March 26, 2020
As our federal, state, county and local governments more aggressively take actions designed to reduce potential exposure and spread of COVID-19, employers are suddenly confronted with difficult decisions. In many cases, whole industries are being required to shut down or discontinue operations, and public gatherings of any size in business establishments are now being prohibited by law, with exceptions only for essential activities.
Employers preparing their businesses and workforces for the unprecedented pandemic are likely to face the unfortunate requirement of layoffs, reduction in pay or hours or other workforce reductions that implicate the Worker Adjustment and Retraining Notification (“WARN”) Act (29 U.S.C. Sections 2101-2109) and similar state laws. For example, California’s “mini-WARN” law is in the California Labor Code, at Section 1400, et. Seq (the “California WARN Act”)
The WARN Act
The WARN Act applies to employers that have (a) 100 or more full-time employees (meaning, for this purpose, employees working more than 20 hours per week who have been employed for at least six of the last 12 months) or (b) 100 or more employees, including part-time employees who, in the aggregate, work at least 4,000 hours per week. If applicable, the WARN Act requires advance notification of an “employment loss,” which is:
- Termination of employment, for reasons other than cause, retirement or voluntary acts;
- Layoffs exceeding six consecutive months; or
- a reduction in hours of more than 50% during each month of any 6-month period.
The WARN Act’s requirements generally apply if, within a 90 day period:
(a) 50 or more full-time employees experience an employment loss at a single site of employment as a result of a permanent or temporary shutdown of a single site of employment or one or more facilities or operating units within a single site of employment (known as a “Plant Closing”); or
(b) At least 50 full time employees representing at least 33% of the active full time employees experience an employment loss at a single site of employment (referred to as a “Mass Layoff”).
In the case of Plant Closings or Mass Layoffs, the WARN Act requires the employer to provide at least 60 days’ advance notice to all employees (including affected part-time employees) who will experience an employment loss. Damages for employers that fail to provide the required notice can include back pay, benefits, and civil penalties for each affected employee for each day of defective notice. State WARN laws and court interpretations establish variations on these triggers, including the California’s Warn Act. For example, the California WARN Act defines a layoff as a “separation from a position for lack of funds or lack of work” and at least one California court has held this requirement is triggered by a layoff as short as four to five weeks, rather than six months under the Federal WARN Act.
To eliminate or limit exposure to WARN Act risk arising from the COVID-19 pandemic, particularly given the uncertainty of the duration for any resulting layoffs, conservative employers should consider giving legally-compliant advance notice whenever possible or considering alternatives for reducing WARN Act exposure.
Many employers will pro-actively ask employees to voluntarily take vacations, accept reductions in pay, work fewer hours, or accept voluntary termination packages, or engage in community efforts to slow the pandemic. While these measures may avoid characterization as employment losses for purposes of the WARN Act, many of these actions create other issues under state law wage and hour requirements.
Exceptions – Natural Disasters and Unforeseeable Business Circumstances
The WARN Act does not require 60 days’ notice for employment losses that are the direct result of “natural disasters” (defined as “floods, earthquakes, droughts, storms, tidal waves or tsunamis, and similar effects of nature”). It’s too soon to know how courts will interpret the natural disaster exception to the COVID-19 pandemic.
Similarly, the WARN Act provides that fewer than 60 days’ notice may be given due to “unforeseeable business circumstances”. The WARN Act regulations expressly recognize that “an unanticipated and dramatic major economic downturn might be considered a business circumstance that is not reasonably foreseeable.”
In these exceptional situations, employers must give as much notice as is practical, providing as much of the required information as is available in the circumstances.
Unfortunately, the California WARN Act does not include comparable exceptions for natural disasters or unforeseeable business circumstances. However, the California WARN Act has recently been suspended by Governor Gavin Newsom in response to the COVID-19 pandemic.
California WARN Act Suspended
On March 17, 2020, California Governor Gavin Newsom issued Executive Order N-31-20 order suspending the California WARN Act because of the need to prevent or mitigate the spread of COVID-19. The California Warn Act ordinarily requires 60 days advance notice of mass layoffs, terminations or relocations unless they are necessitated by a physical calamity or act of war. Pursuant to this Executive Order, the California WARN Act is suspended for an employer that orders a mass layoff, relocation or termination caused by COVID-19 related business circumstances that were not reasonably foreseeable as of the time that a notice would have been required. The order is effective for “the period that began March 4, 2020 through the end of this emergency” and includes the following conditions:
- The employer must provide as much notice as practicable to employees of the covered establishment affected by the decision, the California Economic Development Department (“EDD”), 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, including a brief statement as to why the 60-day notice period could not be met.
- The notice must Include the following information:
- Name and address of the employment site where the closing or mass layoff will occur.
- Name and phone number of a company official to contact for further information.
- Statement as to whether the planned action is expected to be permanent or temporary and, if the entire location is to be closed, a statement to that effect.
- Expected date of the first separation, and the anticipated schedule for subsequent separations.
- Job titles of positions to be affected, and the number of employees to be laid off in each job classification.
- In the case of layoffs occurring at multiple locations, a breakdown of the number and job titles of affected employees at each location.
- An indication as to whether or not bumping rights exist.
- Name of each union representing affected employees, if any.
- Name and address of the chief elected officer of each union, if applicable.
(c) The notice must also 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."
Governor Newsom’s Executive Order suspends the California WARN Act only for those employers who satisfy the specific conditions of the Order.The California Department of Industrial Relations, Division of Labor Standards Enforcement, and the EDD have published guidance regarding the Governor’s Executive Order on this important issue, which is available through this link:
Please contact your ECG Shareholder for advice applicable to your particular situation.
Author: J. Michael Vaughn, Shareholder, Enterprise Counsel Group