Dive Brief:

• Two former Earth Fare employees have filed a class-action lawsuit on behalf of the chain’s 3,400 workers, claiming the grocer did not give adequate notice of store closures under the WARN Act.
• The suit seeks compensation for all employees’ qualified wages, salaries, bonuses, holiday and vacation pay along with pension, 401(k) contributions and benefits over the 60-day period following Earth Fare’s closing announcement on Feb. 3.
• Earth Fare filed for Chapter 11 bankruptcy protection last week and is currently negotiating with buyers for its 50 stores in 10 states. The chain listed $138 million in debt in its filing.

Dive Insight:

Earth Fare could have even more creditors on its hands if a bankruptcy court judge in Delaware allows the suit by the chain’s former employees to proceed.

According to the defendants, one of whom worked at a store in Tennessee, the other at a Florida location, Earth Fare failed to properly notify employees of its impending closing. Instead, workers found out via news reports last Monday that it was shuttering all stores, then subsequently filing for Chapter 11 bankruptcy protection.

“The defendants violated the WARN Act by failing to give the plaintiffs and other similarly situated employees of the defendants at least 60 days’ advance written notice of termination, as required by the WARN Act,” according to the complaint, which was filed alongside the company's bankruptcy filings.

Earth Fare did not respond to a request for comment and further information. Under the WARN Act, employers must provide “advance notice in cases of qualified plant closings and mass layoffs.” At least 60-days notification is required in most cases, the law states.

As Grocery Dive previously reported, Earth Fare decided to close its stores just days after a last-minute offer for the majority of the chain fell through. According to a court declaration filed by the chain last week, an unidentified company was interested in acquiring 33 stores along with Earth Fare’s corporate headquarters in Fletcher, North Carolina. The two sides met at the corporate office on Jan. 28 to draw up papers, but a day later the interested party withdrew for unspecified reasons.

Earth Fare’s largest distributor, presumably United Natural Foods, Inc. (UNFI), had also said it would discontinue service to stores due to unpaid orders, according to the declaration. Earth Fair lists UNFI as its largest unsecured creditor, with $9.6 million due.

Earth Fare has retained A&G Real Estate Partners and Hilco Streambank to sell off its stores and intellectual property. The companies said liquidation sales would wrap up by the end of the month.