On March 17, 2020, California Governor Gavin Newsom issued an Executive Order (EO) waiving the 60 day notice period normally required for mass layoffs, relocations, or terminations under California’s version of the Worker Adjustment and Retraining Notification Act (“Cal-WARN”) (Labor Code § 1400, et seq.). The new EO also waives the liability and civil penalty sections of the law. The EO impacts notices issued between March 4, 2020 and the “end of this emergency” (which is undefined). Covered employers under Cal-WARN still, however, must provide notices subject to specific substantive requirements.

This order becomes particularly relevant in light of the Governor’s March 19, 2020 statewide stay-at-home order. Below we provide a brief overview of existing Cal-WARN requirements, the new EO revisions, and practical takeaways for covered employers moving forward in these uncertain times.

Existing Cal-WARN Act requirements

• Who is covered? Cal-WARN applies to “employers” who order a “mass layoff, relocation, or termination” at a “covered establishment.” An “employer” is any person or legal entity that directly or indirectly owns and operates a “covered establishment.” A “covered establishment” means any industrial or commercial facility (or part thereof) that employs, or has employed within the preceding 12 months, 75 or more persons. A “mass layoff” is any layoff (separation from a position for lack of funds or lack of work) during any 30-day period of 50 or more employees at a “covered establishment.” A “termination” means the cessation or “substantial cessation” of industrial or commercial operations at a “covered establishment.”
• What is required? Under existing Cal-WARN requirements, an employer must provide at least 60 day notice to employees (and other public entities) of any order for a mass layoff, relocation, or termination. That notice must contain certain substantive requirements, set forth in the statute.
• Are there exceptions? Under existing law, there are several exceptions to the notice requirement, including for businesses seeking capital and for seasonal employees. Another key exception is that no notice is required if a mass layoff, relocation, or termination is necessitated by a “physical calamity or act of war.” The phrase “physical calamity” is not defined, and has not yet been addressed by the courts.

New EO changes

The new EO signed by Governor Newsom on March 17, 2020 suspends the Cal-WARN 60 day notice requirement, as well as the liability and civil penalty sections under the law. Covered employers planning a mass layoff, relocation, or termination of at least 50 employees at a covered establishment, however, must still provide notice that satisfies the following requirements:

• Notice timing. Notice need not be given within 60 days, but must be given with as much notice as is practicable.
• Notice substance. The notice must provide: (1) a brief statement of the basis for reducing the notification period; (2) the substantive requirements set forth in the Fed-WARN Act and its implementing regulations; and (3) the following statement: “If you have lost your job or been laid of temporarily, you may be eligible for Unemployment Insurance (UI). More information on UI and other resources available for workers is available at labor.ca.gov/coronavirus2019.”
• Unforeseen circumstances. The mass layoff, relocation, or termination must be caused by COVID-19 related “business circumstances that were not reasonably foreseeable as of the time that notice would have been required.” The standard for determining whether the business circumstances were not reasonably foreseeable as of the time the notice would have been required are set forth under 29 USC § 2102(b)(2)(A) and 20 CFR § 639.9(b). If the mass layoff or termination is the result of the Governor’s March 19, 2020 stay-at-home order, employers will likely be able to satisfy this standard.
• Notice recipients. Notice must be provided to: (1) impacted employees; (2) the California Employment Development Department; (3) the local workforce investment board; and (4) the chief elected official of each city and county government within which the termination, relocation, or mass layoff occurs.

Takeaway #1 - Know your triggers

The new EO only applies to Cal-WARN, which applies to covered “employers” that directly or indirectly own and operate a covered establishment. Thus, if your company maintains a joint management agreement, or is not the owner and operator of a particular site, there may be a question as to whether Cal-WARN is triggered. Likewise, if the layoff involves fewer than 50 individuals, there may not be a trigger. In addition to Cal-WARN, you must also take into account the dozens of other states that have similar mini-WARN statutes, and the triggers of the Fed-WARN when determining what notices may be appropriate.

Takeaway #2 - Develop the narrative for unforeseen circumstances

The new shortened notice provided under the EO tracks the shortened notice permitted under Fed-WARN - if the need for shortened notice is a result of unforeseen business circumstances. The EO makes clear that the unforeseen business circumstances must relate to COVID-19. Because the notice must set forth a brief statement justifying the shortened notice period, it’s important to formulate the narrative for the unforeseen business circumstances now so the notice development is streamlined. The March 19, 2020 stay-at-home order likely will provide sufficient justification for this notice.

Takeaway #3 - Known unknown / physical calamity exception

Cal-WARN provides that no notice is required if the mass layoff, relocation, or termination is a result of a physical calamity. That phrase is not defined. Many have opined that the COVID-19 crisis may constitute a physical calamity. However, the common definition of physical calamity often tracks that for natural disasters, such as earthquakes and floods. Thus, it’s not clear that the current crisis would qualify.

If you and your business require further guidance on structuring or reviewing reductions in force, including layoffs and reduction in hours in these uncertain times, please reach out to one of the key contacts listed.

To help our clients manage the employment challenges of COVID-19, wherever their employees are located, we also provide the following resources that may be useful to you:

• We have built out and are continually updating a Global Labor and Employment Tracker as a resource for comparative perspectives on employment law obligations in light of COVID-19:  https://www.covid19globalemployer.com
• Here is a link to our overall COVID-19 hub, where we have collected all our alerts and other resources:  https://www.dentons.com/en/issues-and-opportunities/covid-19-coronavirus-hub
• The coronavirus alerts and other resources can also be identified country by country here:   https://www.dentons.com/en/issues-and-opportunities/covid-19-coronavirus-hub#Countries