Advice for Businesses in Dealing with the Expanding Coronavirus Events

Executive Order from Governor Newsom Regarding the California WARN Act

March 18, 2020

PH COVID-19 Task Force

The California WARN Act (Labor Code 1400, et seq.) differs from the Federal WARN Act in that it does not contain an “unforeseeable business circumstances exception,” although it does contain “physical calamity” and “actively seeking business or capital” exceptions.  This has left employers in a state of confusion as to whether the current Coronavirus pandemic qualifies for either of the available exceptions.

On March 17, 2020, Governor Gavin Newsom issued Executive Order N-31-20 (https://www.gov.ca.gov/wp-content/uploads/2020/03/3.17.20-EO-motor.pdf), which relaxes the California WARN Act’s notice requirements from March 4, 2020 through the end of the emergency (presumably when Governor Newsom declares the California State of Emergency over).  According to the Executive Order:

• Written notice must still be given to the normal recipients:  the affected employees, the Employment Development Department, the local workforce investment board, and the chief elected official of each city and county government within which the termination, relocation, or mass layoff occurs.

• The contents of the notice remain the same (i.e., those specified by the Federal WARN Act).

• The notice must be given as far in advance as practicable and include a brief statement of the basis for providing shortened notice (e.g., government order, unforeseen spread of the virus, social distancing, etc.).

• Exactly how much notice must be provided will be a facts and circumstances test.

• One case applying the Federal WARN Act’s exception found that the employer gave as much notice “as is practicable” when it learned of the unexpected cancellation of a major customer’s contract on January 15, 2004, and notified employees on January 22nd (the Tuesday after the Martin Luther King, Jr., holiday); the company did not act unreasonably “in taking just three business days to determine whether ‘it could survive the carnage.”

• Accordingly, an employer should both provide notice as soon as practicable and as far in advance as is practicable.

• The employment action must be caused by a COVID-19-related business circumstance that was not reasonably foreseeable at the time the notice otherwise would have been required (i.e., 60 days in advance), consistent with 20 C.F.R. section 639.9(b), which provides:

• An important indicator of a business circumstance that is not reasonably foreseeable is that the circumstance is caused by some sudden, dramatic, and unexpected action or condition outside the employer's control. A principal client's sudden and unexpected termination of a major contract with the employer, a strike at a major supplier of the employer, and an unanticipated and dramatic major economic downturn might each be considered a business circumstance that is not reasonably foreseeable. A government ordered closing of an employment site that occurs without prior notice also may be an unforeseeable business circumstance.

• The test for determining when business circumstances are not reasonably foreseeable focuses on an employer's business judgment. The employer must exercise such commercially reasonable business judgment as would a similarly situated employer in predicting the demands of its particular market. The employer is not required, however, to accurately predict general economic conditions that also may affect demand for its products or services.

• Notices after March 17, 2020 must include the following statement:  “If you have lost your job or been laid off 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.”

Additional guidance from the Labor and Workforce Development Agency is expected by March 23, 2020.