The financial impact caused by COVID-19 has left many businesses with little choice but to lay off significant numbers of employees. Financial institutions that had previously extended credit to impacted businesses are often faced with a need to exercise one or more remedies as the related credit defaults put at risk their ability to collect payments and protect collateral securing the related obligations. Two recent cases out of New York illustrate the potential dangers faced by financial institutions and other creditors that, in the act of protecting their own interests and minimizing losses associated with troubled debt, were exposed to potential liability under the Worker Adjustment and Retraining Notification Act (WARN Act). Although both cases involve businesses that were in distress before the arrival of COVID-19, the cases act as reminders to financial institutions of the risks associated with taking remedies against businesses that have recently had to engage in mass layoffs and may be unable to survive the economic consequences of COVID-19.

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