Why it matters

In a troubling new decision, a California appellate panel ruled that the state’s Worker Adjustment and Retraining Notification (WARN) Act notification requirement applies to a temporary furlough lasting four to five weeks. The case involved NASSCO, a ship building and repairing company with staffing needs that change frequently. On March 3, 2014, the company notified 14 employees that they were not to return to work for at least three weeks. Two weeks later, NASSCO informed an additional 76 workers they were also out of work for at least three weeks. Some of the employees returned to work on April 7, and the rest came back on April 14. The union sued on behalf of the employees, arguing that the failure to provide prior notice of the time off violated the state’s WARN Act, seeking back pay and statutory penalties. The trial court granted the union’s motion for summary judgment, rejecting NASSCO’s argument that the time off was simply a temporary reduction in manpower and not a layoff. The appellate panel affirmed, finding that unlike the federal statute—which does not require notice when the time out of work lasts for less than a six-month period—California’s law applies to temporary layoffs. The ramifications for employers in the state are serious, with the potential for significant penalties under the WARN Act for failure to comply with the statute’s notification requirements.

Detailed discussion

NASSCO Holdings employs thousands of workers in its ship building and repairing business, where the employees are represented by The International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers, and Helpers. NASSCO’s staffing requirements change frequently, and the collective bargaining agreement contains rules applicable to terminations and unpaid work stoppages.

Realizing it needed to temporarily reduce the labor force because of a lull in shipyard production work, NASSOC notified 14 employees on March 3, 2014, they were not to return to work for at least three weeks. On March 17, an additional 76 workers were informed they were out of work for at least three weeks.

Some of the employees returned to work on April 7, and the rest were back on April 14, 2014, all returning to their same job classification.

The union president wrote to NASSCO, claiming that by laying off more than 50 workers within a 30-day period, the employer triggered the statutory notice protections of California’s Worker Adjustment and Retraining Notification (WARN) Act. NASSCO responded that the time off was more accurately characterized as a “furlough” or a “manpower reduction,” adding that under the federal WARN Act, notice is not required when the layoffs are for less than a six-month period. The union disagreed and filed suit.

Ruling on cross motions for summary judgment, a trial court judge sided with the union and entered final judgment in the plaintiffs’ favor for $211,405 plus interest, costs and attorney fees. NASSCO appealed.

Beginning with the language of the statute, the appellate panel considered the statutory duty to provide notice. There was no question NASSCO was a covered establishment with 75 or more employees or that more than 50 workers were instructed to stop working. However, the employer argued that the situation did not fall under the definition of layoff under the statute—“a separation from a position for lack of funds or lack of work”—because the work stoppage was for only a brief period.

But the court said the statute did not dictate a specified time period. “Under its plain meaning, ‘separation’ means an action of moving apart, and does not contain a temporal component,” the court wrote. “Under a commonsense understanding, a separation can be permanent or it can be temporary. Thus, the fact that the work stoppage was temporary does not logically take the action outside the scope of the statutory duty.”

This position was bolstered by the statutory context in which the term “separation” appears, the court added. Lawmakers could have defined a layoff to mean the termination of employment, or even separation of employment, but chose not to. “The Legislature used the phrase ‘from a position’ immediately after the word ‘separation,’” the panel wrote. “The concept of being separated from a position does not suggest a requirement that the employment relationship be severed.”

Applying this reasoning to the NASSCO workers, the “‘separation from the position’ definition does not suggest a severance from the employment relationship must occur before the notice duty triggers,” the court said. “Instead it encompasses a temporary job loss, even if some form of the employment relationship continues and the employees are given a return date.”

The court found additional support in the statute’s other definitions, many of which contain explicit time restrictions—demonstrating that the legislature knew how to establish such limits when it wanted to do so.

NASSCO’s efforts to rely upon dictionary definitions and judicial decisions to support its view that a “separation” means a complete termination of the employment relationship did not sway the appellate panel. Nor did its attempt to characterize the time period as a “furlough,” a term the court noted was never used in the California WARN Act.

“The California WARN Act does not state that a separation must occur for a specified time period, and there are no statutory grounds for determining the scope of such a proposed rule,” the court wrote. “Although an employer may view a five-week break as minimal, a worker who is living paycheck-to-paycheck may not.”

Even assuming the relevant language of the statute was ambiguous, the legislative history and the underlying public policy support the conclusion that an employer has the obligation to provide notice even if the intended layoff is temporary, the panel said.

Congress enacted the federal WARN Act in 1988, but it wasn’t for another 15 years that California passed its own version of the statute, “believing the federal law was ineffective in various respects and seeking to ‘supplement’ the law to provide stronger worker protections.”

One of the ways in which the state analogue attempted to beef up worker protections: reducing the number of workers for coverage (from 100 employees under the federal WARN Act to just 50 in California) and for notice (a decrease from 500 employees or 33 percent of the workforce down to 50 workers). State legislators also changed the language of the definition of “mass layoff,” eliminating the six-month time period found in the federal statute.

“[T]he entire thrust of the legislative effort in enacting the California WARN Act was to provide greater protection to California workers than was afforded under the federal law,” the panel said, noting that the statute is remedial in nature and is intended to provide protections to workers, their families and communities. “Otherwise there would have been no need for a state law.”

To read the opinion in The International Brotherhood of Boilermakers v. NASSCO Holdings Inc., click here.