California Governor Partially Suspends Cal-WARN’s 60-Day Notice Period for COVID-Related Closures

On March 17, 2020, California Governor Gavin Newsom signed Executive Order N-31-20,  conditionally suspending enforcement of certain—but not all—employer obligations under the state’s Worker Adjustment and Retraining Notification (Cal-WARN) Act “as a result of the threat of COVID-19.”

The Cal-WARN Act requires subject employers to provide employees and certain government agencies with 60-days’ prior notice before implementing a qualifying “mass layoff,” “relocation,” or “termination.” Cal-WARN applies to “covered establishments,” defined as “any industrial or commercial facility, or part thereof that employs, or has employed within the preceding 12 months, 75 or more persons,” including part-time employees.

Cal-WARN is triggered by:

• A “termination,” which is defined as “the cessation or substantial cessation of industrial or commercial operations in a covered establishment”
• A “mass layoff,” which is defined as “a separation from a position for lack of funds or lack of work” of 50 or more employees at a covered establishment during any 30-day period.  Unlike federal WARN, there is not a minimum length of time for a brief layoff to trigger Cal-WARN. In fact, a California Court of Appeals panel has held that even a temporary furlough can trigger Cal-Warn WARN Act because such an action constitutes “separation from a position.” See International Brotherhood of Boilermakers v. NASSCO Holdings, Inc., 17 Cal. App. 5th 1105, 1121-22 (2017).
• A “relocation,” which is defined as “the removal of all or substantially all of the industrial or commercial operations in a covered establishment to a different location 100 miles or more away.”

The Executive Order indefinitely suspends Cal-WARN’s 60-day prior notice provisions retroactively, as of March 4, 2020, for employment actions that are caused by COVID-19-related “business circumstances that were not reasonably foreseeable as of the time that notice would have been required.” Notably, however, the Executive Order still requires employers to issue Cal-WARN notices, subject to the following conditions:

1. Employers much give employees and the requisite government agencies as much notice as is practicable;
2. The notice must include:
   • All information required by the federal WARN Act (e.g., the nature of the employment action (i.e., layoff, termination, relocation); whether the employment action is expected to be permanent or temporary; the expected date when the employment action will commence; an indication of whether bumping rights exist; and the name and phone number of a company official to contact for further information);
   • A brief statement setting forth the basis for reducing the notification period and specifying that the employment action “is caused by COVID-19-related business circumstances that were not reasonably foreseeable as of the time that notice would have been required”; and
   • 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.”

On March 23, 2020, the California the Department of Industrial Relations, Division of Labor Standards Enforcement and the Employment Development Department (EDD) provided guidance  regarding the conditional suspension of the Cal-WARN Act.  The guidance addressed, among other things, whether the current COVID-19 pandemic qualifies for the “physical calamity” exemption to Cal-WARN’s notice requirements, as set forth in Labor Code section 1401(c). The guidance provides as follows:

If an employer fails to give any notice at all on the basis that the layoff or closure is due to a “physical calamity,” will that employer be shielded from liability?

Only if the employer can prove that the claimed physical calamity actually meets the definition of a “physical calamity.” The Executive Order does not affect the California WARN Act’s so-called “physical calamity” exemption. Lab. Code § 1401(c). That exemption permits an employer to avoid providing any notice altogether. To avail itself of the exemption, an employer would need to prove that the COVID-19 pandemic is a “physical calamity.” However, there are currently no precedential cases interpreting what constitutes a “physical calamity” for purposes of the California WARN Act.

By contrast, the Executive Order temporarily suspends the usual 60-day requirement for those employers that provide notice to affected employees and fulfill the Executive Order’s other conditions. The employer would not have to demonstrate that the COVID-19 pandemic is a “physical calamity” if they follow the conditions of the Executive Order.

Cal-WARN’s coverage is significantly broader than the federal WARN Act. Unlike Cal-WARN, the federal WARN Act applies to businesses with 100 or more full-time employees, is limited to circumstances in which there is an “employment loss” exceeding six months, and includes an exception for “unforeseeable business circumstances” as justification for reducing the 60-day notification period.

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