On December 12, 2005, in MacIsaac v. Waste Mgmt. Collection & Recycling, Inc. (2005) __ Cal.App.4th __, 2005 Cal. App. LEXIS 1905, the First District Court of Appeal issued the first appellate opinion construing the California’s “WARN” Act. The California Worker Adjustment and Retraining Notification Act, Labor Code § 1400, et seq., took effect on January 1, 2003, and prohibits an employer from, inter alia, ordering a “mass layoff” of 50 or more employees during a 30-day period unless the employer gives 60 days’ notice to the affected employees and various governmental entities. MacIsaac considered the question of whether there has been a “mass layoff” within the meaning of the California WARN Act where employees are transferred seamlessly from one employer to another, performing the same work for the same pay and benefits. In an opinion upholding the trial court’s grant of summary judgment for the defendant employer, the MacIsaac panel determined that in such circumstances there was no “mass layoff” triggering the notice requirements of the California WARN Act. Id., at *1-2.

Plaintiff Stanley MacIsaac was a former employee of the defendant refuse collection, disposal and recycling service company doing business as Empire Waste Management, Inc. Prior to February 1, 2003, Empire Waste provided these services to the City of Santa Rosa under a contract with the City. However, in 2002, the City accepted a bid from a competing waste disposal company, North Bay Disposal Corporation, to provide these services beginning in 2007. Empire Waste agreed to sell the remaining years of its contract with the City to North Bay in 2002. As part of the purchase agreement, North Bay agreed to buy equipment such as trucks and to accept the transfer of 41 Empire Waste garbage truck drivers and one mechanic to North Bay in their current positions. Under the companies’ agreement, the drivers would drive the same routes in the City that they had covered for Empire Waste, use the same equipment, work the same Monday through Friday schedule, at the same pay and date of hire for seniority and benefits purposes, and with benefits equivalent to those they received from Empire Waste. The transfer occurred seamlessly, with 41 of the 42 employees starting work at North Bay on Monday, February 3, 2003, after finishing their work with Empire Waste the Friday three days before. Id., at *2-4.

Plaintiff MacIsaac declined to accept the new position offered him at North Bay and, after a 20-employee reduction in force that occurred later in February at Empire Waste, filed an action in Sonoma County Superior Court claiming that Empire Waste was required collectively to have given the 20 and 42 employee groups 60 days’ notice of a “mass layoff” under the California WARN Act. The trial court heard cross-motions for summary judgment, and found that because the transferred employees “were not separated from their positions for lack of funds or lack of work within the meaning of Cal-WARN,” the statute did not apply. Id., at *4-7.

On appeal, the First District affirmed the decision below, concluding that the plain language of the California WARN Act required a finding that there had been no mass layoff triggering the statute’s notice requirements. Under the California WARN Act, a “mass layoff” is “a layoff during any 30-day period of 50 or more employees at a covered establishment.” Lab. Code § 1400(d). The word “layoff,” in turn, is defined in the immediately preceding subdivision as “a separation from a position for lack of funds or lack of work.” Lab. Code § 1400(c). The Court agreed with Empire Waste that because the transferred employees continued to work in the same positions after the sale of the contract to North Bay, they had not been “separated from their positions” so as to trigger notification obligations. In so holding, the Court rejected the plaintiff’s contention that the dispositive separation was a split from a particular employer, rather than a particular position. Id., at *16-22.

Although not required to do so, the Court went on to find that an examination of the federal WARN Act and the legislative history of the California WARN Act, along with considerations of “reason, practicality, and common sense,” compelled the conclusion that the California WARN act should not apply to the transfer of employees from Empire Waste to North Bay. The Court noted that the California WARN Act was intended to supplement the federal WARN Act by “giv[ing] communities a chance to prepare for the impact of large layoffs which do not trigger notification under the [federal] WARN Act,” and that there was no community impact felt as a result of the seamless transition of employees from Empire Waste to North Bay. Moreover, the Court noted that adoption of the plaintiff’s construction of the statute would have required the Court to award up to 60 days’ “back pay” to the affected employees pursuant to Labor Code § 1402, a result that would have been a windfall to the employees transferred to North Bay, who experienced no gap in their employment or loss of benefits. Id., at *23-32.

Although employers certainly should regard MacIsaac as a helpful first decision construing California’s WARN Act, they should not overestimate the breadth of its application. The Court was quick to point out that its holding was “limited to the situation before us, in which all of the transferred employees retained their former positions with no change in the terms of their employment. A different situation might be presented if North Bay had offered to rehire the workers at a wage so much lower than their previous wage, or on conditions so much inferior as to rebut an inference of continuity of employment.” Id., at *22, n.8 (internal quotations and citations omitted).

California employers anticipating reductions in force or large-scale terminations should carefully consider both the federal and California WARN Acts, and consult experienced counsel on these issues.