Understanding California Labor Laws and the WARN Act

Created in 1988, the Federal Worker Adjustment and Retraining Notification Act (‘WARN” Act) requires employers to notify their staff at least sixty days prior to a mass layoff or closing of a plant. The law is intended to provide employees sufficient time to find work before being laid off, or to make other arrangements in advance of their upcoming separation of employment.

Several states, including California, have different variations of the WARN Act as well as other California labor laws The California WARN Act was established in January, 2003 and expands the obligations of the Federal Act.

The California Act differs from the Federal Act in a number of ways. For example:

  • The California Act applies to layoffs that affect 50 or more employees within a 30-day period, regardless of what percentage those employees comprise of the total workforce. For example, a 600 employee company laying off 60 employees (only 10% of the workforce) would still be subject to California WARN. The Federal Warn Act defines a “mass layoff” as a layoff of 50 or more employees that comprise at least of 1/3 of the entire workforce (or 500 employees regardless of percentage).
  • California WARN applies to businesses that employ 75 or more employees, while the Federal WARN applies to businesses with more than 100 employees.
  • The California Act applies to part-time employees in addition to full-time employees, while the Federal Act only applies to full-time employees.

Collins v. Gee West Seattle

A recent court decision highlights the complexity of the WARN Act, and how a misinterpretation of the law is not a viable defense by an employer who violates it. On January 21, 2011, the Ninth Circuit Court of Appeals ruled in Collins v. Gee West Seattle that employees who quit after being notified of the impending shutting of operations, but prior to the actual closure, are still considered towards the minimum count of 50 employees.

In September, 2007 Gee West Seattle, an auto franchise with 150 employees, notified its staff that it would be shutting the business in 10 days. By the time they closed their doors, only 30 employees remained, a net loss of 120 employees. Several employees later sued Gee West claiming their employer had violated the WARN Act by not providing the minimum 60 days notice required by the law.

Gee West argued that only 30 employees remained at the time of the closure, and that all the prior employees had left their jobs of their own free will. Gee West claimed the WARN Act did not apply to their closure, and therefore were not required to provide 60 days notice.

In their decision, the Ninth Circuit ruled against Gee West and stated that employees who quit after being notified that they will be laid off are not considered “voluntarily departing”, but rather terminated employees as part of the shutting of operations.

The Court said that Gee West would have to prove that the employees left for reasons other than upcoming closure, and short of doing so, would be found guilty of violating WARN.

In Conclusion

This lawsuit, like so many others, reinforces that employers cannot claim “ignorance” as a defense against violating the law. The burden of proof lies with the employer to prove their innocence, and the courts will invariably rule in favor of the employees where the law has been violated, and the employer cannot prove otherwise. Another conclusion is that California labor laws differ from the federal laws in may ways, and employers must be more diligent in their compliance in this state.

For help with understanding the WARN Act, or any other State or Federal law, please contact one of our California Human Resources Experts who can assist you.

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