California Governor Suspends Strict Employer Compliance With California WARN Act
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California Governor Suspends Strict Employer Compliance With California WARN Act

Key Takeaways:

  • Addressing the COVID-19 pandemic impact on businesses, California Governor Gavin Newsom issued an executive order temporarily easing employer compliance from a significant portion of  the California Worker Adjustment and Retraining Notification Act

  • The executive order temporarily suspends the provisions of the WARN Act that impose liability and penalties for the duration of the COVID-19 emergency

  • Employers seeking protection under the order must comply with certain conditions, detailed in this alert

California Governor Gavin Newsom issued an executive order temporarily easing employer compliance from a significant portion of the California Worker Adjustment and Retraining Notification Act (WARN Act) for the duration of the current COVID-19 pandemic.

As all are aware, the COVID-19 pandemic is wreaking havoc on many employers’ operations. In particular, companies in the restaurant, hospitality, retail, and travel industries are reeling from widespread local, state, and general guidance and orders limiting gatherings and travel in an attempt to mitigate the spread of the virus. This guidance, along with the shelter-in-place orders starting to be issued, have resulted in a significant number of business closures or substantial adjustments to business operations (including layoffs or unpaid furloughs).

In addition to concerns related to the health of their employees, one of the many other concerns California employers are struggling with during this time is compliance with California’s challenging state labor laws, including the California WARN Act. The California WARN Act requires employers who operate covered establishments to give 60 days’ warning that they plan engage in any mass layoff, relocation or termination, among other things. Theoretically, even temporary shutdowns and emergency mass layoffs could trigger the act’s notice requirements. Under this law, a covered establishment is any industrial or commercial facility that employs or has employed 75 or more persons over the last year.

Recognizing that 60 days’ warning may be impossible for employers who are struggling with cash flow or who have otherwise been ordered to cease operations, Governor Newsom issued Executive Order N-31-20, temporarily suspending the provisions of the California WARN Act that impose liability and penalties for the duration of the COVID-19 emergency, subject to certain conditions specified in the governor’s order. Employers who seek to avail themselves of the protections in the executive order must comply with the following:

  1. Employers must still give written notice of mass layoffs, relocations, or termination consistent with California WARN Act requirements, meaning notice must be given to the affected employees and also to the California Employment 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
  2. Consistent with the federal WARN Act, employers must give as much notice as practicable and, at the time the notice is given, provide brief statements of the basis for reducing the notification period
  3. The layoff, relocation, or termination must be caused by COVID-19 related business circumstances that were not reasonably foreseeable as of the time that notice would have been required and consistent with the federal WARN Act
  4. For written notices given after the date of the executive order, March 17, 2020, the notice must 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 here.” (in addition to the other required elements)

The executive order is retroactive to March 4, 2020, and applies to all covered employers who order a mass layoff, relocation, or termination that is caused by COVID-19-related business circumstances that were not reasonably foreseeable as of the time that notice would have been required.

Prior to this executive order, many employers who were forced to rapidly layoff employees or cease operations without 60 days’ notice had no choice but to optimistically rely on the California WARN Act’s physical calamity exception in hopes that it would apply to this situation, but with no certainty the exception would apply. The act, as written, does not anticipate a situation of this magnitude or provide an express exception for a pandemic. Now, however, California employers forced to reduce their workforce seemingly have a path forward. The order directs California’s Labor and Workforce Development Agency to issue guidance on how this order should be implemented by March 23, 2020.

Notably, the federal WARN act is still in effect, though it contains the unforeseeable circumstances exception cited in the governor’s executive order. It is likely that employers issuing a COVID-19-related order for layoffs can rely on this exception, but employers should continue to consult with legal counsel about their notice obligations under both the executive order and the federal law.

Goldberg Segalla’s Employment and Labor team will continue to monitor updates in this regard, including any additional guidance that is issued by the Labor and Workforce Development Agency.

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