Seyfarth synopsis: Companies contemplating a mass layoff must comply with the federal Worker Adjustment and Retraining Notification Act. In California, alas, companies must also consider the even more stringent requirements of California’s own WARN act. That is the harsh lesson recently imparted by the California Court of Appeal in Boilermakers v. NASSCO Holdings Inc.  

As just reported in our management alert, a California shipyard sustained liability when it failed to notify 90 employees of a four- to five-week furlough occasioned by a lull in their production work. Under the federal WARN act, no notice was required, because fed-WARN requires notice only for a “plant closing” or a “mass layoff,” and the latter refers only to an “employment loss,” which is either a termination, a layoff exceeding six months, or a 50% reduction in work hours during six consecutive months.

Because the short furlough here did not trigger any of those conditions, fed-WARN did not apply.

But California is different. As NASSCO Holdings explains, California, as is its wont, has decided that federal worker protections are inadequate, and that California knows better: “the entire thrust of the legislative effort in enacting the California WARN Act was to provide greater protection to California workers than was afforded under the federal law.” Cal-WARN, like fed-WARN, applies to “mass layoffs,” but defines the term more broadly than fed-WARN does. Under Cal-WARN, a “mass layoff” includes a layoff of at least 50 employees during a 30-day period, with a “layoff” being any “separation” from a position for lack of funds or work, and with there being no requirement of a minimum duration (such as the six-month minimum duration stated in fed-WARN). So Cal-WARN can cover a short-term layoff that fed-WARN would not cover.

The employer in NASSCO Holdings pointed to absurdities resulting from a broad reading of Cal-WARN, such as Cal-WARN applying to long holiday weekends and totally unforeseen events. NASSCO Holdings responds that, under Cal-WARN, “California employers, not California employees, should bear the risk of surprise resulting from an unexpected layoff,” and that employers who do not like that result can always take their concerns to the California Legislature. (Good luck with that.)

NASSCO Holdings also sounds a warning that Cal-WARN’s extension to short-term layoffs is not its only Cal-peculiarity. Cal-WARN exceeds the reach of fed-WARN in other respects as well. For example, Cal-WARN, unlike fed-WARN,

  • provides employers no exemption for layoffs resulting from “unforeseeable events,”
  • permits an award of attorney fees only for prevailing plaintiffs (not prevailing defendants),
  • includes part-time employees as well as full-time employees in calculating whether enough employees have been affected to constitute a mass layoff,
  • requires direct notice to employees (not just to employee representatives), and
  • requires notice to more local officials and agencies.

This Cal-WARN saga is thus an apt exemplar of the more general peril that unsuspecting national employers—duly following national labor law—can encounter when they do business in the Golden State. Be WARNed: California is peculiar.

California Workplace Solution:  Laying off at least 50 employees can trigger a Cal-WARN concern even if the layoff, or furlough, will be short-term. So you may have to give employees at least 60 days’ notice of that event. Some administrative authority suggests that very short furloughs—lasting two weeks, or some shorter period—do not trigger Labor Code termination obligations, which arguably could mean that they escape the grasp of Cal-WARN. That authority is consistent with Cal-WARN language that creates liability only to employees who have “lost … employment,” and with the fact that a very short-term furlough is not a meaningful loss of employment. But the facts of each particular situation will matter. Our specialists at Seyfarth are here to WARN you of the risks and advise you on how best to handle your own situation.

Edited by David Kadue.