As entertainment industry employers continue to grapple with production hiatuses precipitated by the coronavirus outbreak, productions will need to remain mindful about circumstances that may transform a prolonged hiatus into a mass layoff or plant closing governed by California’s Worker Adjustment & Retraining Notification law (Cal-WARN). Because Cal-WARN contains an exclusion for entertainment industry employers’ layoffs of personnel in the normal course of project completion, production companies normally do not need to concern themselves with Cal-WARN for production layoffs in the normal lifecycle of the production. However, production stoppages due to coronavirus concerns would likely fall outside of the entertainment industry’s layoff exclusion for normal project completion. There is another Cal-WARN exclusion for seasonal employees, but not all production workers may be considered seasonal.
Generally, under Cal-WARN, a layoff of at least 50 employees in a 30-day period at an establishment employing at least 75 people over the prior 12 months or any employment loss resulting from closure of such an establishment requires at least 60 days’ advance written notices to the affected employees, their union, and state and local agencies that contain specified information to avoid employer liability for back pay, benefits, and penalties from insufficient notice. Governor Newsom recently suspended via executive order the 60-day Cal-WARN advance notice requirement and violation liability for employers that follow a challenging safe harbor procedure explained further below.
Rather than relying on a difficult safe harbor via the executive order that leaves employers with uncertainty of protection, production companies may consider the alternative of trying to structure production stoppages in a manner that avoids triggering Cal-WARN. Cal-WARN defines layoff of an employee as a separation from a position for lack of funds or work. A California court of appeals case ruled that that a temporary layoff of about 90 employees for 4-5 weeks with a projected recall date constituted a Cal-WARN layoff where the affected employees did no work, received no wages, earned no vacation time, and accrued no pension service credit. (Federal WARN excludes temporary layoffs under 6 straight months and reductions of hours greater than 50% for under 6 straight months from covered employment loss). The appellate court did not impose a black-letter rule on the minimum time period that a stoppage would constitute a Cal-WARN layoff but rejected using the firm federal WARN sub-6-month temporary layoff/major reduction in hours exclusions because they were omitted from Cal-WARN. Employers desiring to avoid any hiatus from transforming into a Cal-WARN layoff should consider taking measures to distinguish themselves from the temporary layoff facts of the appellate case.
As alluded earlier, those employers opting to proceed with a Cal-WARN mass layoff/establishment closing will need to adhere to the following requirements to invoke the coronavirus safe-harbor in the Governor’s executive order:
- distribute notices compliant with federal WARN notice content requirements to all Cal-WARN required employee, union and agency notice recipients,
- give as much notice as is practicable (a disputed issue ripe for litigation) with a brief statement in the notices of the basis for reducing the notification period,
- ensure business circumstances dictating the coronavirus-related mass layoff/establishment closing were not reasonably foreseeable as of the time that the standard 60-days’ advance notification would have been required, and
- advise in the employee notices of employees’ rights to apply for unemployment benefits using specific verbiage contained in the executive order.
Cal-WARN contains an exclusion for mass layoffs or closures necessitated by acts of war and physical calamity, but uncertainty whether the coronavirus outbreak would constitute a physical calamity, such as an earthquake, or whether layoffs and closures would be necessitated by the virus, prompted the executive order.
Finally, as a separate consideration, employers should take note the California Labor Commissioner has provided opinion letter guidance that any unpaid full stoppage exceeding two weeks may count as a termination/layoff triggering payment of all wages and any banked vacation wages (separate from CBA vacation pay arrangements) by the day before the prolonged stoppage begins (which as applied to entertainment industry employers would be the next regular payday after the last day before the prolonged work stoppage).
For any questions about this alert, you may contact:
Joseph Scudiero, Senior Vice-President & Chief Labor Counsel
Scott Bishop, Vice-President, Employment Law