The BP Blast!: A California Employment Law Blog

FEDERAL AND CALIFORNIA STATE WARN LEGISLATION

As the national economy continues to deteriorate, an unparalleled number of businesses have been financially devastated, many to the point of closing operations, and others facing the unpleasant realization of mass layoffs. The U.S. Labor Department recently reported 21,137 mass layoffs took place in 2008, resulting in the termination of more than 2.1 million workers. As employers analyze the advantages and disadvantages of mass layoffs and strategize the least laborious manner to implement cutbacks, it is also essential they familiarize themselves with the legal responsibilities associated with these decisions.

Enacted in 1988, the Federal Worker Adjustment and Retraining Notification ("WARN") Act requires covered employers give affected employees at least 60-days notice of a plant closing or mass layoff. Fifteen years later, the California Legislature created an additional obligation for California employers to consider when conducting layoffs and plant closings in the form of the "Baby-WARN" Act. Although similar to the companion federal law in many respects, Baby-WARN extend coverage to businesses with as few as 75 employees and to layoffs of 50 or more employees regardless of the size of the business. In contrast, WARN applies to businesses employing 100 or more full-time employees and to layoffs of 50 or more full-time employees, if the layoff affects 33% of the workforce at a single site or 500 or more people at a single site, during a 30-day period. While the federal statute was accompanied by extensive regulations and guidance from the U.S. Department of Labor, the California legislation passed with little guidance.

Employers who fail to provide the required notice face potential class-action litigation with severe damages and penalties. On February 9, 2009, dynamic random access memory (DRAM) maker Qimonda AG was stricken with a putative class action filed by former factory employees who claim the company violated the Federal WARN Act by failing to give them proper notice before shutting its Virginia plant. (Blair et al. v. Qimonda North America Corp. et al., Case Number 09-CV-00073, in the U.S. District Court for the Eastern District of Virginia.)

According to the current complaint, at least 1,000 workers at Qimonda's Virginia facility were adversely affected by the company's failure to give notice prior to closing the plant on February 4, 2009. Plaintiffs' allege Qimonda failed to pay wages, make pension and 401(k) contributions, and provide health insurance coverage for the 60-day period following their dismissal, in violation of the WARN Act.

The plaintiffs are seeking damages equal to the sum of unpaid wages, salary, commissions, bonuses, accrued holiday and vacation pay, and pension and 401(k) contributions for 60 working days. They also are asking for health insurance coverage and other fringe benefits under the Employee Retirement Income Security Act (ERISA) for 60 working days, attorneys' fees and other costs.

Employers wishing to avoid the harsh realities now facing Qimonda should (1) carefully consider the potential legal ramifications associated with layoffs and other employment decisions made during difficult economic times and (2) always consult with knowledgeable and experienced employment counsel making similar determinations.