With many restaurants forced to close and numerous other businesses facing the prospect of laying off workers in response to the economic fallout from COVID-19, employers have to give careful attention to potential notice obligations under the federal WARN Act 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.
Much of the focus had been on Cal-WARN because that statute lacked many of the relevant exceptions contained in the federal WARN Act which might be applicable with COVID-19. However, on March 17, Governor Gavin Newsom signed an Executive Order implementing important temporary modifications to Cal-WARN to assist employers in the current crisis.
Here is what you need to know.
What is WARN?
The federal Worker Adjustment and Retraining Notification Act 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.”
What is Cal-WARN?
The California version of 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. 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, Cal-WARN had no express exception for unforeseen business circumstances.
What does the Executive Order Change About Cal-WARN
Governor Newsom’s Executive Order, which applies from March 4, 2020, through the end of the declared State of Emergency, suspends the 60-day notice requirement of Cal-WARN for employers who meet certain conditions:
- The employer gives the required notices to the affected employees, the Employment Development Department, the local workforce investment board, and the chief elected official of each city and county government within which the termination, relocation, or mass layoff occurs;
- The employer gives as much notice as practicable and includes a brief statement on the basis for reducing the notification period;
- The termination, relocation, or layoff is caused by COVID-19-related business circumstances that were not reasonably foreseeable at the time notice would have been required (e., 60 days before); and
- For notices given after March 17, in addition to the usual contents of the notice, the employer must include 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 directs the Labor and Workforce Development Agency to provide guidance for implementing these requirements.
The Executive Order does not completely suspend or waive Cal-WARN; rather, it provides a mechanism in line with the federal WARN Act that gives some relief to employers facing unforeseen business circumstances. Employers must 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.