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You Have Been WARNed: California Employers and their Duty to Warn of Shutdowns

August 5, 2014

 

Employment in California is at-will. That means that, absent some type of agreement to the contrary, you can be fired for any reason or for no reason at all.

But there are lots of limitations on that rule. The federal government has some limitations, but the State of California has many more. California law frequently models itself after federal law, but then adds additional protections. One example is California's WARN Act, or Cal-WARN.

California's Worker Adjustment and Re-training Notification Act applies to employers with more than 75 employees in the last 12 months. Passed in 2002, Cal-WARN was a reaction to mid-sized companies opening and closing in rapid succession, taking a heavy toll on local communities.

In a nutshell, Cal-WARN requires covered employers to give their workers 60 days advanced notice of a mass layoff, relocation, or termination of operations. If they don't do it, they're liable for their failure to provide such notice up to 60 days of wages and benefits.

That's good in theory, but here's the problem: companies that are laying off or closing down probably don't have any money. So who's going to pay those 60 days of wages and benefits?

That's where Cal-WARN is so much better than the federal WARN Act. Although the courts have said that Cal-WARN is modeled after the federal law, the two really have very little to do with one another. In fact, they share virtually no language in common. (As near as I could tell, Cal-WARN may have been modeled after Maine's Severance Pay Act, because that's the earliest law that I could find with language similar to Cal-WARN.)

Cal-WARN has its own definition of "employer," which includes "any person . . . who directly or indirectly owns and operates a covered establishment. A parent corporation is an employer as to any covered establishment directly owned and operated by its corporate subsidiary.:

That's a lot to take in, but it essentially means any entity, whether a person or a company, who directly or indirectly owns and operates the business. A parent corporation is liable for its subsidiary's actions even if it doesn't operate the business.

This opens up a lot of avenues under Cal-WARN that aren't available under the federal act. I've hooked private investment companies (they're my favorites; their egos just won't let them not try to operate the business themselves), parent corporations, and individuals into liability for Cal-WARN. That's because the whole point of Cal-WARN is to protect workers from sudden unemployment,  and to give them a financial bridge to finding something else. So Cal-WARN extends liability to employers above and beyond what the law normally thinks of as an "employer."

Cal-WARN is a bit of a hodgepodge of a statute. It's internally contradictory, and in some places it just doesn't make any sense. But it is a powerful tool available to displaced workers, and it is especially valuable in a bad economy.

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