Cal-WARN and Unemployment Benefits
In response to the COVID-19 pandemic, on March 4th, 2020, Governor Gavin Newsom proclaimed a State of Emergency in California. The economic disruption hit non-essential businesses particularly hard, leaving many business owners wondering how to manage furloughs and layoffs. Compounding the difficulty is the uncertainty of how long a workforce will be reduced.
Despite this chaotic and uncertain period, business owners are still required to stay compliant with federal, state and local regulations. For businesses operating in the state of California, this includes the Cal-WARN Act. Governmental leaders are responding to this tumultuous time by passing programs that bolster benefits and provide creative solutions that can help both employer and employee.
What is the Cal-WARN act?
Passed in August 1988, the federal Worker Adjustment and Retraining Notification (WARN) Act was passed to protect workers from a sudden and unexpected mass layoff. A number of states, including California, have since enacted their own statewide version. The state law in California is known as the Cal-WARN Act.
The federal WARN and Cal-WARN Acts are similar, but some key differences do exist, and business owners need to be familiar with both. Here is a short summary comparing and contrasting the federal WARN and Cal-WARN Acts:
Federal WARN Act
- Requires a covered employer (100 or more full-time employees) to provide written notice 60 days in advance of a mass layoff, plant closing.
- Employees who have not worked six of the 12 preceding months from notice period and part-time employees who work fewer than 20 hours per week are not counted.
- Provides an exception for "unforeseeable business circumstances."
- Does not apply to "temporary layoffs" of less than six months.
- Requires a covered establishment (75 or more full- and part-time employees employed in the preceding 12 months) to provide notice to employees and certain government entities 60 days in advance of a closing, mass layoff, or major relocation.
- Part-time employees are included in the count including temps if they otherwise meet the definition of an employee.
- Applies to temporary layoffs or furloughs.
- Normally, no exceptions for unforeseeable business circumstances. However, other exceptions may apply.
Notice Period for Cal-WARN
One of the largest distinctions between WARN and Cal-WARN Acts lies in the exception of providing notice due to "unforeseeable business circumstances." For businesses in California, generally there is no similar notice exception. Recognizing that business circumstances changed rapidly and in ways that were not reasonably foreseeable due to California's State of Emergency, Governor Newsom responded by issuing Executive Order N-31-20. The Order is in effect until this state of emergency ends. In addition to the Executive Order, the Labor Commissioner’s Office has published a guidance document that provides answers to frequently asked questions related to the Executive Order and the California WARN Act.
The Executive Order amends the Cal-WARN act to suspend the notice period “caused by COVID-19-related business circumstances that were not reasonably foreseeable at the time that notice would have been required.” Covered businesses still must provide notice to their employees of mass layoff, closure, or relocation, but the timing is "as soon as practicable.” The notification must still meet specific written notice requirements.
Final Pay Requirements
Executive Order N-31-20 provides a temporary suspension of the 60-day notice period due to COVID-19, but businesses remain obligated to stay compliant with state final pay requirements. A business must provide all wages due upon termination when an employee is sent home without pay and not provided a return-to-work date within the pay period. In California, this includes any employee who has been furloughed or given a temporary layoff extending beyond the pay period.
To ensure compliance and avoid civil penalties, a business owner should plan accordingly to implement best practices in this scenario. This means final pay should include payment of accrued but unused vacation, paid time off (PTO), or personal days that can be used for any reason. Final pay should be issued at the time of "termination," even if the termination is temporary. A delay in payment may subject the employer to waiting time penalties in the form of continued wages.
In addition to traditional unemployment benefits, the Coronavirus Aid, Relief and Economic Security (CARES) Act, has bolstered what an employee is eligible to receive when they have been laid off, furloughed, or have had their hours reduced due to COVID-19.
Under the CARES Act, workers who have been laid off, furloughed, or have had their hours reduced will have their unemployment insurance (UI) extended an additional 13 weeks. Eligible individuals will also receive an additional $600 per week (expires July 31, 2020). The total amount of benefits that an eligible individual can receive will be equal to the amount determined under state law, plus the additional amount of $600 per week, per worker.
Additionally, eligibility expands beyond traditional recipients. Traditional individuals are not eligible if:
- They are able to work remotely.
- They are receiving paid leave benefits under the Families First Coronavirus Response Act.
- Their salary has been reduced but the regular work schedule remains the same.
Other insurance benefits may include short-term disability benefits for those who are ill or unable to work due to exposure (e.g. must remain quarantined for two weeks) and other state-specific paid family leave benefits for those who are caring for a covered individual who is ill.
Work Sharing Program
To help provide an environment beneficial to both employers and employees, California long-ago established a Work Sharing Program, which is gaining renewed interest during COVID-19. Employers can apply to this program as a temporary alternative to layoffs if their business's production and/or services have been reduced.
The program helps employees whose hours and wages have been reduced by allowing them to receive UI benefits while keeping their current job. These two actions can help an employee avoid financial hardship and provide valuable peace of mind during a frightening and chaotic time.
Employers benefit too. Through California's Work Sharing Program they can minimize or eliminate the need for layoffs thus keeping trained employees and quickly prepare and respond for when business conditions improve. Taking advantage of the Work Sharing Program allows employers to avoid the immense cost of recruiting, hiring, and onboarding new employees.
Requirements for Work Sharing Program
According to the State of California Employment Development Department, a business must adhere to a number of requirements. The list is comprehensive. To qualify, your business must meet all of the following requirements:
- Be a legally registered business in California.
- Have an active California State Employer Account Number.
- A minimum of two employees and at least 10 percent of your regular workforce, or a department of the workforce, must be affected by a reduction in hours and wages.
- Hours and wages must be reduced by 10 to 60 percent.
- Health and retirement benefits must stay the same as before, or they must meet the same standards as other employees who are not participating in Work Sharing.
- The employees' bargaining unit must agree to voluntarily participate and sign the application for Work Sharing.
- Affected work units to be covered by the Work Sharing plan, and each participating employee, must be identified by their legal name and Social Security number.
- Employees must know in advance that you plan to take part in the Work Sharing program.
- Estimate amount of layoffs to be avoided by participating in the Work Sharing program.
- All necessary reports and information are provided to the EDD.
Restrictions for Work Sharing Program
In addition to meeting the above requirements, California's Work Sharing Program also includes several restrictions:
- Leased, intermittent, seasonal, or temporary service employees cannot participate.
- Corporate officers or major stock holders with investment in the company cannot participate.
- Work Sharing cannot be used as a transition to a layoff.
For more information go to State of California Employment Development Department where you will find resources and details about California's Work Sharing Program.
COVID-19 Business Owner Resources
As a business owner, you're tasked with navigating this difficult and overwhelming period. For answers to your questions about your business and COVID-19, take advantage of the Paychex Coronavirus Help Center where you will find accessible tools and answers to help you face today's challenges and opportunities and take advantage of programs designed to help you weather this stormy time.