California law is complicated, and oftentimes federal laws are accompanied by a more-stringent state law. Such is the case when it comes to plant closings and large layoffs in the Golden State. This topic and more California-specific workplace compliance issues are discussed in my newly released book, California Employment Law: An Employer's Guide, Revised and Updated for 2018 (SHRM, 2018).
There are two laws that require advance warnings to employees in California in the event of a plant closing or large layoff: the federal Worker Adjustment and Retraining Notification ("WARN") Act and the California WARN Act.
In many respects, these laws are similar. Each requires that certain employers provide at least 60 days of advance notice to affected employees in the event of a plant shutdown or a "mass layoff" that affects 50 or more employees. Failure to provide such notice will cause an employer to be liable to affected employees for pay and benefits for that portion of the 60-day period in which advance notice was not given.
For example, if only 30 days of advance notice was given, the employer would be liable for pay and benefits for the remaining 30 days for which notice was not given. If no advance notice was given, the employer would be liable for pay and benefits for 60 days. State and local governments can recover penalties from the employer as well.
Under the federal WARN Act, advance notice of a mass layoff must be given only when the layoff lasts for more than six months—essentially a permanent reduction in force.
California's WARN Act, however, does not include the six-month minimum.
Last year, a California appellate court ruled that California's WARN Act applies to all layoffs and furloughs of 50 or more employees, even temporary ones. The case (Boilermakers Local 1998 v. Nassco Holdings, Inc.) involved a shipbuilding company that laid off about 90 employees for three to five weeks during a workload lull. The employees were notified of the furlough on the day it began. Their union sued for violation of California's WARN Act. The trial court ruled in favor of the union, and the appellate court affirmed.
The court emphasized that, unlike the federal WARN Act, California's WARN Act does not limit the notice requirement to layoffs lasting at least six months. Any layoff involving 50 or more employees in a 30-day period requires 60 days of advance notice under California law.
The court also observed that, unlike under federal law, California's WARN Act does not have an "unforeseen business circumstances" exception to the notice requirement.
California's WARN Act applies to:
- Covered establishments, which are industrial or commercial facilities in which 75 or more full-time or part-time employees have been employed at any time during the year prior to the event requiring notice.
- Employers based outside California with respect to any facility they operate in California that qualifies as a covered establishment.
Employers with covered establishments in California therefore are exposed to WARN Act liability if advance notice of layoffs involving 50 or more employees is not given, regardless of the duration. Such employers must use care in planning layoffs.
While there is an exception to the notice requirement for seasonal employees who are hired with the understanding that their employment is only seasonal and temporary, the notice requirement is likely to apply where annual shutdowns occur, such as closing between Christmas and New Year's or during the summer months.
Employers facing a sudden downturn in demand or a break in supply of raw materials will be placed in a more difficult position. They will not be able to furlough a large number of employees with little or no notice (although furloughs of up to 49 employees without notice will still be lawful).
Finally, keep in mind that when WARN notice is required, it must be given to each employee individually, their union (if any), and various state and local government agencies.
Merely sending an e-mail to employees or listing an annual closing in an employee handbook is not likely to qualify as sufficient notice.
James J. McDonald Jr. is managing partner of the Irvine, Calif., office of the labor and employment firm Fisher Phillips.