Due to Executive Order N-33-20 (“Stay At Home Order”) and the economic downturn caused by COVID-19, many businesses are being forced to close or lay off workers. When either occurs, employers must give careful attention to notice obligations under the federal WARN Act (“WARN”) and its state equivalent, Cal-WARN. WARN and Cal-WARN require employers to give 60-day advance notice to employees and government officials of certain closures and layoffs, with back pay and civil penalties for failing to give adequate notice.
In the past few weeks, many employers had concerns with Cal-WARN as that statute lacked many of the relevant exceptions contained in WARN which might be applicable with COVID-19. However, on March 17, 2020, Governor Gavin Newsom signed Executive Order N-31-20, implementing temporary modifications to Cal-WARN to assist employers in this difficult time.
Let’s take a deeper look.
WARN applies to employers of 100 or more full-time employees (or 100 full-time and part-time employees who work a total of 4,000 non-overtime hours per week). A covered employer must give 60-days’ notice to affected employees and specified government officials before it: (i) shuts down an employment site that causes employment loss for 50 or more full-time employees; (ii) conducts a layoff that effects 50 or more employees and 33% or more of the total workforce at a single location; or (iii) lays off 500 or more employees at a single location.
Potentially relevant to COVID-19 layoffs and closures, WARN has several exceptions. WARN does not apply to layoffs lasting less than 6 months. Nor does WARN apply to closures or layoffs resulting from a “natural disaster.” Finally, an employer could give less than 60 days’ notice in the case of a closure or layoff resulting from “business circumstances that were not reasonably foreseeable.”
Cal-WARN operates similarly, but with crucial differences. Cal-WARN applies to an employer who has employed 75 or more persons, including part-time employees, at a single industrial or commercial facility (called a “covered establishment”) within the preceding 12 months. An employer has to give 60-days’ notice before (1) terminating operations at the covered establishment; (2) relocating the covered establishment’s operations more than 100 miles; or (3) laying off 50 or more employees at the covered establishment in a 30-day period. Note, the California appellate court in The International Brotherhood of Boilermakers v. NASSCO Holdings Inc. decided that furloughs are layoffs for the purpose of the California WARN Act, so this may affect whether Cal-WARN is triggered. For an employee to count as part of the 50-employee threshold, that person must have worked for the employer for at least 6 of the preceding 12 months.
Several features of Cal-WARN are less employer-friendly in the COVID-19 context. While WARN only applied to layoffs exceeding 6 months, Cal-WARN applies to layoffs of any duration. As such, employers must comply with Cal-WARN even for a short-term layoff. Cal-WARN has an exception for “physical calamity or act of war,” but it is uncertain whether a pandemic would qualify as a physical calamity. Prior to the Governor’s Executive Order N-31-20, Cal-WARN had no express exception for unforeseen business circumstances.
Governor Newsom’s Executive Order, which applies from March 4, 2020 (yes, it is retroactive), through the end of the declared State of Emergency, suspends the 60-day notice requirement of Cal-WARN for employers who meet certain conditions:
Thus, although Executive Order N-31-20 provides relief with regards to the 60 days’ notice requirement, it still requires that some notice be provided, consistent with the requirements of WARN.
Further, Executive Order N-31-20 directs the Labor and Workforce Development Agency to provide guidance by March 23, 2020, as to how Executive Order N-31-20 will be implemented. We will continue to monitor for updates, as should you.
All in all, employers should continue to evaluate potential obligations under both WARN and Cal-WARN. Given the significant penalties for non-compliance, employers faced with closing a location or laying off employees (even for short periods) should consult legal counsel.