A California Court of Appeals has held that temporary furloughs trigger notice obligations under the California Workers Adjustment and Retraining Notification Act (CA-WARN). Specifically, the appellate court in The International Brotherhood of Boilermakers v. NASSCO Holdings Inc., decided that employees were entitled to 60 days’ notice of termination under CA-WARN after the employer temporarily furloughed more than 50 employees within a 30-day period at a single worksite in California.1 The court found that furloughs are layoffs for the purpose of the CA-WARN, even though the temporary layoffs would not have triggered notice obligations under the federal Worker Adjustment and Retraining Notification Act (Fed-WARN). As a result, employers that plan to furlough employees in California should carefully consider whether the furlough triggers a CA-WARN notice obligation.

Background

The defendant company employed a variety of workers in its shipbuilding business. Its shipyard employees were represented by the International Brotherhood of Boilermakers. In March of 2014, the company furloughed 90 employees for three weeks due to lack of shipyard work. The company continued some employee benefits, but did not pay the employees during the furlough. The union protested and argued that this was a layoff that triggered CA-WARN notice obligations. The company disagreed, arguing that this was a temporary furlough that did not meet the definition of a “layoff” according to CA-WARN.

Three employees and the union sued for failure to provide notice according to the CA-WARN. After considering cross-motions for summary judgment, the lower court granted the plaintiffs’ motion and found that temporary furloughs were layoffs for the purpose of the Act. On appeal, a California Court of Appeals agreed that furloughs were layoffs, even if they last for less than the six-month federal WARN standard.

Analysis

This decision complicates the already complex question of when employers are required to provide 60 days’ advance notice of certain group terminations to employees and certain government agencies under the CA-WARN and Fed-WARN. CA-WARN requires 60 days’ notice be given to employees and specific government entities when an employer lays off 50 or more employees at a “covered establishment” that employed 75 or more persons in the prior 12 months.2 This requirement also applies when an employer relocates or closes a covered establishment. While furloughs/layoffs of less than six months do not require notice under Fed-WARN, the NASSCO Holdings decision obligates employers to provide 60 days’ notice to certain employees furloughed in California for much shorter time periods. Accordingly, this decision presents a new challenge for employers by limiting the ability to furlough 50 or more employees at a single location in California without providing 60 days’ notice. Depending on whether the employer provides sufficient notice of project-based employment, this decision may be particularly problematic for employers that frequently use furloughs to manage staffing needs.

Recommendations

The NASSCO Holdings decision may be appealed. In the meantime, employers should:

  • Plan furloughs in California at least three months in advance whenever possible in order to allow time to comply with potential notice requirements if notice is required.
  • Explore the complicated definitions, options and exceptions to CA-WARN to determine if there may be reasons that notice is not otherwise required.3
  • Comply with CA-WARN notice obligations for temporary furloughs when furloughing 50 employees or more at a covered establishment, regardless of the planned length of the furlough.
  • Begin negotiations with union representatives if employees are represented by a union early to obtain contractual terms that will accommodate notice requirements.
  • Consult Fed-WARN Act guidelines for furloughs that last six months or longer.