By AMANDA BRONSTAD
Staff Reporter
Employer groups are concerned about a new law significantly lowering the threshold at which companies are required to notify employees and government entities of impending layoffs.
They argue that the state’s more stringent version of the federal Worker Adjustment and Retraining Notification, or WARN, Act will create added burdens, costs and potential litigation for a wider group of companies.
“This is one rule that can be very expensive,” said Jim Kuns, consultant with the Employers Group in L.A. “You have to potentially pay for any liability that occurs when someone loses their benefits, or if they lost medical coverage and had high expenses. The employer could be stuck.”
But legislators and employee groups say that workers need more protection, especially in times of greater job insecurity.
“We believe the federal law didn’t go far enough,” said Teresa Stark, chief of staff for Assemblyman Paul Koretz, D-West Hollywood, who drafted Assembly Bill 2957, which became effective on Jan. 1. “We wanted to provide workers in California with more tools to facilitate their re-entry back into the workforce.”
Until Jan. 1, California businesses were governed by the federal law, which requires employers with 100 or more full-time employees to give 60-day notice of layoffs. The WARN Act was created in 1989 to give workers time to find another job before they lose their current one.
But the federal law is limited to companies that lay off either in excess of 500 employees or at least 50 people where they represent 33 percent of the workforce. The federal requirement excludes layoffs related to relocations, transfers and part-time employees.
While the federal requirements remain in place, they have been supplanted for California businesses.
Under the new requirements, businesses must notify employees at locations with 75 or more full-time or part-time employees if there is to be a layoff of 50 or more people. The state law has no 33 percent or 500-person minimum requirement.
Among the businesses that may now have to notify employees will be small businesses that have most of their operations at a single site, as well as larger businesses with sizeable offices. Also likely to be affected will be small manufacturers and defense companies, as well as large retailers and restaurants with several part-time employees.
Under the WARN Act and the California law, employers must pay $500 a day in civil fines for each day they violate the 60-day notification requirement. They must also pay benefits, back pay and attorney’s fees if a lawsuit is filed against them.
Attorneys who handle wrongful termination suits said the new state law ensures more companies be held liable.
“This will enable employees to find a job while they have a job, not wait until after they get their pink slip,” said Jeffrey Winikow, a Los Angeles sole practioner. “I’ve found few employers, unless faced with a WARN exposure, that were candid with employees about closing down a plant. What employers fear is how to captain the ship to closure when the crew is jumping off the boat.”
Of concern to employer groups is the new law’s ambiguous wording.
Under the WARN Act, a mass layoff or plant closing subject to notification must create “employment loss,” meaning that employees must be unemployed. Under the state law, the “employment loss” standard is not applied, which means transfers, relocations and temporary shutdowns may also be subject to notification, said Richard Simmons, an employment partner at Sheppard Mullin Richter & Hampton LLP.
For instance, if a restaurant or hotel closes down for two weeks for remodeling, it may have to file notification and pay the wages of the employees for two weeks, he said. Also, if 50 employees work for a company’s Van Nuys location but are offered jobs in Glendale, the company may still be subject to the 60-day notification requirement because the employees are not required to have an “employment loss” under California’s law, he said.
Plaintiffs’ attorneys and legislators dispute the ambiguities. They say the litigation is more likely to come from companies attempting to skirt their responsibilities through various exceptions included in the state law that were not included in the WARN Act.
“Employers will know about the law,” Winikow said. “There will be more litigation about an employer who wiggles out of it than about damages occurring to employees.”
Assembly Bill 3957 – Effective Jan. 1.
Obligations:
– 60-day notice to employees and government entities
Businesses covered:
– Facilities employing 75 or more employees,
full- or part-time
– Excludes companies actively seeking funding; broadcasting, motion picture, construction, drilling, logging and mining industries when layoff involves completion of a project
– Excludes layoffs caused by physical calamities or acts of war
Circumstances:
– Layoffs of 50 or more people
– Mass layoffs within a 30-day period, relocations and terminations
Violation costs:
– $500 per day plus back pay & benefits of each employee
