In a recent decision, a California Court of Appeal ruled for the first time that a temporary layoff is sufficient to trigger the protections of the California WARN Act (“Cal WARN”). In Int’l Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers and Helpers, Local 1998 v. NASSCO Holdings, Inc., the court distinguished the federal WARN Act (“WARN”), which applies to layoffs of six months or longer, and the California statute, which contains no such limitation. Although it acknowledged that the de minimis doctrine might provide an exception for very brief layoffs, the court provided no guidance as to where that threshold might lie. California employers are therefore left to guess as to when the obligations of Cal WARN are triggered. The risks are substantial, as failure to comply can result in liability for back pay and lost benefits, interest, and attorneys’ fees, as well as penalties of $500 per day.

Both WARN and Cal WARN were enacted to ameliorate the impact on workers of unannounced layoffs. A key feature of both laws is the requirement that employers give at least 60 days’ notice before implementing a “mass layoff.” WARN applies only to employers having more than 100 employees, and only to layoffs affecting either 33 percent of the workforce or 500 employees. Cal WARN, by contrast, applies to employers with 50 or more employees, and requires notice when 50 or more employees are impacted at an “establishment,” regardless of the percentage of the workforce.

In NASSCO, the court had to decide whether a temporary layoff of four to five weeks triggered the protections of Cal WARN. The facts were straightforward and not disputed.  NASSCO is a ship building and repair company that employs thousands of employees in California, some of whom are represented by a union and covered by a collective bargaining agreement. Due to the sporadic nature of its business, NASSCO is often required to implement short term furloughs, and the collective bargaining agreement sets forth the rules for doing so.

Over a two week period in 2014, the company implemented a temporary furlough of about 90 employees, without notice. During the furlough, the employees were unpaid and did not accrue vacation or pension credits, although health care premiums were paid. All of the employees returned to their same positions about four to five weeks after being furloughed.

The union claimed that the company’s actions violated Cal WARN, and brought suit.  In defense, NASSCO argued that because the layoffs were temporary, they were a “furlough” and did not constitute a “separation from a position” within the meaning of Cal WARN. (Both parties agreed that WARN had no application, because the layoff was shorter than six months.)

Agreeing with the trial court, the Court of Appeal ruled that NASSCO had violated Cal WARN by failing to provide 60 days’ notice. In arriving at this determination, the court focused on the word “layoff,” which the statute defines as “a separation from a position for lack of funds or lack of work.” The court noted that the layoff, even though temporary and therefore not a “separation from employment,” was still a “separation from a position,” and therefore triggered the Cal WARN obligations.

The provisions of WARN and Cal WARN are complicated and technical, and in the absence of “bright line” guidance from the courts, California employers who are contemplating a layoff  or furlough of any duration affecting 50 or more employees should contact experienced employment counsel for guidance.