California Eases Layoff Rules as Businesses Reel From COVID-19 Pandemic

Gov. Gavin Newsom has signed an executive order freeing employers from some state restrictions governing mass layoffs and employee relocations in the wake of the COVID-19 pandemic.

The action temporarily suspends requirements that businesses that have employed 75 or more full- and part-time employees in the 12 months give 60 days warning that they plan to terminate a large number of workers. The order instead requires businesses hurt by coronavirus-related conditions to give “as much notice as is practicable” and to tell laid-off and furloughed employees that they may qualify for unemployment insurance.

The move is “a big deal for employers who are … forced to lay off at least 50 employees or cease operations,” David Reis, head of Arnold & Porter Kaye Scholer’s labor and employment practice group, said Wednesday.

“This executive order will allow them to avoid paying the statutory and civil penalties that would otherwise follow from a shut down or mass layoff where the employer doesn’t provide at least 60 days’ notice,” Reis said. “Many employers were worried about the uncertainty over whether they would risk having to pay 60 days’ wages as a penalty under Cal-WARN if they had to shut down or conduct a mass layoff.”

The changes, in effect during the declared coronavirus emergency, align the state’s layoff-alert law more closely with the federal Worker Adjustment and Retraining Notification Act, better known as the WARN Act.

The governor gave the state Labor and Workforce Development Agency until March 23 to issue guidance for companies on complying with the executive order.

Newsom signed the order as companies in the retail, restaurant, travel and hospitality industries reel from widespread shelter-in-place orders around the state and general guidance by health authorities for the public to avoid gatherings.

A survey released Tuesday by NPR, PBS Newshour and Marist of 835 working adults in the United States found that 18% reported losing work hours or being laid off due to the coronavirus. Thousands of employees are facing reduced shifts or being laid off across industries, as companies respond to reduced demand, according to a new Wall Street Journal report.

“Many, many companies will be impacted,” said Mandana Massoumi, who leads Manatt, Phelps & Phillips’ retail and consumer products practice. “A lot of organizations are reassessing options as they consider the new reality.”

Late Wednesday, the U.S. Senate passed a $104 billion package that includes boosts to unemployment insurance. Last week, Sen. Dianne Feinstein, D-California, introduced legislation “prohibiting employers from firing, punishing or otherwise discriminating against a worker who is quarantined or isolated.”

More than two dozen cities, states and U.S. territories have some version of a layoff notification law. Those are now under scrutiny by many jurisdictions.

“Quite frankly we see developments happening on an hourly basis,” Massoumi said. “This is a fast-moving topic that is changing and is being modified. These are truly unprecedented times.”

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