California Law on Layoffs

By Dan Ketchum - Updated August 07, 2018
Depressed businessman sitting on stairs with belongings in cardboard box beside him

Straight from the horse's mouth – where the horse, in this case, is the Labor Enforcement Task Force of California – all Californian workers are not only protected by federal and state labor laws, but "it does not matter where you born or what your legal status is. Once you are hired, you have rights."

Those rights, by law, extend to all sorts of protections for workers, including rest and meal breaks, minimum wage and overtime requirements, health and safety regulations, rights to take legal action against your employer without fear of employment-based punishment, and benefits that kick in when you're injured.

Of course, that's all fine and dandy if you're actively employed in the Golden State. But in those unfortunate cases in which the risk of getting laid off looms large, the famously progressive coastal state has your back in a whole lot of different ways, including some fairly expansive California layoff laws – and those are all on the books.

Tip

In general, California's state laws are even tighter on layoffs than federal laws, especially in their expansion of WARN laws.

California WARN Law

Passed in 1988, the Worker Adjustment and Retraining Notification Act is a United States labor law that gives employees the right to some notice before large-scale layoffs, such as the closure of a manufacturing plant. Under federal law, laid-off employees are entitled to damages if their employer doesn't provide a certain amount of notice.

As it happens, lawmakers on the West Coast didn't feel like the federal WARN act was quite up to snuff for their residents – in 2003, they put some distinctly Californian twists on the WARN act, most of which further favor laid-off employees. California Labor Code 1400 through 1408 expands on the nationwide WARN law in what has come to be known as the state's very own "mini-WARN" act. As per the unique California WARN law, employers that own an industrial or commercial facility employing at least 75 employees are affected; federal WARN law, less stringent in comparison, affects only employers with 100 employees working at least 20 hours per week, six months out of the year. California's WARN law may even affect part-time workers, under certain circumstances.

While federal law, which is of course applicable in California, kicks in when these employers lay off at least 33 percent of their workforce, it doesn't cover relocation. The California WARN law, on the other hand, does cover relocation; it protects employees when an industrial or commercial facility with 75 or more employees moves to a location at least 100 miles away.

In Cali, laid-off employees that meet these varying qualifications are legally entitled to a minimum of 60 days notice upon termination, whether they're in a union or not. This is the same amount of notice as federal law, and like the federal WARN law stipulates, the notice must include information about the planned layoffs, such as whether termination is expected to be temporary or permanent, when it will take effect and whether or not employment seniority is taken into account (also known as "bumping rights").

It's not only employees (or their legal representatives) that are legally required to receive 60 days of notice before mass layoffs in California under WARN law. Employers must also provide written notice to the state-disclosed worker unit. In this case, that's either the Employment Development Department or Workforce Services Division. Additionally, notice must be served to the Local Workforce Development Areas, the county government in question and the chief elected official of each city in which the layoffs occur. According to the California Employment Development Department, WARN notices may be filed by email or physical mail. Once the notice is filed, the EDD's Rapid Response Team and America's Job Center of California step in to assist employers and employees during mass layoffs, distributing information about dislocated worker services and unemployment insurance programs.

On federal and state levels, employers who violate the Worker Adjustment and Retraining Notification Act may end up having to pay any worker affected full pay and benefits for up to 60 days, minus any severance pay. For example, if a worker in California only got 10 days of notice before a mass layoff without any severance pay, she'd be entitled to 50 days pay and benefits by law. On the employer end, businesses may be subject to civil penalties of up to $500 per day for each violation of the WARN act.

Exceptions to the WARN Rule

In California and all 49 other states, WARN rules do not apply to seasonal or temporary employees, as these workers were hired with the understanding that their employment was not permanent. Across the United States, WARN law is not applicable when the mass layoff is the result of employee action such as a unionized strike or an employee lockout. By California's mini-WARN act, employers are not required to provide notice of termination if it results from an act of war or physical calamity. Employers are also exempted from this requirement if they are actively seeking capital to enable them to prevent or delay job losses, at least to the extent of the 60-day notice.

The federal WARN act does exempt employers from providing 60-day notice under unforeseeable business circumstances or natural disasters. In cases such as these, companies are only required to give as much notice as possible, given the circumstances. The California WARN act does not provide employers with exemptions for layoffs resulting from unforeseeable events.

Only in California does the WARN act permit an award of attorney fees in the case of litigation motivated by layoffs, but Cal-WARN does not offer that award for prevailing defendants (the employers). This policy is reflective of the employee-leaning nature of Cali's expanded WARN act, as NASSCO Holdings, Inc., pointed out in the 2017 California Court of Appeal case, Boilermakers v. NASSCO Holdings, Inc.: "The entire thrust of the legislative effort in enacting the California WARN Act was to provide greater protection to California workers than was afforded under the federal law [...] California employers, not California employees, should bear the risk of surprise resulting from an unexpected layoff."

More California Protections

California layoff requirements are a little less stringent when dealing with individual terminations rather than mass terminations. Los Angeles law firm Hennig, Ruiz and Singh says, "more often than not, California employers have the ability to lay off workers due to economic business needs if their employees are hired 'at-will.'" "At-will," in this case, means that the duration of the employee-employer relationship was not specified at the time of hiring.

On the flip side, as a contracted employee in California, the terms of termination should be clearly laid out in contract form. If an employer lays off a contracted employee for reasons not specified in said contract, the employer may face legal ramifications. Even for "at-will" employees, employers who break their own termination policy can face legal consequences.

Additionally, in California and other states, union workers may be covered by collective bargaining agreements while government employees may benefit from civil service laws that prevent employers from laying them off without just cause.

For many workers, "can I get unemployment if I get laid off?" is the first question that arises after losing a job. In California as in the rest of the country, one requirement for receiving unemployment benefits is that you must be out of work by no fault of your own – downsizing, losing your job via a reduction-in-force termination, or layoffs all meet this qualification.

Discriminatory and Retaliatory Layoffs in California

California's own mini-WARN act isn't alone in protecting employees from unfair layoffs – the state also enforces the California Fair Employment and Housing Act.

The CFEHA protects California employees from discrimination and harassment – including layoff and termination situations – on the basis of age, ancestry, color, race, religion, sex, gender or gender identity (including gender expression), sexual orientation, marital status, national origin, mental or physical disabilities, medical condition, pregnancy or the potential for medical, pregnancy, disability or family care leave.

If California employees protest workplace discrimination – such as by filing a complaint with the California Department of Fair Employment and Housing or the Equal Employment Opportunity Commission – their employers may not legally lay them off them in retaliation. This same protection applies to whistleblowers who report legal violations within the company to their supervisors or law enforcement agencies.

What About Severance?

In California, severance pay law is not in effect. There are no state laws requiring employers to pay severance – employers are only obligated to pay severance if a compensation package is promised in the employee-employer contract, or by way of another guarantee. Those guarantees may include a company-wide severance policy (such as one detailed in an employee handbook), a clause in your pre-employment contract, a union agreement, or even just a well-established practice of having paid compensation packages to laid-off employees. So, if every employee who has been let go from your company for the past five years has received a severance package but you didn't get one, you may have grounds to take legal action.

Although severance pay isn't a sure bet on the West Coast, California does impose strict laws on exactly when you must receive your final paycheck – in fact, the state requires employees to have their final check in-hand at the time of being laid off. More than that, the final paycheck must include compensation for all accrued vacation or paid time off (but, in general, not sick leave). Similarly to how the WARN act is enforced, you're entitled to daily wages for every day your employer is late with your final paycheck, for up to 30 days.

There are a few exceptions to this final paycheck rule, though. In the case of layoffs of seasonal employees, employers have 72 hours to produce a final paycheck. If there's a solid return-to-work date after the layoffs, employers may pay the employees at the time of their next regular payday.

From the Employer Side

California termination laws are a two-way street. They help protect employees from exploitation, and when followed properly by businesses, they protect the business from potential litigation resulting from terminations.

In addition to considering the California Fair Employment and Housing Act – including its protections against discriminatory and retaliatory firing practices – California employers must consider other factors before laying off workers. For instance, terminating an employee who has filed a workers' compensation claim or who intends to file one may be considered workers' compensation discrimination.

All terminated employees must receive the State of California Employment Development Department's booklet on unemployment benefits, also known as DE-2320. They must also receive a copy of "Notice to Employee as to Change in Relationship," issued pursuant to provisions of Section 1089 of the California Unemployment Insurance Code.

About the Author

As a freelance writer and small business owner with a decade of experience, Dan has contributed legal- and finance-oriented content to diverse sources including Chron, Fortune, Zacks.com, Motley Fool and MSN Money, among others.

Cite this Article A tool to create a citation to reference this article Cite this Article