American LaFrance is facing a class-action lawsuit after two former employees claimed they and others weren't given proper notice of termination under the federal Worker Adjustment and Retraining Notification Act (WARN) before the company closed its doors on Jan. 17. American LaFrance had been in business since 1832.
The South Carolina-based fire truck manufacturer closed its warehouse, production and service facilities in Monks Corner, S.C., Ephrata, Pa., and Los Angeles. The company said in a public statement the closing was due to an "unexpected current financial condition [that] requires the discontinuation of operations in these locations at this time and these facilities are not expected to reopen."
In addition to the employee lawsuit there are concerns about how those fire departments with American LaFrance rigs will find parts.
Industry insiders say customers have concerns about the availability of replacement parts and how they will maintain their apparatus, said Glenn Usdin, owner of Command Fire Apparatus, a used fire truck company. Usdin also spent three years at American LaFrance as president of the used apparatus division when it was owned by Freightliner.
In a public statement, the company said customers will soon be notified about where to get replacement parts and service from an unspecified third-party vendor. The company will contact customers with that information "in the near future."
Usdin expects a third-party vendor will meet the market's need, including offering routine parts and serving American LaFrance apparatus.
"A majority of the parts are available through secondary sources that could be found with a simple web search," Usdin said. "I expect someone to step up and make all the parts in short order."
The closing caps years of financial struggles for the company that included layoffs and bankruptcy. Usdin said there were plans for American LaFrance to reclaim its former status in the fire marketplace when it was owned by Freightliner from 1995 to 2005.
"Those were positive days because we really thought we could bring the American LaFrance brand back to where it had been from the early 1900s through the 1980s," he said.
However, American LaFrance was never able to regain market share. It was sold to Patriarch Partners in 2005. By January 2009, American LaFrance had filed for Chapter 11 bankruptcy protection and later that year stopped making fire apparatus at one of its South Carolina plants.
In March, the company won a judgment approving its disclosure statement to accompany a debtor's plan of reorganization to address $85 million of contingent and non-contingent general unsecured debt. The plan provided for the assumption by the reorganized company of $28 million and to establish a fund of assets to pay the remaining claims.
At the time, CEO Lynn Tilton said they were "pleased to take a step forward towards ensuring the long-term future of this 175-year-old company."
Usdin doesn't expect the brand to survive.
"I don't think they will come back," he said. "There isn't much left as far as the American LaFrance name."
Notice to employees
WARN is a federal law that requires 60 days' notice of closures when a company has more than 100 employees. The law was enacted to protect workers by providing them with an opportunity to seek out retraining and explore other options with some notice, said Chris Tuck, an attorney with Richardson, Patrick, Westbrook & Brickman.
The law firm filed the class-action suit on behalf of two employees who worked for the company for 10 years. The suit asks for all unpaid wages and benefits for that 60-day period, Tuck said.
When American LaFrance closed, the company was required by law to provide that 60 days' notice to employees.
"That was not done here," Tuck said. "The company closed with no notice, and these employees are entitled to back pay and benefits under federal law because American LaFrance did not carry out its obligations under the act."
'Unexpected' way out
The firm doesn't believe American LaFrance can claim any exceptions to the WARN act that would have eliminated the need for the 60 days' notice. Yet, the company used the term "unexpected" in its public statement, which Tuck believes is a maneuver to stave off liability.
"That is an effort, we believe, to get out from under the WARN act," he said. "It is not uncommon for those companies who don't provide the 60 days' notice to claim there was some unexpected financial turmoil that obviated the need for notice."
Tuck said employers should notify a labor lawyer if planning a closing to ensure they meet federal regulations.
"The businesses that are contemplating a plant closure need to consult with labor lawyers who can advise them on this issue," he said. "The problem we see is that there are some companies who want to avoid paying out these wages and benefits when they know they are about to close. So the easy thing is to seek a short cut that unfortunately creates substantial harm to these employees, their families and their communities."