“WARN” ACT CLAIMS IN THE TIME OF COVID-19 – CONSIDERATIONS FOR CALIFORNIA EMPLOYERS
State and federal WARN acts
WARN acts require advance notice to employees and local workforce agencies before an employer makes a substantial reduction in its workforce, whether through a layoff or closure. There are state and federal WARN acts.
The Federal WARN act applies to employers with 100 or more full-time employees, while the California WARN act applies to employers of 75 or more full-time employees. Both federal and state enactments provide exemptions to the notice requirements. In California, it is more likely that a claim will be asserted under the California WARN act because it applies to companies with fewer employees and allows for greater recovery than the federal version.
WARN act claims arising from the COVID-19 pandemic
Even before COVID-19, WARN act notice requirements could be confusing. Fortunately, WARN act claims were also rare. But the early lull in claims arising from COVID-19 is expected to change as furloughs become permanent layoffs, and the long-term consequences of the pandemic take shape. A sharp increase in WARN act claims may follow.
Now more than ever, risk management strategies for mass layoffs and closures warrant a closer look at WARN act considerations. And particular attention should be paid to available exemptions. COVID-19 closures and layoffs may fit an exemption to these notice requirements, but will require a fact-intensive argument and proper documentation.
What’s at stake
Damages for state and federal WARN act violations are similar, and somewhat limited (at least from an individual employee’s perspective). But they can add up quickly for an employer who has laid off a large number of employees. And the risk arises at the worst time – when a company is looking to cut costs.
Both the state and federal enactments allow an employee to recover up to 60 days’ back wages. Additionally, affected employees are entitled to the value of any benefits they would have received during the violation period, as well as medical costs that would have been covered under an employee health plan. Further, under the California WARN Act, a civil penalty of $500 per day of violation may be assessed. Reasonable attorneys’ fees may be awarded under both the state and federal enactments.
When evaluating WARN act claims, courts will look to how much notice was given and evaluate the reasonableness on a case-by-case basis. Courts will also analyze whether COVID-19 really was the underlying reason for an unforeseeable business circumstance, or used as a “get out of jail free card” for a struggling or failing business.
Best practices for California employers
California employers planning to reduce their workforces should consider WARN act implications ahead of time, and need to be prepared to respond if a claim is raised. As a best practice, it is recommended that employers consider the following:
- Prepare a timeline illustrating that the layoff or plant closure was caused by an unforeseen event outside of its control.
- Do not rely solely on COVID-19 as a sure-fire defense to all WARN act claims.
- Consult with experienced employment counsel before implementing layoffs or closures.
For further WARN act information, see here.
Please do not hesitate to contact us for assistance with WARN act best practices, whether due to COVID-19 or otherwise.