Federal and California Worker Adjustment and Retraining Notification Acts

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Many businesses are struggling with the decision to lay off, furlough or terminate employees. California has temporarily loosened previous strict notice requirements required by businesses who fall within the Cal-WARN Act requirements.

The Cal-WARN Act is broader then the federal WARN Act and includes more employers in its requirements. As a result, California employers were generally bound by the broader requirements. However, the federal WARN Act provided for the “unforeseeable business circumstances” exception to the notice requirements providing states covered by the federal WARN Act more flexibility in handling layoffs and downsizing as a result of the COVID-19 pandemic.

The Cal-WARN Act requires employers who have employed 75 or more people within the preceding 12-month period to provide 60-days’ notice to employees before conducting a mass layoff (defined as 50 or more employees in a 30-day period), relocation or termination (plant closure or other cessation of operations). It may also apply to employee furloughs lasting less than six months.

On March 17, Governor Newsom signed Executive Order N -31-20 temporarily suspending notice requirements under Cal-WARN in connection with mass layoffs, relocations or termination related to COVID-19. Prior to signing the Executive Order the only potential exception to the notice requirement is if a mass layoff is caused by “physical calamity or act of war.” What qualifies as a “physical calamity” is unknown, which is why Governor Newsom’s Executive Order provides the clarity many employees have been seeking during this uncertain times.

The Executive Order now permits an “unforeseeable business circumstances” exception to the notice obligation, an exception only previously available under the federal WARN Act. It may be asserted where the mass layoff or shutdown is caused by “sudden, dramatic, and unexpected action or condition outside the employer’s control.”

To qualify for the unforeseen business exception, employers must comply with other provisions under Cal-WARN:

1. The employer’s mass layoff, relocation or termination must be caused bu COVID-19 related “business circumstances that were not reasonably foreseeable at the time the notice would have been required."
2. The employer must still provide written notice pursuant to the Cal-WARN to:
1. Employees affected by the mass layoff, relocation or termination;
2. All representatives of employees affected (such as labor unions);
3. The EDD, Local Workforce Development Board and chief elected official of each city and county government within which the termination, relocation or mass layoff occurs.
3. Explain in writing to the impacted employees and state and local government why full notice cannot be given.
4. The employer must notify employees of their eligibility for unemployment insurance benefits.

Employers who are typically subject to the federal WARN Act (i.e., those with 100 or more full-time employees, subject to certain caveats) must provide 60 days’ notice of an “employment loss” if there is a “plant closing” or a “mass layoff” impacting 50 or more employees over a 90-day lookback period. For “mass layoffs,” it must impact at least 50 full time employees and at least 33% of the active full-time employees at a “single site of employment,” unless the layoff impacts 500 or more employees, in which case the one-third requirement does not apply.

Under the federal WARN Act, an “employment loss” is: (1) an employment termination, other than a discharge for cause, voluntary departure, or retirement; (2) a layoff exceeding six consecutive months; or (3) a reduction in hours of more than 50% during each month of any six-month period.

The last thing any employer knows right now is what the world will look like in 60 days in light of COVID-19. That is where the “unforeseeable business circumstances” exception comes in, which only requires the employer to provide “as much notice as is practicable…,” rather than 60 days. Under the applicable regulations, “[t]he employer must, at the time notice actually is given, provide a brief statement of the reason for reducing the notice period, in addition to the other element ..." Notably, for purposes of the current COVID-19 pandemic, the federal WARN Act expressly recognizes that “an unanticipated and dramatic major economic downturn might be considered a business circumstance that is not reasonably foreseeable."

Governor Newsom recognized the problem and, in order to provide more flexibility to businesses, initiated the temporary suspension of certain Cal-WARN notice requirements.

For further information, please see the following sources:

• The Labor and Workforce Development Agency (LWDA) provides guidance here: https://www.dir.ca.gov/dlse/WARN-FAQs.html, and
• The U.S. Department of Labor Guidance on Federal WARN Act compliance is here: https://www.dol.gov/agencies/eta/layoffs/WARN

SEE ALSO

• Other sections in this book

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