The WARN Act and Mass Layoff Class Actions in California

What is the law regarding mass layoffs? The federal Worker Adjustment and Retraining Notification Act (WARN Act) requires most employers planning a plant closing or a mass layoff to provide affected employees and certain state and local government officials at least 60 days’ written notice. California has an equivalent law that can be found in the Labor Code § 1401(a). If this law is not followed lawyers and attorneys may file a class action to recoup lost wages for the employees.

The purpose of these laws is threefold:

  • To assure the most rapid possible readjustment and retraining of displaced workers and to ease the personal and financial difficulties for workers who must make these transitions.
  • To provide workers and their families some transition time to adjust to the prospective loss of employment, to seek and obtain alternative jobs and, if necessary, to enter skill training or retraining that will allow these workers to successfully compete in the job market.
  • to provide a wage worker’s equivalent of business interruption insurance (that) protects a worker from being told on payday that the plant is closing that afternoon and his stream of income is shut off.

Aggrieved employees or their “representative” may also sue on behalf of other persons similarly situated. WARN claims are “particularly amenable to class litigation.” Finnan v. L.F. Rothschild & Co., Inc. (SD NY 1989) 726 F.Supp. 460, 465.

The California statute applies to any person or business entity that owns and operates a covered establishment, which is any industrial or commercial facility that employs at least 75 persons. Labor Code § 1400(a),(b).

An employer who fails to give the requisite notice before ordering a mass layoff, relocation or termination is liable to each affected employee for:

  • Back pay at the average regular rate of compensation received by the employee during the last three years of his or her employment, or the employee’s final rate of pay, whichever is higher.
  • The value of the cost of any benefits to which the employee would have been entitled had his or her employment continued. This includes any medical expenses incurred by the employee that would have been covered under an employee benefit plan.

The court may award reasonable attorney fees as part of costs to any plaintiff who prevails in such an action. Labor Code. § 1404. An employer who fails to give the requisite notice is also subject to a civil penalty (payable to the state) of not more than $500 for each day of the violation (no matter how many employees are involved).

 

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