United States: California WARN Act Notice Requirements Apply To Temporary Layoffs

The California Court of Appeal has held that the California Worker Adjustment and Retraining Notice (WARN) Act requires that employers notify employees of temporary layoffs, even if anticipated to last less than six months. In contrast, the Federal WARN Act excludes such layoffs from the definition of "employment loss."

The Decision

California's WARN Act requires employers to provide 60 days' notice to employees before laying off 50 or more employees due to lack of funds or available work. See California Labor Code §1400, et seq. Nassco Holdings Inc. had given same-day notices to 90 employees that they were being sent home for three to five weeks due to a lull in the shipyard's productivity. During the layoffs the employees performed no work and received no wages, nor accrued any vacation pay or pension service credit, though Nassco did pay for their healthcare premiums and allow them to continue accruing seniority. All of the employees subsequently returned to their jobs.

Unions representing Nassco employees sued, claiming that the layoffs required notice under California's WARN Act. Nassco responded that notice was not required because the layoffs were less than six months, citing the federal WARN Act's exclusion of such layoffs. The trial court granted summary judgment for Plaintiffs, finding that California's WARN Act covers temporary layoffs, including those lasting less than six months. Though it awarded the employees back pay and lost pension benefits, the trial court declined to award civil penalties, finding that Nassco had acted in good faith given the unsettled legal issue.

The California Court of Appeal then affirmed, explaining that unlike its federal counterpart, the California WARN Act's definition of a layoff ("a separation from a position") contains no temporal limitation: "Under a commonsense understanding, a separation can be permanent or it can be temporary." The Court observed that the Act was meant to bolster protections provided by the federal law and opined that, under California's WARN Act, a layoff encompasses temporary job losses, "even if some form of the employment relationship continues and employees are given a return date."

The Court rejected Nassco's argument that subjecting temporary layoffs to WARN notice would cause "absurd" results, such as requiring notice for extended holiday weekends or unforeseen events, and declined to speculate about such hypothetical scenarios. But it noted that the Act's legislative history did not suggest a legislative intent to exclude layoffs caused by unforeseeable events. Rather, the "[Act] reflect[s] a deliberate decision to shift the burden of unexpected, unplanned—even brief—work stoppages . . . to the employer rather than to the employees..."

The Takeaway

Nassco imposes a much broader application of WARN Act requirements than under federal law. Employers should consider the Nassco holding when imposing any furloughs of at least 50 employees, whether temporary or permanent. Failing to provide the requisite notice may subject the employer to backpay, civil penalties, and attorneys' fees.

Link to Decision

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