In response to the ongoing disruption caused by the growing coronavirus pandemic, California Governor Gavin Newsom issued Executive Order N-31-20 (the “Executive Order”) temporarily suspending the 60-day notice requirements and liabilities under the California Worker Adjustment and Retraining Notification Act (“Cal-WARN”) for layoffs caused by COVID-19. The Executive Order is subject to certain conditions, but employers struggling to respond to the evolving COVID-19 crisis will not trigger liabilities under Cal-WARN if they have to conduct layoffs or furloughs without providing the full 60-day advance notice.
Q: When Does Cal-WARN Apply?
Cal-WARN applies when an employer has a mass layoff, termination, or relocation at a “covered establishment” in California with 75 or more employees.
- A “mass layoff” occurs when an employer terminates at least 50 employees at the covered establishment within a 30-day period due to lack of funds or work.
- A “termination” occurs when there is a “cessation or substantial cessation of industrial or commercial operations in a covered establishment.”
- A “relocation” occurs when an employer moves all or substantially all of its operations at a covered establishment to a different location 100 miles or more away.
When Cal-WARN is triggered, employers must provide at least 60-days’ advance notice to affected employees and certain state and local officials before conducting the mass layoff, termination, or relocation. Failure to provide the mandated notice exposes employers to liability for back pay (up to 60 days), the value of benefits for affected workers, civil penalties of up to $500 per day (which can be recovered under PAGA), and attorney fees.
Under Cal-WARN (unlike the federal WARN Act) there is no minimum period for the layoff. Courts have found that even a “brief” layoff is sufficient to trigger the notice obligations under Cal-WARN. In other words, if an employer furloughs 50 employees or more at a “covered establishment” even for a few days or weeks, the 60-day notice obligation would be triggered unless one of the limited exceptions to Cal-WARN applies.
Because there is no temporary grace period under Cal-WARN, employers have been scrambling to figure out whether they need to provide Cal-WARN notices in light of the increasing number of businesses being forced to temporarily close their doors or furlough employees. The only possible exception under Cal-WARN that could apply to the closures caused by the coronavirus is the exception for layoffs “necessitated by a physical calamity.” However, it is far from clear whether the current COVID-19 emergency would qualify as a “physical calamity.”
Q: How Does the Executive Order Affect Cal-WARN’s Requirements?
The Executive Order temporarily suspends the Cal-WARN obligation to provide 60-day prior notice of a mass layoff, relocation, or termination “caused by COVID-19-related ‘business circumstances’” and relieves employers of the Cal-WARN liabilities for damages and civil penalties. Although employers covered by the Executive Order need not provide 60-days’ advance notice, they must still:
- Provide “as much notice as is practicable,” including a brief statement of the basis for reducing the notification period; and
- Ensure their written notices contain 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 Executive Order applies retroactively to March 4, 2020, and extends through the end of the current COVID-19 emergency, which remains undetermined. The Executive Order also requires the California Labor and Workforce Development Agency to provide additional guidance on the order by March 23, 2020.
Q: What Should My Business Do Now?
California employers now have some much-needed breathing room to assess the rapidly evolving situation without incurring liability for not immediately providing Cal-WARN notices. Businesses who need to conduct layoffs or furlough employees due to COVID-19 pandemic should first assess whether those actions would trigger the 60-day notice requirements under Cal-WARN. If Cal-WARN is triggered, employers should consider taking the following steps:
- Document the action is due to “COVID-19 related ‘business circumstances’”;
- Provide the required Cal-WARN notices as soon as reasonably practicable to the affected employees, their union if they are represented, the California Employment Development Department, the chief elected official of the city and county government where the termination, relocation, or mass layoff occurs, and the applicable local workforce investment board; and
- Ensure the notices contain the language required by the federal WARN Act, a brief statement of the reasons for reducing the notification period, and the statement above concerning employee eligibility for unemployment insurance.
For more information about how employers should respond to of the growing COVID-19 pandemic, please refer to our prior client alert on this topic, available here. If you need more specific guidance, feel free to contact one of the members of our Employment and Labor Group.