Dec. 19, 2005 Transferring Employees to Another Employer Without A Change in Employment Terms Does Not Trigger the California WARN Act Notice Requirements

Summary

Under the California Worker Adjustment and Retraining Notification Act (California WARN Act), covered employers must give 60 days’ written notice to employees who are affected by any mass layoff, relocation, or substantial termination of operations. In MacIsaac v. Waste Management Collection and Recycling, Inc., the issue was whether the transfer of employees from one employer to another, without a change in the employees’ position, pay, or benefits, required a California WARN Act notice.

Under the terms of the federal WARN Act, a 60 day notice was not required, since the federal statute is triggered only by an actual “employment loss.” However, the California WARN Act does not contain the same statutory exception as its federal counterpart. Nevertheless, the California Court of Appeal ruled last week that the same result would apply under the California WARN Act.

Details

As part of a negotiated purchase agreement, North Bay Disposal Corporation agreed to buy equipment, including garbage trucks, from Empire Waste. Empire Waste also agreed to transfer a number of its garbage truck drivers to North Bay. These transferred employees performed the same work for the same rates of pay and retained the same benefits and level of seniority that they had at Empire Waste. Later, one of the transferred employees brought an action against Empire Waste, claiming that the transfers were part of a “mass layoff” triggering the notice requirements under the California WARN Act.

The California WARN Act defines a “mass layoff” as any layoff during a 30-day period affecting 50 or more employees. The term “layoff,” in turn, is defined as a “separation from a position for lack of funds or work.” Analyzing the plain language of the Act, the Court of Appeal explained that a layoff occurs only when an employee has been separated from a position, not from an employer. In this case, the transferred employees retained their positions, which were simply shifted to another employer. As a result, no mass layoff occurred under the California WARN Act, and Empire Waste had no obligation to provide 60 days’ advance written notice of the transfer to the transferred employees.

What this Means

Prior to this decision, there was no California case construing the terms of the California WARN Act, and it was unclear whether employee transfers to a different company as part of a sale or merger would require a California WARN notice, even when a federal WARN notice was not required. Thus, this is a welcome and positive decision for California employers.

However, California employers should be wary of the limitations of the Court of Appeal’s decision. First, the Court of Appeal limited its holding to the situation in which transferred employees retain their former positions with no change in the terms of their employment. The Court noted that a different result might have been reached if the transferred employees were paid a lower wage, or were subject to inferior terms and conditions of employment by their new employer. Further, this holding only relates to mass layoffs under the California WARN Act. This case did not involve a transfer of employees due to relocation or substantial termination of operations under the California WARN Act. Accordingly, we recommend that employers seek counsel prior to any layoff, relocation, or termination of operations to make sure that they are in compliance with the California and federal WARN Acts.

This E-Update was authored by Rod Betts and Mike Minguet. For more information, please contact Mr. Betts, Mr. Minguet, or any Paul, Plevin attorney at 619-237-5200.