California’s WARN Act requires employers to provide 60 days’ advance notice to affected employees before ordering a “mass layoff” of 50 or more employees. But is notice required for a temporary furlough of just five weeks? In a recent decision, a California appellate court ruled the California WARN Act did apply to an employer’s temporary layoff, and therefore the employer owed a statutory duty to provide advance notice to the affected workers.
In Internat. Brotherhood of Boilermakers etc. v. NASSCO etc. (CA4/1 D070620 11/30/17), the defendant employed thousands of workers in its ship building and repairing business, with staffing requirements that changed frequently. In 2014, the company notified about 76 employees they were laid off for at least three weeks, due to a lull in its shipyard production work. While the Union claimed laying off more than 50 workers within a 30-day period triggered statutory notice protections, the employer responded that it had not implemented a “layoff,” and instead it was a “furlough” or a “manpower reduction,” and that under the federal WARN Act, notice is not required when the layoffs are for less than a 6 month period.
California WARN Act vs. Federal Act
But unlike the federal law, California’s WARN act simply defines a “mass layoff” as a layoff during any 30-day period of 50 or more employees at a covered establishment. It provides that an employer may not order a mass layoff at a covered establishment unless, 60 days before the order takes effect, the employer gives written notice of the order to the employees and specified public officials and agencies. The law applies to any industrial or commercial facility that employs, or has employed 75 or more persons within the preceding 12 months.
Despite that the employer had continued to extend certain benefits to the furloughed employees, such as paying both the employer and employee portion of the health care premiums, the court held that the California WARN Act does not state a separation must occur for a specified time period. The court held that the law “does not suggest a severance from the employment relationship must occur before the notice duty triggers. Instead it encompasses a temporary job loss, even if some form of the employment relationship continues and the employees are given a return date.”
The California WARN Act is a remedial statute designed to provide protections to workers, their families, and communities. An employer who violates the notice requirement is liable to each employee entitled to notice who lost his or her employment, and the damages consist of back pay and the value of any lost benefits to which the employee would be entitled to if his or her employment had not been lost. There are also civil penalties associated with WARN violations and a prevailing employee is entitled to recover reasonable attorney fees, but a prevailing employer is not. Here, the superior court had previously entered judgment in plaintiffs’ favor, awarding the workers $211,405 in back pay and lost pension benefits for the five week furlough.
Thus, even short term labor force reductions as a result of a lack of work, without 60 days’ advance notice, could trigger WARN penalties. The court noted that “Although an employer may view a five-week break as minimal, a worker who is living paycheck-to-paycheck may not.”
Employers in industries such as construction and agriculture need to pay close attention to this decision and plan ahead when they know a project may be winding down. But there is also concern about the potentially far-reaching implications of this decision for all industries. The court refused to “speculate about the scope of an employer’s obligations under the hypothetical situations” the employer raised on appeal asking whether WARN notice was required if a business closes down for a few hours or a full day due to lack of inventory or a holiday shut-down, because these circumstances were not before this court. This means there remain many open questions about the scope of California’s WARN Act. California employers should seek legal counsel before furloughing more than 50 employees in any 30 day period.