During this time of economic uncertainty, many employers are wondering what their options are in reducing employee hours, furloughs, or even layoffs. Before considering furloughs or layoffs, employers must consider their obligations under both the Federal and (unsurprisingly more restrictive) California WARN Acts. 

Governor Gavin Newsom recently temporarily relaxed requirements under Cal-WARN in connection with mass layoffs or shutdowns causally related to COVID-19.

Cal-WARN requires employers who have employed 75 or more employees within the preceding 12-month period to provide 60 days’ notice to employees before conducting a mass layoff (50 or more employees in a 30-day period), relocation, or termination (plant closure or other cessation of operations). Cal-WARN may also apply to employee furloughs lasting less than six months.

The executive order now permits an “unforeseeable business circumstances” exception to the notice obligation, an exception previously available only under the federal WARN Act. It may be asserted where the mass layoff or shutdown is caused by “sudden, dramatic, and unexpected action or condition outside the employer’s control.”

To qualify for the unforeseeable business exception, employers must comply with other provisions under Cal-WARN:

1. The employer’s mass layoff, relocation or termination must be caused by COVID-19-related “business circumstances that were not reasonably foreseeable at the time that notice would have been required.”

2. The employer must provide written notices to: 

  • Employees affected by the mass layoff, relocation or termination;
  • All representatives of employees affected (such as their union);
  • EDD; the Local Workforce Development Board; and the chief elected official of each city and county government within which the termination, relocation, or mass layoff occurs.

3. Explain in writing to the impacted employees and state and local government why full notice cannot be given; and

4. Notify employees of their eligibility for unemployment insurance benefits.

Before an employer considers these more extreme options, you should discuss with your employment practice specialist to ensure compliance with the many other competing labor law obligations under California and Federal law.

The Labor & Workforce Development Agency (LWDA) provides the following link for guidance:

The U.S. Department of Labor guidance on the Federal WARN Act compliance can be found here:

For questions on this issue or further guidance regarding the impact of COVID-19 on your business, contact Managing Partner Eric De Wames by email at edewames@sullivanattorneys.com.