Unfortunately, the economic reality of the COVID-19 pandemic, including recent shelter in place orders in California, is forcing employers to implement a range of cost-cutting measures - furloughs, temporary office and location closings, and layoffs. As employers continue to adjust operations during these extraordinary times, it is essential to remember the notice obligation under the federal Worker Adjustment and Retraining Notification (WARN) Act and similar state mini-WARN Acts like the California WARN Act.
The federal WARN Act requires employers to provide 60 days' advance notice to covered employees, unions, and government officials prior to a plant closing or mass layoff at a single site of employment. State mini-WARN laws contain separate and distinct requirements from the federal WARN Act that are easy to overlook. Given the recent shelter in place orders issued in California which required all non-essential business to transition to work from home, many employers questioned whether they must comply with WARN.
Is your company subject to WARN?
Employers are covered by the federal WARN Act if they have 100 or more employees, not counting part-time employees who have worked less than six months in the last 12 months or who work an average of less than 20 hours a week. See 29 U.S.C. 2101(a)(1)(A). Employers are also covered by the federal WARN Act if they employ 100 or more employees who together work at least 4,000 hours per week. See 29 U.S.C. 2101(a)(1)(B).
The federal WARN Act defines a part-time employee as "an employee who is employed for an average of fewer than 20 hours per week or who has been employed for fewer than 6 of the 12 months preceding the date on which notice is required, including workers who work full-time. This term may include workers who would traditionally be understood as 'seasonal' employees." See 20 CFR § 639.3(h).
California WARN applies to "covered establishments" instead of employers. A covered establishment is "any industrial or commercial facility" that employs (or within the past 12 months has employed) at least 75 or more full and part-time employees. There is no requirement that the employee be full time; both full and part-time employees are counted toward the 75-employee coverage trigger. Cal. Lab. Code § 1400(a), (b). However, new hires or employees employed for less than 6 months in the preceding 12-month period do not count as "employees" for purposes of California WARN. The California WARN Act defines an employee to be "a person employed by an employer for at least 6 months of the 12 months preceding the date on which notice is required." Cal. Lab. Code § 1400(h).
Exceptions to the 60-day notice period – "the unforeseen business exception" and California's Executive Order
The federal WARN statute provides that less than 60 days' notice is required under federal WARN if there are "unforeseeable business circumstances." A government shutdown order for a worksite likely constitutes unforeseeable business circumstances. However, the employer is still required to give as much notice as practical given the unforeseen circumstances.
California WARN has no similar "unforeseeable business circumstances" exception to the 60-day notice period, however, on March 17, 2020, California's Governor issued Executive Order N-31-20, waiving the requirement that employers provide at least 60 days' notice of a triggering event such as a mass layoff, plant closing or relocation, to employees impacted by COVID-19 related business shut downs. Although covered California employers which experience a WARN triggering event for COVID-19 related reasons do not need to provide 60 days' advance notice, these employers do need to provide written WARN notice to employees, any applicable union, and the required government entities as soon as practicable. According to the Executive Order, the waiver of the 60-day notice requirement is only effective if the employer takes the following actions:
- Gives WARN-compliant written notice to the affected employees, applicable union if any, and the required government agencies such as the California Employment Development Department (EDD), the county and city government where the affected employees work, and any Labor Workforce Development Agency in the county, specified in Labor Code section 1401 (a)-(b) (see https://www.edd.ca.gov/Jobs_and_Training/Layoff_Services_WARN.htm for specific county by county contact information);
- gives as much notice as is practicable and, at the time notice is given, provides a brief statement of the basis for reducing the 60-day notification period;
- orders such a mass layoff, relocation, or termination that is caused by COVID-19-related "business circumstances that were not reasonably foreseeable as of the time that notice would have been required;" and
- provides the following statement in the written notice: "If you have lost your job or been laid off temporarily, you may be eligible for Unemployment Insurance (Ul). More information on Ul and other resources available for workers is available at labor.ca.gov/coronavirus2019."
Thus, it is imperative that employers who have had a WARN triggering event provide immediate WARN compliant notice to affected employees and the appropriate government agencies, in order to ensure that the waiver of the 60 day notice period will be applicable. Failure to provide the required notice may subject the employer to WARN penalties, which includes employee back pay for each day of non-compliance.
The California Executive Order states that the California Labor Workforce Development Agency will issue further guidance on March 23, 2020.
Has your company suffered a triggering event?
Under federal WARN, a temporary or permanent plant closing is the shutdown of a single site of employment or of one or more facilities or operating units within a single site of employment, if the shutdown results in an employment loss for 50 or more employees during any 30-day period.
To determine if there is an employment loss for 50 or more employees, the employer should not count part-time employees. However, if there is a plant closure for other full time employees, part-time employees are entitled to WARN notice.
Under California law, a shutdown of a covered establishment requires WARN notice, regardless of how many employees are impacted. A shutdown means "a cessation or substantial cessation of industrial or commercial operations in a covered establishment."
Under federal law, a mass layoff is a reduction in force that is not the result of a plant closing and that results in an employment loss at a single site of employment during any 30-day period for at least 33% of full time employees and at least 50 or more full-time employees; or at least 500 full time employees.
CA defines mass layoff more broadly than federal law. A layoff of any 50 or more employees, full or part-time, at a covered establishment triggers California WARN notice requirements.
Federal WARN does not apply to layoffs of 6 months duration or less, but if circumstances change and a layoff exceeds six months, notice is required. California WARN applies to layoffs of any duration.
Immediate Action Required!
- Determine whether the employer is subject to WARN under Federal law, California law, or any other state mini-WARN statute;
- If the employer is subject to WARN, determine whether a triggering event occurred under all applicable WARN statutes;
- If a triggering event occurred or will occur in the near future immediately provide WARN-compliant notice to the affected employees, unions (if any), and the applicable government entities.