California’s WARN Act is Unclear on Whether Bay Area Employers Must Give 60 Days Notice of Layoffs Related to COVID-19 Outbreak

The recently issued shelter-in-place orders issued by most Bay Area counties as part of their efforts to stem the spread of the novel coronavirus (COVID-19) has left numerous local businesses without access to either employees or customers. Unfortunately for those businesses, it is unclear as to whether they can lay off employees without giving 60 days’ notice under California’s WARN Act.

Under the state’s Worker Adjustment and Retraining Notification (WARN) Act, California businesses with 75 or more employees are required to provide employees with 60 days’ notice of any layoff, termination or relocation affecting 50 or more employees over a 30-day period. That includes part-time employees.

Employers are also required to provide 60 days’ notice if an establishment brings an end to substantial operations at a location or relocates more than 100 miles away. Employees may receive pay in lieu of notice.

There are several exceptions to the WARN Act’s notice requirements. The one most applicable to layoffs related to COVID-19 outbreak is the provision stating that notice is not required if the layoff, relocation or plant closure is “necessitated by a physical calamity or act of war.”

Do the layoffs and terminations that result from the COVID-19 outbreak qualify as a physical calamity? The WARN Act does not define the term and the most common usage of physical calamity is in reference to such things as earthquakes, fires and floods. Unfortunately, no court has addressed the issue of whether a pandemic qualifies for the exception to the WARN Act to help clear up the issue.

California’s courts will likely address the issue in the next few years and there are good arguments to be made on either side. Employers who lay off employees without the notice required under the WARN Act have a credible argument that COVID-19 qualifies as a physical calamity because it causes physical damage to individuals. However, laid-off employees also have a solid argument that notice was required because the virus resulted in the employer needing to lay off employees due to lost business, not physical damage.

Please note that this article is not intended as legal advice and we only seek to provide employers with notice that the COVID-19 pandemic might qualify for the physical calamity exception. Contact an attorney before conducting any layoffs that could be subject to California’s WARN Act.

Federal WARN Act is Also Unclear on COVID-19 Layoffs

The federal WARN Act also applies to mass layoffs, but its provisions apply to companies with 100 or more employees, excluding part-time employees working 20 or fewer hours a week. Employers are required to give 60 days’ notice for layoffs of at least 50 employees, excluding part-timers, that comprise at least 33 percent of their workforce. Notice is always required for layoffs of 500 or more employees.

Additionally, notice under the federal WARN Act is required when an employment site is temporarily or permanently shut down and 50 or more employees are laid off or terminated in a 30-day period. The federal act also applies in cases of employer relocation.

Like California’s WARN Act, the federal legislation has a natural disaster exception for employment losses that result from “natural disasters.” The federal act defines natural disasters as “floods, earthquakes, droughts, storms, title waves or tsunamis, and similar effects of nature.” Does a pandemic qualify as a natural disaster under that definition? Again, no court has addressed the issue and the answer is unclear.

Penalties Under State and Federal WARN Acts

If an employer is found to have failed to give required notice under either the California or federal WARN statute, it faces a possible penalty of up to $500 for each day of the violation. Employers will also be required to pay employees for each day the act was violated, as well as the benefits that would normally have accrued over that time.

Both WARN Acts cap back pay and benefits at the lower of 60 days or half the number of days an individual employee worked for the business. However, both the state and federal acts allow for the award of attorney fees and under the California WARN Act, it is possible that a court could find individual company officers and directors liable for violations.

Categorised in: Government, HR and Payroll

This post was written by Sean Allaband