Episode 67: Avoid Cal-WARN Act Liabilities

Welcome to the Workplace, a podcast by Cal Chamber. I'm Erica Frank, Cal Chambers, Executive Vice President and General Counsel. And back at you today, we have Jennifer Shah of the Shah Law Group. Hey, Jen, how's it going?

Hi, Erica. I'm well. How are you today?

I'm just dandy. Just dandy. So, Jennifer, I want to talk about whether we warn or not to warn. That's question today.

Oh, my goodness. Okay, so I have to tell you, the Warren act and the California equivalent are laws that deal with when employers need to do what we call a mass layoff or a closure of a location. Now, in the absence of COVID 19, this happens pretty rarely. Right. You know, you have maybe something where there's been a merger or an acquisition, they're going to close a facility, or a large number of employees are going to be sent to the unemployment line. And the idea of the Federal Warrant act and what we call the baby warn in California, the Cal warn, is that these workforce development agencies, the Employment Development Department, the Labor Commissioner, these folks should know that a bunch of people are going to come online so they can help with retraining. They can help place them in jobs. Right? That's the idea. Now, during COVID of course, we've never seen so many unemployment claims. So it's not like anybody needs notice that, oh, a bunch of people are going to be applying for unemployment. But these are two very obscure, relatively unknown laws that can really get employers in trouble. So I think it's a great topic for us to briefly discuss today. People's head will roll if we go into too much detail, but I think the big picture that we want them to get is if you're talking about closing a facility or you've got 75 people at a location and you're looking at laying off 50 of them, or even 25 of them, depending on what's going on, you need some counsel. And this is not the type of thing that you can just go on the Internet and find the link and really get it done. Right. There are notices you have to give for COVID 19. There's special language that Governor Newsom says we have to include. So there's a lot here. And of course, if you don't do it, there are very significant consequences, including paying your employees 60 days of wages and benefits. So this is not an area where we want to mess around.

Okay? So I think this is really important and a great topic because we've talked on the podcast briefly about the Warren Act. We've talked about it when We've talked about furloughs versus layoffs. We also did a coverage when Governor Newsom issued his executive order, which the headline was suspend. But we know that that's not what the executive order did. And I think that caught a lot of people off guard. Suspending what really suspending just this 60 day advance notice. But as you said, there's still notification requirements. So, Jennifer, why don't we talk a little bit about some of the misconceptions and some key things that employers need to be aware of and why they do need to reach out for help.

So a couple of things. First of all, remember that the Fed warn, the WARN act and the CAL Warn are two separate laws and they provide for different things. For example, a temporary layoff or a furlough can actually activate CAL warn, where it generally won't activate the federal WARN Act. So very specific requirements in terms of how many employees work at what location, what is considered a mass layoff, what is considered a closure. There's a lot of definitional issues. And I'll tell you, anytime a client calls me for advice on the Warren act or CAL Warren, I get out my code, right? I gotta look at it every time. There are so many things I can keep in my head. But when I talk about the Warren act or the Cal Warren Act, I always make sure I'm checking my sources because there are a lot of gotchas in these laws and really things that people wouldn't think of, like, I sold my business, but the person's job didn't change. The only thing that changed was the name on their pay stub. That's a WARN act issue. Well, the California Court of Appeals said it very well could be. So we have to think about where when we think too logically, right? Oh, okay. There's already all this unemployment. It's not like anybody needs to know. Well, there's no COVID 19 exception. Now, I will tell you there are exceptions to Warren and Cal Warren for a physical calamity or an act of God in quotes, but they have not been litigated. Most of these exceptions don't actually have any case law behind them. It's very clear or very unclear, I should say what it's going to take to meet the exception. As you already talked about in the other podcast, what Governor Newsom did is said, look, I know you won't be able to give 60 days notice. I just want you to give the notice you can. But that notice better be right. And that's something that's really Important in terms of making sure that we're just getting them out. And by the way, the notices are very simple. Once you do them, you'll be like, oh my gosh, this was what all this hullaboo was about. But you do have to do them correctly. So one misconception is, look, everybody knows about what's going on with unemployment, so why do I need to notify anybody? Another misconception is people already know. I already told my employees. Guess what? You're not telling the employees. That's one group of people you're telling. You're also telling these public entities, these boards, the Employment Development Department, retraining organizations. So there's a lot of notice you have to give to actually the local public entities as well. Another misconception about the Warren act is, well, what's the big deal if people get unemployment? They're not going to care about the Warren Act. Well, plaintiffs lawyers care about the WARN act and the CAL WARN Act. So don't think that you're not going to get a claim just because somebody's going to get to go out and get their unemployment. That is not the same as being employed for an additional 60 days, getting the benefits, getting the additional 401k contribution, whatever might be happening. So those are some of the significant misperceptions or misconceptions that people have. The bottom line is when you're hiring and when you're firing or separating in California for any reason, whether it's performance based or not, you've got to think about what is my process, how am I making these decisions, how am I documenting these decisions, what do I need to be able to show to prove to someone that I made a legitimate decision? It wasn't based on someone's race or color, sexual or national origin. I actually did the right thing. And the WARN act and the CAL WARN act, the baby warn, are exactly in line with the other laws that say, look, we want you to make the right decision. We want you to notify the right people. There are boxes you have to check. And anytime an employer has to check boxes, they need to get some advice.

Right? So, Jennifer, I know on the governor's website, we've talked before the Resources page. You guys have a resources page? Cal Chamber has a resources page. There are links to information that the Labor Commissioner's office has put out on the WARN act, but it's not a complete resource like you talked about, and it does not mention a lot of the steps that need to be taken, which is why we're out here letting all of these employers know.

That's right. And you know, I think it's one of those things where sometimes clients will tell me, jen, thanks for telling me, but I'm not going to do it. That's fine. I have no ego in whether or not someone decides to follow the Warn actor, Cal Warn. Right. That's your decision. You run your business. I have enough trouble running my own business. Right. I don't need to run yours too. But I want you to know what the risks are. And I think sometimes, especially with what's going on right now, many of us are so overwhelmed just by how do you go grocery shopping and not touch the cart and get toilet paper and everything else. We need that. Thinking about the Warren act and the Cal Warren act are really at the bottom of our list. But because most of us are going to be around when this darn thing is over, it doesn't pay to be short sighted. It pays to take a deep breath, go for a run, eat some chocolate, and then come back to it and figure out, okay, what do I need to do here? Let me take this one step at a time. It does feel overwhelming when you look at it all in one big picture. But if you can break it down, it's not that hard. It's not that intellectually challenging. We just have to know what you don't know. And that's why the resources are so important.

Okay. So, Jennifer, let's just kind of put things into context. Not scare our listeners, but just sometimes hearing what the penalties and liability could be for a misstep helps heighten the seriousness of following such laws as the Warren act or what are the penalties that employers would face.

So you can get 60 days of wages and benefits. That means if somebody was on COBRA and they had a heart attack and you were supposed to be covering them, that heart attack now gets covered on your insurance. So that's huge. There can also be penalties. There can be attorneys fees. Of course, if you did it all wrong, it's also subject to class action treatment, but also potentially a PAGA claim because the cow warn the baby warn is in the labor code. So we've got a lot of different potential liabilities, and it's really just as important as worrying about overtime or rest breaks and meal periods. I think often when we're hiring and we're employing, we're thinking about these rules more. When we're talking about shutting down or laying off or doing reductions in force, we're so focused on that process that we don't realize, oh my gosh, there's additional liability here.

I think that's so well stated. And one other thing that I want to mention is a couple weeks ago, everybody was working fast and furious. Now we have quite a bit of information out there and this executive order that softens or relaxes as far as the timing requirements. So for those employers that are looking ahead for reductions in force, which unfortunately is likely to come for some, there's not going to be that, oh yeah, it was a little bit confusing back then. Do have some clear guidance and requirements. So for those employers that were looking for the hey, I was doing my best a month ago, might get it. Now that we have more guidance on the executive order, the leniency may not be there as much.

Well, Erica, that's a really good point because that's how the governor's executive order is actually written, that you have to give as much notice as feasible or practicable. Now that we're hearing about all of this, it's going to be real hard to argue two months from now that you didn't know you were going to have to give notice. I mean, this is all over everywhere. So that's why I think this topic is so timely.

Well, appreciate it as always, Jennifer, and I know that our listeners do, too. So thank you again so much for being here through all of this. We really appreciate it.

Well, thank you. I love partnering with you guys. So it's my honor to be here. Of course.

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