California Suspends Worker Layoff Notifications. Did Velodyne Take Advantage?

May 4, 2020, 11:15AM. By Anne Wallace

Should courts examine employers’ motives for COVID firings?

San Jose, CA Siers v. Velodyne Lidar is a class action lawsuit brought under the provisions of the federal Worker Adjustment and Retraining Notification Act (WARN) and provisions of California labor law that afford employees similar protection against sudden and precipitous layoff. According to Benjamin Siers, Velodyne terminated a third of its workforce with just one day’s notice, citing the COVID-19 pandemic. In the context of Velodyne’s other business activities, however, that reason appears to have been a pretext – a very convenient pretext that relieved Velodyne of time and attendant costs it would otherwise have incurred as it moved production facilities overseas.

Lawyers throughout the United States reportedly expect an surge in class action employment lawsuits arising from coronavirus containment efforts. For the California worker who now faces the grim reality of no paycheck and a long wait for unemployment benefits, the issue is not about legal trends; the problem is personal. Widespread personal problems, though, have a way of becoming larger social issues, which become legal trends.

Whether California labor law comes to the rescue of the newly unemployed Velodyne workers will depend specifically on whether the District Court for the Northern District of California is willing to examine the motives of an employer who may have simply seized on an opportunity to cut costs. The larger issue may be the future shape of worker protections in a post-COVID California.

Here’s your hat. What’s your hurry?

On March 30, 2020, Velodyne fired 140 employees at its San Jose location, more than 33 percent of the workforce at that site. Velodyne’s notice, issued only a day before the layoffs took effect, cited the COVID-19 pandemic. The workers argue that the story doesn’t ring true, since the company had long planned to relocate operations.

Velodyne had been transferring production jobs overseas since the summer of 2019 and had planned to continue doing so prior to the outbreak of COVID-19. As the complaint alleges, Velodyne’s written notice failed to provide employees with a reason why it was giving them just one day’s notice, when a layoff was reasonably foreseeable before March 30.

Federal WARN Act

The federal WARN Act protects workers, their families and communities by requiring employers with 100 or more employees  to provide at least 60 days’ advance written notice of a plant closing or layoff of 50 or more employees at a single site. WARN makes certain exceptions to the requirements when layoffs occur because of unforeseeable business circumstances.

The advance notice is meant to give workers and their families transition time to adjust to the prospective loss of employment, to seek and obtain other jobs, and if necessary, to enter skill training or retraining that will allow them to compete successfully in the job market.

An employer who violates the notice provision is liable to each employee for an amount equal to back pay and benefits for the period of the violation, up to 60 days. The liability may be reduced by the period of any notice that was given and any voluntary payments that the employer made to the employee, sometimes referred to as "pay in lieu of notice."

California WARN Act

California’s version of WARN, California Labor Code Sections 1400 to 1408 , generally tracks federal law. It requires employers to provide 60 days' advance notice to employees and certain government entities before:

A layoff involving the elimination of 50 or more jobs during any thirty-day period, due to lack of work or lack of funds ;

• A relocation; or
• A plant closure.

An employee whose employer violates the law is entitled to:

• Back pay for the period of the WARN Act violation, at the average regular rate the employee received during the last three years of employment OR the employee's final pay rate, if higher; and
• The value of any benefits to which employee would have been entitled during the period of the WARN Act violation – including the cost of any medical expenses that would have otherwise been covered under employer-provided health insurance.

California governor suspends application of California WARN in some COVID circumstances

On March 17 Governor Newsom issued Executive Order N-31-20, which temporarily suspended the 60-day notice requirement in the California WARN Act for those employers that give written notice to employees and satisfy other conditions. Among the conditions that employers must satisfy is the requirement that the layoffs must have been caused by COVID-19 related business circumstances that were not reasonably foreseeable as of the time that notice would have been required.

The plaintiffs’ argument under both federal and California law hinges on whether the circumstances were unforeseeable and pandemic-related or whether they were the product of existing business plans. Back pay and medical insurance are the issue. It obviously makes a difference for Benjamin Siers and other Velodyne workers.

Because the lawsuit invites scrutiny of an employer’s underlying motives for mass firings, it may also make a difference for a wide swath of California workers who find themselves suddenly out of a job and without employer-paid health insurance in the wake of pandemic-related disruptions. In the long run, decisions like these may also shape the new “normal” in California employment law that will emerge when the crisis has passed.