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Sound the Alarm: California Company Ordered to Pay $211,405 in Back Wages for Violating Cal-WARN

Earlier this month, employees at a San Diego shipyard were awarded $211,405 in back pay and lost pension benefits after a California Appellate Court affirmed a lower court decision which ruled that the employer violated the California WARN Act by not providing employees with a 60-day notice of an impending temporary layoff of 90 employees.

NASSCO Holdings Incorporated and National Steel and Shipbuilding Company (collectively “NASSCO”) employs thousands of workers in its shipbuilding and repairing business. NASSCO employees are represented by The International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths Forgers and Helpers, Local 1998 (the “union”). NASSCO’s staffing requirements change frequently and its collective bargaining agreement (“CBA”) with the union contains detailed rules regarding the handling of terminations and short-term unpaid work stoppages, which the CBA refers to as a “layoff.”

In early 2014, NASSCO determined it would need to temporarily reduce its workforce due to a lull in its shipyard production work. Between March 3, 2014, and March 17, 2014, about 90 employees were laid off. All of the affected employees returned to work by April 14, 2014. Afterwards, the union president informed NASSCO that the layoff triggered the California WARN Act notice requirements. NASSCO tried to argue that it did not have to comply with the California WARN Act notice because the layoff was not a layoff at all, but instead was a furlough or a manpower reduction.  NASSCO pointed to the fact that at the time of the reduction the employees were scheduled to eventually return to work and did in fact return to work. 

Under the California WARN Act, a covered employer must provide 60 days’ written notice to employees if it institutes a “mass layoff, relocation, or termination." A covered “establishment" includes any industrial or commercial facility that has employed 75 or more persons within the preceding 12 months. A mass layoff involves a layoff of 50 or more employees within any 30-day period. The term “layoff” is defined as “a separation from a position for lack of funds or lack of work.”

An employer who violates the notice requirement under California WARN Act is liable for, among other things, back pay and the value of any lost benefits to which the employee would be entitled had the employment not been lost. Liability is calculated for up to a maximum of 60 days or one-half the number of days that the employee was employed, whichever is smaller. The parties recognized that there was no liability under the parallel federal WARN Act because the federal law applies to a temporary layoff only if the layoff exceeds six months.   

The Appellate Court agreed with the lower court that the California WARN Act did apply to NASSCO’s temporary “furlough” and therefore NASSCO was required to provide the required notice under the statute. Specifically, the Appellate Court noted that the California WARN Act does not require that a separation from employment must occur for a certain period of time as is required by its federal counterpart and that, while the employer may view a five-week break as minimal, an employee who is living paycheck to paycheck may not.

COUNSEL TO MANAGEMENT

Employers who conduct routine layoffs, especially those who conduct seasonal or regular short-term layoffs, must be aware of their obligations under both the California WARN Act and its federal equivalent. Generally speaking, employers of seasonal/temporary workers are not required to issue WARN notices at the end of a normal seasonal layoff cycle when it is known by the employee that the employment was seasonal and temporary. The burden will be on the employer to demonstrate that at the time of hire the employee knew that their employment was seasonal/temporary.

Employers must also be aware that Cal-WARN and federal WARN have different requirements which trigger the notice requirements and that employers must be compliant under both laws. Please contact The Saqui Law Group with any questions regarding your company’s duties under Cal-WARN and the federal WARN, especially if your company conducts routine and/or seasonal layoffs.

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