Under both the federal Worker Adjustment and Retraining Notification (WARN) Act and its California equivalent (Cal-WARN) covered employers are required to provide at least 60 days' notice before executing a mass layoff or termination of operations at a covered facility. The required notices must be provided to the impacted employee and to certain state and local officials. Employers that fail to provide the required notice may be liable for 60 days of backpay and/or civil penalties, unless one of the narrow exceptions apply.
Cal-WARN applies to “covered establishments” in California that employs or has employed 75 or more persons in the preceding 12 months. Employers intending to do any of the following at a covered establishment must provide the 60 days’ advance notice:
- Mass Layoff: Lay off 50 or more employees in a 30-day period
- Shutdown: Cease or substantially cease operations
- Relocation: Move all or substantially all the operations to a location 100 miles or more away
Although modeled after the federal WARN Act, Cal-WARN can be triggered more easily and contains fewer exceptions. Cal-WARN's requirement to provide 60 days’ notice (or 60 days pay in lieu of notice) can limit the options of a distressed company seeking to cut costs in the near term.
While federal WARN contains an exception where unforeseen business circumstances prevent an employer from providing the 60 days’ advance notice, Cal-WARN has lacked that exception.
However, on March 17, 2020, Governor Newsom issued Executive Order N-31-20, temporarily suspending portions of Cal-WARN and relaxing obligations for California employers affected by the COVID-19 pandemic. The Executive Order provides for the following:
- California employers who conduct shutdowns or mass layoffs at covered establishments that are caused by COVID-19 can utilize a new, temporary exception that is akin to the “unforeseen business circumstances” exception under federal WARN. The new exception is more limited than the federal exception and excuses employers from the requirement of providing the full 60 days’ notice only if the shutdown or mass layoff results from “COVID-19-related business circumstances that were not reasonably foreseeable as of the time that notice would have been required.” Note that the applicability of this exception may lessen the longer the COVID-19 pandemic continues because the resulting deterioration of market conditions will become more and more foreseeable.
- Even if the exception appears, Cal-WARN notice must still be provided to the affected employees and government officials with as much advance notice as practicable (even if less than 60 days). Failure to provide as much notice as practicable could result in a violation of Cal-WARN.
- The notice must still meet the informational requirements under the statute and also provide a brief statement of the basis for reducing the notice period.
- The notice must also contain the following statement:
If you lost your job or been laid off temporarily, you may be eligible for Unemployment Insurance (UI). More information UI and other resources available for workers is available at labor.ca.gov/coronavirus2019.
The limited new Cal-WARN exception only applies from March 4, 2020 through the end of the current state emergency. Employers must remember that this Executive Order does not affect, suspend, or alter the requirements of the federal WARN Act or other states’ mini-WARN laws.
Koray J. BulutPartner