California Announces Emergency Suspension of Certain Cal-WARN Act Provisions
Governor's Executive Order Lifts 60-day Notice Requirement for Mass Layoffs, Relocations or Termination of Operations
- California Gov. Gavin Newsom issued an Executive Order on March 17, 2020, suspending certain provisions of California's Worker Adjustment and Retraining Notification Act (Cal-WARN), Labor Code sections 1400 et seq.
- The Executive Order allows employers covered by Cal-WARN to order a mass layoff, relocation or group termination at large worksites without giving 60 days of notice as would normally be required.
- The Executive Order provides employers with much-needed flexibility to implement significant workforce changes in response to the uncertain economic conditions caused by the COVID-19 pandemic.
California Gov. Gavin Newsom issued an Executive Order on March 17, 2020, suspending certain provisions of California's Worker Adjustment and Retraining Notification Act (Cal-WARN), Labor Code sections 1400 et seq. The Executive Order allows employers covered by Cal-WARN to order a mass layoff, relocation or group termination at large worksites without giving 60 days of notice as would normally be required. It also provides employers with much-needed flexibility to implement significant workforce changes in response to the uncertain economic conditions caused by the COVID-19 pandemic.
California's WARN Act
Cal-WARN requires covered employers to provide at least 60 days of notice, or pay in lieu of notice, to impacted employees and local government officials before conducting a mass layoff, relocation or termination at a "covered establishment." A covered establishment is any industrial or commercial facility, or part thereof, that employs or employed at least 75 persons within the past 12 months. A mass layoff is a layoff during any 30-day period of 50 or more employees at a covered establishment. A relocation means 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. A termination means the cessation or substantial cessation of industrial or commercial operations in a covered establishment.
The federal WARN Act
The federal WARN Act, 29 U.S.C. sections 2100 et seq. is largely similar to Cal-WARN, with a notable exception – there is an "unforeseeable business circumstances" exception in the federal WARN Act, which is not in Cal-WARN. Under the federal WARN Act, an employer may provide less than 60 days of notice if the plant closure or layoff was caused by an unforeseeable business circumstance, in addition to the faltering company and natural disasters exceptions. Unforeseeable business circumstances include but are not limited to "a principal client's sudden and unexpected termination of a major contract with the employer," "an unanticipated and dramatic major economic downturn," and "government ordered closing of an employment site that occurs without prior notice."
The lack of the unforeseeable business circumstances exception under California law has, so far, hampered employers' ability to cope with business realities caused by COVID-19. Many major metropolitan areas in California are under involuntary shelter-in-place orders and employees cannot commute to work. Employers around the state in almost all industries are facing sudden and dramatic decreases in business, if not outright closing. Despite these realities, employers have remained constrained by Cal-WARN's lack of an explicit exception that would apply to the economic conditions caused by the COVID-19 pandemic.
Executive Order Suspending Cal-WARN's 60-Day Notice Requirement
On March 17, 2020, Gov. Newsom issued an Executive Order addressing COVID-19's impact on business and Cal-WARN. The Executive Order declared that, in light of the "rapid changes in workforce needs" caused by the pandemic, Cal-WARN is suspended retroactive to March 4, 2020, subject to certain conditions. Cal-WARN's 60-day notice requirement remains suspended until the end of the state of emergency previously declared by Gov. Newsom on March 4, 2020.
Though the 60-day notice requirement is suspended, employers must still provide employees "as much notice as practicable" of the impending layoff, termination or relocation. The notice to employees must include specific statements regarding availability of unemployment insurance in addition to other required WARN notice language. In addition to suspending the 60-day notice requirement, the Executive Order requires the California Labor and Workforce Development Agency, by March 23, 2020, to provide guidance on how the Executive Order will be implemented.
Employers are now free to make workforce decisions such as layoffs and mass terminations in response to the COVID-19 pandemic without the constraints of – and potential penalties imposed by – Cal-WARN. Employers must still be cautious to provide as much notice as practicable and abide by the other specific requirements of the Executive Order, and should carefully evaluate with legal counsel the available options and which course of action would result in the best outcome to the business and its workforce.
If you have any questions regarding the Executive Order, please contact the authors or another member of Holland & Knight's Labor, Employment and Benefits Group.
DISCLAIMER: Please note that the situation surrounding COVID-19 is evolving and that the subject matter discussed in these publications may change on a daily basis. Please contact the author or your responsible Holland & Knight lawyer for timely advice.
Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.