March 25, 2020
Hotels, resorts, and restaurants in California have already begun mass layoffs in the wake of the COVID-19 pandemic. Many wondered if the industries would be exempt from giving California Worker Adjustment and Retraining Notification Act (“WARN Act”) notices to employees and the government under the “physical calamity” exception of Labor Code section 1401(c).
On March 17, 2020, California Governor Newsom issued Executive Order N-31-20. The emergency order stated that employers engaging in mass layoffs or business closures due to the COVID-19 pandemic were relieved of the California WARN Act obligation to give the usual 60-days’ advance notice. The Governor further announced that the Labor & Workforce Development Agency (“LWDA”) would be providing further guidance on WARN Act compliance by March 23, 2020.
On March 23, 2020, the LWDA, in conjunction with the Employment Development Department (“EDD”), published a summary of existing laws on the WARN Act. A link to the Frequently Asked Questions section is provided here.
Notably, the LWDA and EDD declined to state that the COVID-19 pandemic certainly satisfies the “physical calamity” exception to giving WARN Act notices. Rather, the LWDA and EDD opined that an employer would need “to prove” suffering from a “physical calamity” to qualify for the exemption. The agencies did not provide any further guidance on what a “physical calamity” is or what kind of proof would be sufficient. The government seems to be hinting that mass layoffs may be viewed as a mere option to stem business losses caused by lessened customer demand and not caused by the actual contracting of a contagious virus.
The fact that the Legislature qualified the term “calamity” with the word “physical” may suggest that the calamity must actually cause damage to the body of employees or customers, or the workplace itself. LWDA and EDD opinions are persuasive to a judge, but they are not legally binding on a judge asked to interpret independently the term “physical calamity.”
What the LWDA and EDD have made somewhat clearer, however, is that they are encouraging employers to give WARN Act notices, and that abbreviated or truncated notices are, in their view, better than no notices at all.
We suggest you consider all available options carefully before deciding and refer to the chart found here.
Whether or not notice is legally required, we recommend all employers provide written notice to employees of their decision, the reason, and assurance that these measures are taken only in response to the pandemic and with the ultimate goal of returning to business as usual in the near future. During these unprecedented times, goodwill toward employees will go a long way in rebuilding the business.
Visit our COVID-19 Hub for ongoing updates.