Seyfarth Synopsis: California Governor Gavin Newsom issued an Executive Order suspending some Cal-WARN Act obligations, attempting to ease struggling employers' obligations in the face of COVID-19; but note that employers must still comply with critical remaining obligations.
Executive Order N-31-20
Employers struggling with tough layoff decisions and confusing legal obligations might have breathed a small sigh of relief upon learning that Governor Newsom, on March 17, 2020, signed Executive Order N-31-20 suspending certain employer obligations under the California WARN Act. But the Order does not give California employers a free pass, so read the rest of this blog (and the Order) very carefully to see what Cal-WARN obligations remain in place.
Cal-WARN requires employers to provide 60 days' notice to employees and other individuals before the employer causes a mass layoff, relocation, or termination. Acknowledging that COVID-19 has forced some employers to close rapidly without providing the required notice, the Order suspends notice provisions as of March 4, 2020 through the (as yet undetermined) end of the current emergency. The Order also suspends Cal-WARN's noncompliance remedies of backpay, other damages, and civil penalties. Note that these suspensions apply only to employment actions that are caused by COVID-19-related "business circumstances that were not reasonably foreseeable as of the time that notice would have been required."
The Order requires that employers still issue the required Cal-WARN notice, with as much advance notice "as is practicable" under the circumstances.
Employers must provide the notice to all of the following:
(1) Affected employees
(2) California Employment Development Department
(3) Local workforce investment board
(4) Chief elected official of each city and county government within which the termination, relocation or mass layoff occurs.
The notice must include:
(1) All of the information required by the federal WARN Act
(2) A brief statement of the basis for reducing the notification period
(3) The following statement: "If you have lost your job or been laid off temporarily, you may be eligible for Unemployment Insurance (UI). More information on UI and other resources available for workers is available at labor.ca.gov/coronavirus2019."
The Order requires, by March 23, 2020, the California Labor and Workforce Development Agency to provide additional guidance regarding how Executive Order N-31-20 will be implemented.
As a result, employers may want to consider a brief garden leave to cover the time between notices and actual separations, if their financial resources so allow. And if the employer believes its actions may be covered by Cal-WARN, send out notices as soon as possible, invoking both the unforeseeable business circumstances application of the Order as well as the physical calamity exception of Cal-WARN, which may apply to the COVID-19 scenario.
If you've read this far and still are asking, "What is Cal-WARN again? And how does it differ from federal WARN?," read on. If you already know the basics, and just need to be kept up to date on COVID-19 obligations, continue to visit this space and our resource page.
California is peculiar in that the scope of its Cal-WARN exceeds the scope of federal WARN in two major respects: (1) Cal-WARN applies to companies that are too small to be covered by the federal WARN Act, and (2) Cal-WARN applies to business decisions affecting groups of employees that are too small to be covered by federal WARN.
Cal-WARN is triggered by
- the layoff of at least 50 employees (who worked for at least 6 out of the 12 months prior to when a California WARN notice would be due) at a "covered establishment" over a rolling 30-day period due to "lack of funds or lack of work,"
- a "termination," defined as the "cessation or substantial cessation of industrial or commercial operations in a covered establishment," or
- a "relocation," defined as the removal of all or substantially all of the operations at the facility to a different location 100 miles or more away.
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." There is no authority clarifying whether this definition of "covered establishment" refers to 75 persons at any single point in time over the 12 month period, or 75 separate persons over the course of the 12 months.
Unlike federal WARN and most other state mini-WARN laws, the California law contains no express minimum length of layoff that can trigger the notice obligations. At least one California court, in International Bd. of Boilermakers v. NASSCO Holdings Inc. 17 Cal. App. 5th 1105, 1122–25 (2017), has stated that it would not read the federal WARN's six-month layoff standard into California WARN law, and, while not committing to any particular standard, indicated that even a "brief" layoff was sufficient. Thus, under Cal-WARN, a furlough of at least 50 employees at a "covered location" even of a short duration (e.g., 7-10 days) could trigger notice obligations.
If the above did not sufficiently "WARN" you, you would not be alone. Compliance with federal and state WARN acts is complex to say the least. Where any doubts arise as to whether a state or federal WARN statute might be triggered by a potential furlough or any other employment action, employers are strongly advised to consult their favorite Seyfarth attorney.