Many California employers have temporarily curtailed or even closed operations as a result of the COVID-19 crisis. Even temporary layoffs may require employers to distribute notices under federal or California laws known as “WARN Acts.”
The Worker Adjustment and Retraining Notification Act (“WARN”) is a federal statute, codified at 29 U.S.C. § 2101, et seq. California enacted a so-called “Baby WARN,” codified at Labor Code §§ 1401-1408. Both laws require (1) covered employers (2) to give advance “notice” to affected employees and certain government entities of (3) events causing (4) employment losses of sufficient size, (5) subject to certain exceptions. These laws give workers time to seek new employment, while helping government agencies absorb a large influx of unemployed workers.
California’s Governor Gavin Newsom issued an Executive Order, No. N-31-20, partially suspending certain provisions of California’s WARN Act, beginning on March 4, 2020, and for the duration of the crisis. Employers nevertheless must assess their remaining obligations under federal or state WARN.
WARN obligations arise in a number of circumstances. We address here sudden, temporary layoffs and closures, directly caused by a government “stay home” directive.
Federal WARN applies to employers with 100 or more employees, not counting certain short-term or part-time workers. California WARN has no minimum employer size, focusing on the size of the job loss and facility.
Events and Employment Losses
Federal WARN applies to “plant closings,” “mass layoffs,” and “relocations” at “single sites of employment,” or discrete facilities or operations within them. These terms are defined in the statute and the Department of Labor’s detailed regulations.
To trigger federal WARN, the event must cause an “employment loss.” Job losses resulting from shut-downs or reductions-in-force typically cause “employment losses,” if they exceed six months in duration. Hours reductions of more than 50% during six-month periods also may qualify.
A covered, “mass layoff” under federal WARN affects at least 50 non-part-time workers, at a single site, in a 30-day period, which also must constitute 1/3 or more of the non-part-time workforce. A shut-down must involve the termination, layoff, or hours-reduction of at least 50 non-part-time workers within a 30 day period.
California WARN applies to “terminations,” “mass layoffs,” or “relocations,” at “covered establishments.” A “covered establishment” is “any industrial or commercial facility or part thereof that employs, or has employed within the preceding 12 months, 75 or more persons.”
A California WARN “mass layoff” is a “layoff” during any 30-day period of 50 or more employees at a covered establishment. “Layoff” means “a separation from a position for lack of funds or lack of work.” Employees with fewer than six months of service are not counted towards the 50-employee requirement.
“Termination” means “the cessation or substantial cessation of industrial or commercial operations in a covered establishment.” If a facility qualifies as a “covered establishment,” it does not matter how many employees are employed when the facility shuts down.
The foregoing is a general overview. The federal regulations contain a number of details. There are no California WARN regulations, and very few judicial opinions interpreting the law.
Avoiding the Notice Obligation
Most temporary shut-downs and layoffs at smaller sites, or for fewer than six months, may not be federal WARN-related. For those events that may qualify, though, federal WARN permits fewer than 60 days’ notice in certain circumstances. These include a natural disaster, “unforeseen business circumstances,” and a “faltering company.” In those cases, the business still must provide notice as soon as practicable.
California WARN expressly allows employers to avoid notice altogether, unlike federal law. Defenses include a “physical calamity,” as well as when giving notice would thwart employers’ ability to obtain capital they were actively seeking.
Unfortunately, it is unclear whether COVID-19 counts as a “physical calamity.” The term is undefined and there is no case law interpreting it. Governor Newsom did not address it in the Executive Order. The Employment Development Department, in informal guidance issued following the Executive Order, refused to take a position.
In sum, federal WARN requires covered employers to provide notice of covered events, even if an exception reduces the amount of notice. California WARN exempts employers from notice in limited circumstances, such as a “physical calamity.” But employers must prove that COVID-19 qualifies as such. Covered employers experiencing a WARN event therefore should be prepared to provide required notices.
Notices are due to the employees affected by the event or their representative, if any (such as a union). The employer also must provide notice to (in California) a unit of the Employment Development Department, the local workforce investment board, and the chief elected official of each city and county government within which the termination, relocation, or mass layoff occurs. Contact information for these entities generally is available on the Internet.
Employers ordered to or curtail operations due to COVID-19 “Stay Home” Orders and the like obviously did not have 60 days’ notice. They therefore could not send advance notice. Given this reality, Governor Newsom suspended California WARN’s penalties for late notice, subject to certain requirements in the Executive Order. These include that employers required to give notice do so as soon as practicable.
Normally, the content of California WARN notices borrows from federal law, explained in federal WARN regulations at 20 C.F.R. § 639.7. Governor Newsom in his Executive Order requires employers to provide information concerning unemployment benefits, and to specifically include an explanation that complies with the federal “unforeseen business exception” defense.
Notices must be drafted carefully. New or changed circumstances may require issuance of updated or new notices; e.g., if an anticipated return to work or shut-down date changes by more than 14 days.