Court took the issue under advisement.4 Then, on May 27, 2025, the Plaintiffs moved for leave to
file a reply brief, prompting the Trustee to file a response. The Court ultimately allowed the

4 The Court considered the following pleadings: Trustee’s Trial Brief Regarding Priority of
Warn Act Damages (A.P. Dkt. #238), Non-Employer Defendants’ Brief in Response to Trustee’s
Trial Brief Regarding Priority of Warn Act Damages (A.P. Dkt. #247), Trustee’s Reply Brief in
Regard to the Priority of Warn Act Damages (A.P. Dkt. #254), Plaintiffs’ Response to Trustee’s
Trial Brief on the Priority of WARN Damages (A.P. Dkt. #259), Trustee’s Reply Brief in Regard to
the Priority of Warn Act Damages (A.P. Dkt. #260), Plaintiffs’ Motion for Leave to File a
Reply/Rebuttal Brief (A.P. Dkt. #261), Trustee’s Response to Plaintiffs’ Motion for Leave to File a
Reply/Rebuttal Brief (A.P. Dkt. #263), and Plaintiffs’ Reply Brief Regarding the Priority of WARN
Damages (A.P. Dkt. #265).
submission of a reply brief and considered additional arguments made by the Trustee in his
response to the motion for leave to file the reply brief.
III. DISCUSSION
A. Overview of the Parties’ Arguments
As briefly mentioned above, the parties dispute whether damages awarded under the

WARN Act qualify for priority status under § 507(a)(4)–(5). The Trustee opposes priority
classification, arguing that WARN damages do not constitute “wages” or “severance” under the
Bankruptcy Code. Alternatively, both the Plaintiffs and the non-UFI Defendants argue that WARN
damages function as substitute wages or severance pay and are therefore entitled to priority
treatment, subject to the statutory cap.
The Trustee contends that because the WARN Act is silent on how damages should be
classified in bankruptcy, the Court must look to the “essence of the statute” and apply traditional
principles of statutory interpretation. He argues that the structure of § 507(a) reflects no clear
congressional intent to prioritize WARN damages and that reading priority into the statute would

impermissibly broaden its scope. He further maintains that WARN damages do not constitute
“earned” wages or severance, as the employees performed no work or services during the notice
period and the compensation is not tied to the length or quality of employment. According to the
Trustee, the Fifth Circuit has expressly rejected the notion that restitutionary remedies may be
elevated to priority status, and the plain language of the Bankruptcy Code limits priority to
compensation actually “earned” through work.
The non-UFI Defendants disagree, arguing that WARN Act damages should be treated as
priority wage claims under § 507(a)(4) or as contributions to benefit plans under § 507(a)(5). They
assert that these damages are intended to compensate employees for lost income due to the
employer’s failure to provide advance notice, and that courts across jurisdictions have recognized
WARN damages as falling within the ordinary meaning of wages or severance. They further
contend that the statutory damages available under WARN serve a compensatory, rather than
punitive, function, aligning with the protective purposes of both the WARN Act and the
Bankruptcy Code. The non-UFI Defendants also argue that providing priority treatment to these

claims is consistent with bankruptcy policy favoring the protection of workers and that even some
decisions cited by the Trustee acknowledge WARN damages may qualify as priority claims.
The Plaintiffs present a substantially similar position, arguing that WARN damages
constitute either wages or severance within the meaning of § 507(a)(4). They contend that the
backpay remedy under the WARN Act is compensatory in nature, designed to place employees in
the position they would have been in had proper notice been given. According to the Plaintiffs, this
backpay is indistinguishable from other forms of wage-based compensation and should be treated
accordingly. They cite several decisions in which courts have recognized WARN damages as
“earned” wages or severance and argue that the calculation of damages using the employee’s

ordinary wage rate reinforces this classification. The Plaintiffs also suggest an alternative view,
asserting that WARN damages may be considered “earned” in the same way that accrued vacation
or paid time off is earned, even if not tied to specific hours worked. They reject the Trustee’s
assertion that restitutionary classification bars priority, arguing that the determination of whether
damages are compensatory or punitive is a matter of statutory interpretation rather than equitable
analysis. In their view, the term “backpay” as used in the WARN Act mirrors traditional remedies
designed to make employees whole, and the nature and function of such payments justify priority
treatment under the Bankruptcy Code.
B. Treatment of WARN Act Damages under the Bankruptcy Code
In bankruptcy, debtors are rarely able to pay all their creditors in full. In re Powermate
Holding Corp., 394 B.R. 765, 771 (Bankr. D. Del. 2008). For this reason, the Bankruptcy Code’s
priority system is considered fundamental to its operation.5 Czyzewski v. Jevic Holding Corp., 580
U.S. 451, 464 (2017). The Bankruptcy Code establishes a tiered priority scheme for unsecured

claims. Relevant here, § 507(a)(4) grants fourth-level priority to allowed unsecured claims, capped
at $15,150.00 per individual, for “wages, salaries, or commissions, including vacation, severance,
and sick leave pay earned by an individual,” provided those amounts were earned within 180 days
before the petition date or cessation of business, whichever is earlier. See 11 U.S.C. § 507(a)(4)(A).
Section 507(a)(5) affords fifth-level priority to claims for “contributions to an employee benefit
plan . . . arising from services rendered within 180 days” of the petition or cessation of business.
The amount of this priority is limited to the number of covered employees multiplied by
$15,150.00, reduced by the total amount already granted under § 507(a)(4). See 11 U.S.C.
§ 507(a)(5)(A)–(B).

The damages provision of the WARN Act provides that an employer who violates the
statute “shall be liable to each aggrieved employee who suffers an employment loss” for “back
pay” and “benefits under an employee benefit plan.” 29 U.S.C. § 2104(a)(1). Notably, while the
statute refers to amounts owed to a governmental unit as “civil penalties,” it does not use similar
language to describe damages owed to employees. Compare 29 U.S.C. § 2104(a)(3) and 29 U.S.C.
§ 2104(a)(1). When interpreting statutory language, courts give words their ordinary and plain

5 Despite the Trustee’s assertion that the WARN Act’s silence on bankruptcy treatment
requires the Court to rely solely on statutory construction, as the parties will see below, the Court
believes the classification of claims is governed by the Bankruptcy Code’s priority scheme, which
provides the controlling framework for determining how claims are treated in bankruptcy.
meaning and enforce the statutory text as written unless it is ambiguous. United States v. Moore,
71 F.4th 392, 395 (5th Cir. 2023). The term “back pay” as used in § 2104(a)(1) has consistently
been understood to carry its common meaning; namely, wages, benefits, or other compensation
lost due to a violation of the statute. Carpenters Dist. Council of New Orleans v. Dillard Depart.
Stores, Inc., 15 F.3d 1275, 1283 (5th Cir. 1994).6 Because this common understanding of “back

pay” fits squarely within the language of § 507(a)(4), which prioritizes claims for “wages, salaries,
or commissions, including vacation, severance, and sick leave pay”, many courts have concluded
that WARN Act damages fall within the scope of priority wage claims under the Bankruptcy Code.7
1. The Supreme Court’s Guidance in Jevic
Despite the above, the Trustee contends that the Fifth Circuit has rejected the proposition
that WARN Act damages qualify as “back pay” in the ordinary sense of the term and, by extension,
argues that such damages do not fall within the scope of “wages” under § 507. The Court disagrees.
Because each party has cited and discussed the Supreme Court’s decision in Czyzewski v. Jevic
Holding Corp., the Court begins its analysis there. In Jevic, the Bankruptcy Court for the District

of Delaware approved a structured dismissal that permitted payment to general unsecured creditors
ahead of former employees holding WARN Act claims—effectively bypassing the statutory
priority scheme established by the Bankruptcy Code. Czyzewski v. Jevic Holding Corp., 580 U.S.
451, 455 (2017). The employees appealed through successive levels of review, ultimately bringing

6 The Plaintiffs aptly point out although the court in Carpenters cited a case suggesting
WARN Act backpay is not actually backpay but merely calculated the same way, its use of the
“But see” signal indicates the Fifth Circuit viewed the statement as contradictory. See Carpenters
at 1283; The Bluebook, R. B1.2, at 5 (21st ed. 2020).
7 See e.g., In re Beverage Enterprises, Inc. 225 B.R. 111, 116 (Bankr. E.D. PA. 1998);
Saxion v. Titan -C- Manufacturing, Inc., 86 F.3d 553, 561 (6th Cir. 1996); In re Cargo, Inc., 138
B.R. 923, 928 (Bankr. N.D. Iowa 1992); In re Riker Indus., Inc., 151 B.R. 823 (Bankr. N.D. Oh.
1993); and In re Kitty Hawk, Inc., 255 B.R. 428, 439 (Bankr. N.D. Tex. 2000).
the issue before the Supreme Court. Id. at 461-62. The Supreme Court held that, absent the affected
creditor’s consent, a bankruptcy court may not approve a distribution scheme that violates the
Bankruptcy Code’s priority structure. Id. at 471.
While the Trustee is correct that the Supreme Court in Jevic did not discuss why the claims
held by those employees were entitled to priority under § 507(a)(4), the Trustee’s reliance on that

omission is misplaced. The Supreme Court’s reasoning presupposed that the employees’ WARN
damages were entitled to priority treatment under § 507(a)(4), and its holding turned on the
impermissibility of deviating from the statutory priority scheme. If those claims had not qualified
for priority, then no violation would have occurred when the bankruptcy court approved
distributions to general unsecured creditors ahead of the WARN claimants. That the Supreme Court
found such a distribution improper necessarily implies that the claims in question were deemed
priority wage claims. The Court, therefore, concludes that Jevic supports the view that WARN Act
damages are properly classified under § 507(a)(4) and weighs significantly in favor of granting
priority status to such claims.

2. The Trustee’s Objections and Contrary Authority
Although the Court finds that Jevic implicitly affirms the treatment of WARN Act damages
as priority wage claims, it also finds unpersuasive the Trustee’s assertion that the Fifth Circuit has
rejected this view in Fleming v. Bayou Steel BD Holdings II, L.L.C., 83 F.4th 278 (5th Cir. 2023).
There, former employees brought WARN Act claims against the owner of their employer following
a mass layoff. Fleming, 83 F.4th at 284. The district court struck the plaintiffs’ demand for a jury
trial, and the employees appealed. Id. The Fifth Circuit noted that the WARN Act is silent as to
whether it provides a right to trial by jury and does not express a clear intent on that issue. Id. at
289. The court then turned to the two-pronged analysis required by the Seventh Amendment,
asking first whether the action would have been considered legal or equitable in nature at common
law, and second whether the remedy sought is legal or equitable. Id. Applying that framework, the
Fifth Circuit concluded that the remedy provided by the WARN Act is equitable in nature and that
the plaintiffs were therefore not entitled to a jury trial. Id. at 293.
The Court does not, however, read Fleming as rejecting the notion that WARN Act damages

may be compensatory or that they fall outside the scope of § 507(a)(4).8 Rather, the decision
focuses narrowly on the question of jury entitlement and classifies the WARN remedy as equitable
for that limited purpose. Importantly, Fleming did not address the priority of WARN claims under
the Bankruptcy Code,9 nor did it analyze whether such damages should be treated as “wages” for
purposes of § 507(a). As such, it offers little guidance on the issue now before the Court and does
not undermine the reasoning adopted by other courts recognizing WARN Act damages as
compensatory and entitled to priority.
Again, the Court does not take issue with the Fifth Circuit’s decision in Fleming, it
concludes that the inquiry presented here, i.e., how WARN Act damages should be classified under

the Bankruptcy Code, is fundamentally distinct from the constitutional issue addressed in Fleming.
That case concerned the applicability of the Seventh Amendment, which is not at issue here. The
Trustee is correct in pointing out that the WARN Act is silent on the treatment of claims in
bankruptcy proceedings. However, that silence is not dispositive, as it is the Bankruptcy Code—
not the WARN Act—that governs the classification and priority of claims in bankruptcy.

8 The Court further notes that in Staudt v. Glastron, Inc., 92 F.3d 312 (5th Cir. 1996), the
Fifth Circuit employed a similar analytical approach as in Fleming when addressing another issue
on which the WARN Act is silent: the applicable statute of limitations. While the court in Staudt
ultimately did not adopt a specific state statute of limitations, it reasoned that “[i]f we consider
WARN’s remedial goal and damages available under the statute, it is analogous to an action on a
debt for wages owed.” Id. at 316.
9 Notably, Fleming makes no reference to the Bankruptcy Code’s priority scheme.
As previously discussed, § 507(a)(4) provides that allowed unsecured claims of up to
$15,150.00 per individual for “wages, salaries, or commissions, including vacation, severance, and
sick leave pay earned by an individual,” are entitled to priority. See 11 U.S.C. § 507(a)(4).
Separately, the WARN Act states that employers who violate the statute are liable to affected
employees for “back pay.”10 29 U.S.C. § 2104(a)(1)(A). The Fifth Circuit has interpreted the term

“back pay” in the WARN Act to carry its ordinary meaning of wages and benefits. See Carpenters,
15 F.3d at 1283. Although Fleming evaluated the equitable nature of WARN damages for purposes
of jury trial rights, it did so only because the statute was silent on that constitutional issue. That
reasoning has no bearing on whether such damages fall within the substantive wage provisions of
§ 507(a)(4). The Bankruptcy Code clearly defines which claims receive priority, and this Court
sees no ambiguity in its application to WARN Act back pay.
Accordingly, the Court concludes that the Fifth Circuit’s classification of WARN damages
as equitable under the Seventh Amendment does not alter the ordinary meaning of the term
“wages” or preclude such damages from qualifying for priority treatment under the Bankruptcy
Code.11 If Congress intended a different result, either in enacting the WARN Act or in drafting

§ 507, it could have clarified that intention. In the absence of such clarification, this Court must
enforce the statutes as written. WARN Act damages for back pay fall squarely within the priority
provisions of the Bankruptcy Code.

10 Black’s Law Dictionary defines “backpay” as “[t]he wages or salary that an employee
should have received but did not because of an employer’s unlawful action in setting or paying the
wages or salary.” BACKPAY, BLACK’S LAW DICTIONARY (11th ed. 2019).
11 See Saxion v. Titan-C-Manufacturing, Inc., 86 F.3d 553, 561 (6th Cir. 1996) (stating that
applying the well-established meaning of the term “back pay” to its use in the WARN Act
corresponds with the legislative history and that adopted by the Fifth Circuit in Carpenters.).
Not to exclude any arguments made by the Trustee, he also relies heavily on the decision
of the United States Bankruptcy Court for the District of Arizona in In re First Magnus Financial
Corp., 390 B.R. 667 (Bankr. D. Ariz. 2008). In Magnus, a group of employees was terminated
without the required 60 days’ notice just five days before the employer filed for bankruptcy.
Magnus, 390 B.R. at 671. The employees subsequently brought claims under the WARN Act

seeking treatment of their damages as administrative expenses under § 503(b). Id. The bankruptcy
court noted that the issue was one of first impression and framed its analysis around three core
considerations: (1) whether the statute was clear on the question presented; (2) if not, whether
Congress’s intent could be ascertained; and (3) whether that intent supported the requested priority
treatment. Id.
Concluding that the statute was ambiguous on this issue, the court turned to legislative
intent. Id. at 677. After analyzing the language of the WARN Act, pre-BAPCPA treatment of
WARN claims, and the scope of administrative priority under § 503(b), the court held that WARN
Act claims arising from prepetition terminations did not qualify as administrative expenses. Id.

The Magnus court’s holding was therefore limited to the classification of WARN damages under
§ 503(b), not under the wage priority provisions of § 507(a)(4). As such, its reasoning is not directly
applicable to the present case, which concerns whether WARN damages are “wages” or
“severance” entitled to priority, not whether they qualify as administrative expenses.
While the Court agrees with the outcome in Magnus and acknowledges the thoughtful and
thorough nature of that court’s discussion, the analysis in Magnus focused specifically on whether
damages owed to employees terminated prepetition qualify as administrative expenses under §
503. See Magnus, 390 B.R. at 676–79. That is not the issue before this Court. Here, the question
is whether WARN Act damages fall within the scope of wage-based priority claims under §
507(a)(4), not whether they are entitled to administrative expense treatment. Moreover, even the
Magnus court recognized that WARN damages may receive priority treatment under § 507(a)(4).
Specifically, it held that where employees were terminated before the petition date, they retained
“priority over unsecured creditors” up to the statutory cap, and any WARN damages exceeding
that cap would be treated as general unsecured claims. Id. at 679. Accordingly, rather than

undermining the application of § 507(a)(4), Magnus affirms that WARN Act damages may, at a
minimum, qualify for priority as wage claims.
3. Other Considerations Supporting Priority Treatment
Finally, the Court disagrees with the Trustee’s assertion that WARN Act damages are not
“earned” within 180 days of the filing. As previously discussed, the Court does not interpret the
Fifth Circuit’s decision in Fleming as undermining the reasoning adopted in earlier cases—
reasoning with which this Court aligns.12 When employees are terminated without the notice
required by the WARN Act, they are deprived of a benefit granted by federal law. In exchange for
the loss of this statutory protection, the WARN Act entitles them to compensation equivalent to

the wages and benefits they would have received during the 60-day notice period. These damages
are not speculative or punitive. They represent compensation for a lost employment opportunity
that would have otherwise been realized within the relevant statutory window.
To hold otherwise would create a perverse incentive: employers could violate the WARN
Act and then evade liability simply by seeking bankruptcy protection. Such an interpretation would
effectively render the statute unenforceable in precisely the circumstances where its protections
are most needed. The Court declines to adopt a reading of the statute that would so easily defeat

12 See In re Cargo, Inc., 138 B.R. 923 (Bankr. N.D. Iowa 1992) and In re Kitty Hawk, Inc.,
255 B.R. 428 (Bankr. N.D. Tex. 2000).
its remedial purpose. The Court is not persuaded that Congress intended to provide employees
with a substantive right under federal law, only to allow that right to be extinguished (absent certain
exceptions that were not applicable in this proceeding) when an employer files for bankruptcy.
Thus, the Court concludes that WARN Act damages, which represent compensation for notice-
period wages wrongfully denied, are “earned” within the meaning of § 507(a)(4) and are entitled

to priority up to the statutory cap.
Further, the Court is mindful of the practical consequences that would result from
classifying WARN Act damages solely as general unsecured claims. Such a determination would
significantly impair the enforceability of the WARN Act by discouraging qualified legal
representation for affected employees. WARN Act litigation is often brought by plaintiffs’ counsel
on a contingency fee basis, with the understanding that counsel will be compensated from any
recovery obtained. If WARN Act damages are treated as general unsecured claims, any resulting
recovery would be significantly diluted through the bankruptcy distribution process, jeopardizing
plaintiffs’ counsel’s ability to recover the full amount of agreed-upon attorneys’ fees—particularly

in contingency arrangements where compensation depends on a meaningful distribution.
This economic disincentive threatens to chill enforcement of the WARN Act by making it
financially infeasible for counsel to bring valid claims on behalf of employees. That result would
frustrate the WARN Act’s remedial purpose of protecting employees from abrupt mass
terminations. While this concern does not override the statutory text, it does support a construction
of the Bankruptcy Code that harmonizes its provisions with the enforcement mechanisms Congress
clearly intended under the WARN Act. Recognizing WARN damages as earned wages entitled to
priority under § 507(a)(4) ensures both the integrity of the bankruptcy process and the continued
enforceability of federal labor protections in the bankruptcy context.
IV. CONCLUSION
For the reasons stated above, the Court concludes that damages awarded under the WARN
Act fall within the scope of priority wage claims under 11 U.S.C. § 507(a)(4). The statutory text,
relevant case law, and the remedial purpose of the WARN Act all support the conclusion that back
pay owed for the failure to provide notice constitutes “wages” or “severance” within the meaning

of the Bankruptcy Code.
The Court rejects the Trustee’s characterization of these damages as “unearned” or
“restitution” and finds no basis in the Bankruptcy Code or relevant precedent to deny priority
treatment where the damages clearly compensate employees for lost income tied to the notice
period. Additionally, the Court is persuaded that a contrary interpretation would frustrate the
purpose of both the WARN Act and the Bankruptcy Code’s priority structure by limiting employee
remedies in the very context where they are most needed. Accordingly, the Court holds that WARN
Act damages are entitled to priority under § 507(a)(4), subject to the statutory cap of $15,150.00
for each individual.

##END OF ORDER##

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/11066913. Public record. Not legal advice.