California Employers Who Shut Down or Conducted a Mass Layoff on or After March 4 Must Still Provide Notice Under Cal-WARN to Take Advantage of Executive Order

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As discussed in our prior Advisory, on March 17, 2020, Governor Gavin Newsom issued Executive Order N-31-20, which suspended portions of the California WARN Act during the COVID-19 emergency. On March 23, 2020, the Department of Industrial Relations, Division of Labor Standards Enforcement, and the Employment Development Department issued guidance that has important ramifications for California employers with more than 75 employees who shut down or ordered a mass layoff because of COVID-19 between the start of the state of emergency (March 4) and the issuance of the Executive Order (March 17).

Most notably, the guidance suggests that covered employers who took such action during that period are still required to issue notices to employees if they want to avail themselves of the Executive Order's provision relieving them of the normal 60-day notice requirements. Specifically, the guidance provides the following question and answer:

6. What should an employer do with respect to notice if a closure occurred on or after March 4, 2020 but before the Executive Order was issued on March 17, 2020?

Answer: The COVID-19 state of emergency began on March 4, 2020. Between that date and the issuance of the Executive Order, because the California WARN Act was not subject to suspension, employers should have been providing notice as specified under the Act. Now that the Executive Order is in effect, an employer seeking to avail itself of the suspension must satisfy the conditions specified in the Executive Order (described in response to Question (3) above).

Accordingly, employers who closed down or laid off employees before the issuance of the Executive Order and either (i) did not send out notices or (ii) sent out notices that did not comply with the Executive Order's new standards should go back and send out compliant notices to ensure they are covered by the Executive Order's protections. Otherwise, employers will be rolling the dice that the "physical calamity" exception to Cal-WARN excuses their lack of notice, which, as the guidance suggests, is no sure bet:

8. If an employer fails to give any notice at all on the basis that the layoff or closure is due to a "physical calamity," will that employer be shielded from liability?

Answer: Only if the employer can prove that the claimed physical calamity actually meets the definition of a "physical calamity." The Executive Order does not affect the California WARN Act's so-called "physical calamity" exemption. Lab. Code § 1401(c). That exemption permits an employer to avoid providing any notice altogether. To avail itself of the exemption, an employer would need to prove that the COVID-19 pandemic is a "physical calamity." However, there are currently no precedential cases interpreting what constitutes a "physical calamity" for purposes of the California WARN Act.

By contrast, the Executive Order temporarily suspends the usual 60-day requirement for those employers that provide notice to affected employees and fulfills the Executive Order's other conditions. The employer would not have to demonstrate that the COVID-19 pandemic is a "physical calamity" if they follow the conditions of the Executive Order.

If you are a California employer contemplating a termination or mass layoff in light of the COVID-19 emergency, contact one of the Arnold & Porter Labor & Employment attorneys for guidance.

The complete guidance can be found here: https://www.dir.ca.gov/dlse/WARN-FAQs.html.

© Arnold & Porter Kaye Scholer LLP 2020 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.