As California businesses see a precipitous decline in business due to the coronavirus pandemic, employers throughout the state face the difficult decision of whether to lay off employees or temporarily close establishments. These actions raise significant issues under the federal and California Worker Adjustment and Retraining Acts.

Employers considering layoff decisions or cutting worker hours should consult with counsel to determine whether the action would trigger noncompliance penalties with federal or Cal-WARN, which stipulate specific advance notice requirements to employees and relevant municipal and government administrations.

About Cal-WARN

The requirements of the California Worker Adjustment and Retraining Act are generally more protective than the federal Worker Adjustment and Retraining Act. Therefore, this alert will only address issues under Cal-WARN. Generally, under Cal-WARN, a “covered establishment” is defined as any business that employs or has employed at least 75 employees at any point within the preceding 12-month period. Contiguous geographic sites as well as parent/subsidiary entities may be combined to reach the 75 employee threshold. The employee count covers any employee, even part-timers, who has been employed six months or longer.

Covered establishments must provide 60 days of advance, written notice prior to ordering a mass layoff, plant closing or relocation of operations.

These employment events are defined as:

Mass layoff – a reduction-in-force of at least 50 employees during any 30-day period;

Termination of Operations (Plant closing) – the cessation or substantial cessation of operations in a covered establishment (note no required employee job loss threshold); and

Relocation – the removal of all or substantially all of the operations of an employer to a different location 100 miles or more away.

If notice is required, under the Cal-WARN, it must be provided to:

• Affected employees and their collective bargaining representative (if any)
• Employment Development Department
• The local workforce investment board established pursuant to the federal Workplace Investment Act for the locality in which the employment losses will occur
• The chief elected official of the municipality where the establishment is located

Reduced Hours and Temporary Closures

A reduction in work hours is not a covered event under Cal-WARN, however a 50 percent or more reduction in hours could trigger federal WARN. And the California courts have held that a temporary closure may trigger Cal-WARN. In The International Brotherhood of Boilermakers v. NASSCO Holdings Inc., the court found a three-week shutdown did trigger the required notice under Cal-WARN.

Employers contemplating temporary shutdown measures should consult counsel to determine if their shutdown may trigger Cal-WARN notice. Employers may also be required to pay employees’ termination pay under Section 204 of the Labor Code, including accrued but unused paid time off for temporary shutdowns or furloughs of even just 10 days. Failure to do so can trigger Labor Code Section 203 penalties.

Exceptions to Cal-WARN

In limited circumstances, an employer is not required to provide written notice 60 days in advance for a Cal-WARN event. In such a situation, the employer must still provide required, written notice, but it only needs to be provided as soon as practicable. Further, the required notice must, among other things, contain a statement explaining the basis for reducing the notification period.

While the federal WARN Act exempts employers from giving notice due to unforeseen business circumstances, Cal-WARN does not recognize this exception.

With respect to the Coronavirus pandemic, the only exception that might be applicable to employers is the exemption for a “physical calamity.” This definition is not defined in Cal-WARN or in case law. In other states that have utilized the same verbiage, the exemption is applicable to cases of natural disasters, such as a flood, earthquake, or drought. Whether this exception applies to the Coronavirus pandemic is unclear as pandemics are not necessarily analogous to floods, earthquakes or droughts. Further, it is unclear whether the job losses have to be a direct result of the natural disaster (e.g., the establishment closed because it was destroyed by an earthquake) or whether they can be an indirect result of the natural disaster (such as the current situation).

If a California employer has to take the unfortunate step of laying off employees or closing establishments, even temporarily, such employment actions may trigger Cal-WARN. Therefore, if a California employer is contemplating such employment actions, the employer should consult with counsel to determine what notice, if any, needs to be provided to the impacted employees as well as the government and others.