United States: California's Tech Layoff Boom: What Employers Need To Know About Federal And State WARN Act Triggers

With the recent proliferation of Big Tech layoffs in California, it may be time for employers doing business in California to revisit the requirements surrounding the federal and state layoff laws. Employers that are covered under the federal Worker Adjustment and Retraining Notification (WARN) Act and/or its California counterpart, the Cal-WARN Act (California Labor Code Sections 1400-1408), are required to carry out certain requirements before implementing mass terminations. Below is a brief overview of the federal and state requirements with a focus on when the laws' notice provisions are triggered.

(Federal) WARN Act

In general, the WARN Act requires a covered employer to give affected employees (or their union representatives) and local government officials 60 days' advance notice of a “plant closing” or “mass layoff” that results in an “employment loss” to a specified number of employees. A covered employer is an employer with 100 or more full-time employees who must have been employed for at least 6 months of the 12 months preceding the date of required notice in order to be counted. If the required notice is not provided, or not properly provided, an employer can be liable for up to 60 days of pay and benefits, plus civil penalties and attorneys' fees.

The statute defines an employment loss to include: (1) the termination of an individual's employment for any reason other than discharge for cause, voluntary departure, or retirement; (2) a layoff of more than 6 months; or (3) a reduction in hours of work of an individual employee of more than 50 percent during each month of a 6-month period.

The WARN Act requires covered employers to provide at least 60 calendar days' advance written notice of a plant closing affecting 50 or more employees during a 30-day period, or a mass layoff within a 30-day period affecting at least 50 to 499 full-time employees constituting at least one-third of the workforce at a single site of employment. Layoffs of 500 or more employees are covered regardless of percentage of workforce. Typically, WARN looks to the number of employment losses occurring in any rolling 30-day period.

Under some circumstances, the 30-day window increases to 90 days. If two or more groups suffer employment losses at a single site of employment within 90 days, and neither group alone is large enough to trigger WARN Act obligations, the groups will be aggregated together. At that time, WARN Act notices will be required unless the employer can show that the individual events occurred as a result of separate and distinct actions and causes and were not an attempt to evade its WARN Act obligations.

The WARN Act has few exceptions in which 60-day advance notice is not required. Some of these exceptions include the following: there is an offer to transfer an employee to a different site within a reasonable commuting distance; the closure is due to unforeseeable business circumstances or a natural disaster; or the closing or layoff constitutes a strike or constitutes a lockout not intended to evade the requirement of the WARN Act.

(State) Cal-WARN Act

Cal-WARN, which is the state version of the federal WARN Act, is triggered by 50 or more layoffs of covered employees within a rolling 30-day window. The 60-day notice requirement also applies when the business is terminating operations or relocating its operations 100 miles or more away.

As under the federal WARN Act, the employees to whom notice is given are those who have been employed by the employer for at least 6 months of the 12 months preceding the date of required notice in order to be counted.

Failure to provide the required notice subjects an employer to liability in a civil action, including, but not limited to: (1) back pay; (2) a possible civil penalty of $500 per day for each day of violation; (3) cost of any medical expenses incurred by employees that would have been covered under an employer-sponsored health benefit plan; and, (4) reasonable attorneys' fees.

Like the federal WARN Act, Cal-WARN has few exceptions in which 60-day advance notice is not required. Some of these exceptions include the following: seasonal employees who were hired with the understanding that their employment was seasonal and temporary or if a mass layoff, relocation, or plant closure is necessitated by a physical calamity or act of war.

Key Takeaways

There are many potential pitfalls when dealing with the headaches that come with the federal WARN Act and Cal-WARN, including but not limited to, not knowing which employees are covered by the federal WARN Act and Cal-WARN, not sending out the proper notice (that includes all the required elements), and not sending out the proper notice in a timely manner.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.