Existing law, the California Worker Adjustment and Retraining Act, governs relocations, terminations, and mass layoffs. Existing law prohibits an employer from ordering a mass layoff, relocation, or termination at a covered establishment unless, 60 days before the order takes effect, the employer gives prescribed written notice of the order to specified entities, including the local workforce investment board and the chief elected official of each city and county government within which the termination, relocation, or mass layoff occurs. Existing law exempts certain types of employment from the act, including seasonal employment where the employees were hired with the understanding that their employment was seasonal and temporary (seasonal employment exemption). Existing law makes an employer who fails to give notice as required liable to each employee entitled to notice who lost their employment for prescribed compensation, calculated for the period of the employers violation, up to a maximum of 60 days, or ¹/₂ the number of days that the employee was employed by the employer, whichever period is smaller. Existing law authorizes the Labor Commissioner to enforce specified provisions of existing law, as prescribed. Existing law defines terms for its purposes, including definitions for the terms employer and employee. Existing law defines mass layoff for purposes of the act to mean a layoff during any 30-day period of 50 or more employees at a covered establishment, and defines covered establishment as an industrial or commercial facility that employs, or has employed within the preceding 12 months, 75 or more persons.

This bill would require the prescribed notice 75 days before the order takes effect, and would make a conforming change to the calculation of employer liability. The bill would modify the requirement for notice to the local workforce investment board and the chief elected official of each city and county government within which the termination, relocation, or mass layoff occurs to apply only to a termination, relocation, or mass layoff that impacts 50 or more employees at a single location. The bill would require a labor contractor to remit to the employee the payment provided to the client employer in the full amount calculated, as specified, for a violation of the notice requirement, and would define a labor contractor for purposes of the act.

This bill would additionally require for the application of the seasonal employment exemption that the season be complete. The bill would also exempt from the act employees who are employed by a labor contractor to fulfill the needs of a temporary project with a defined end date and are laid off because of the completion of the temporary employment contract, as specified.

This bill would include within the term employer a client employer of a labor contractor. The bill would include within the term employee a person employed by a labor contractor and performing labor with the client employer for at least 6 months of the 12 months and for at least 60 hours preceding the date on which notice is required. The bill would revise the definition of covered establishment to instead mean a place of employment that employs, or has employed within the preceding 12 months, 75 or more persons, and would specify that a covered establishment may be a single location or a group of locations, as specified. The bill would revise the definition of mass layoff to also include employees reporting to a covered establishment.

This bill would prohibit an employer from utilizing compliance with the act in connection with a severance agreement and waiver of an employees right to claims. The bill would provide that any general release, waiver of claims, or nondisparagement or nondisclosure agreement that is made a condition of the payment of amounts for which the employer is liable is void as a matter of law and against public policy. The bill would prohibit an employer who is required to give notice from offering an employee a separate agreement that includes a general release, waiver of claims, or nondisparagement or nondisclosure agreement, unless the agreement is offered in exchange for reasonable consideration that is in addition to anything of value to which the individual already is entitled and includes a statement to this effect, as specified. The bill would provide that any agreement in violation of this prohibition is void as a matter of law and against public policy, and would make an employer who violates this provision subject to a civil penalty of up to $500 for each violation.

Existing law, the California Worker Adjustment and Retraining Act, governs relocations, terminations, and mass layoffs. Existing law prohibits an employer from ordering a mass layoff, relocation, or termination at a covered establishment unless, 60 days before the order takes effect, the employer gives prescribed written notice of the order to specified entities, including the local workforce investment board and the chief elected official of each city and county government within which the termination, relocation, or mass layoff occurs. Existing law exempts certain types of employment from the act, including seasonal employment where the employees were hired with the understanding that their employment was seasonal and temporary (seasonal employment exemption). Existing law makes an employer who fails to give notice as required liable to each employee entitled to notice who lost their employment for prescribed compensation, calculated for the period of the employers violation, up to a maximum of 60 days, or ¹/₂ the number of days that the employee was employed by the employer, whichever period is smaller. Existing law authorizes the Labor Commissioner to enforce specified provisions of existing law, as prescribed. Existing law defines terms for its purposes, including definitions for the terms employer and employee. Existing law defines mass layoff for purposes of the act to mean a layoff during any 30-day period of 50 or more employees at a covered establishment, and defines covered establishment as an industrial or commercial facility that employs, or has employed within the preceding 12 months, 75 or more persons.

This bill would require the prescribed notice 75 days before the order takes effect, and would make a conforming change to the calculation of employer liability. The bill would modify the requirement for notice to the local workforce investment board and the chief elected official of each city and county government within which the termination, relocation, or mass layoff occurs to apply only to a termination, relocation, or mass layoff that impacts 50 or more employees at a single location. The bill would require a labor contractor to remit to the employee the payment provided to the client employer in the full amount calculated, as specified, for a violation of the notice requirement, and would define a labor contractor for purposes of the act.

This bill would additionally require for the application of the seasonal employment exemption that the season be complete. The bill would also exempt from the act employees who are employed by a labor contractor to fulfill the needs of a temporary project with a defined end date and are laid off because of the completion of the temporary employment contract, as specified.

This bill would include within the term employer a client employer of a labor contractor. The bill would include within the term employee a person employed by a labor contractor and performing labor with the client employer for at least 6 months of the 12 months and for at least 60 hours preceding the date on which notice is required. The bill would revise the definition of covered establishment to instead mean a place of employment that employs, or has employed within the preceding 12 months, 75 or more persons, and would specify that a covered establishment may be a single location or a group of locations, as specified. The bill would revise the definition of mass layoff to also include employees reporting to a covered establishment.

This bill would prohibit an employer from utilizing compliance with the act in connection with a severance agreement and waiver of an employees right to claims. The bill would provide that any general release, waiver of claims, or nondisparagement or nondisclosure agreement that is made a condition of the payment of amounts for which the employer is liable is void as a matter of law and against public policy. The bill would prohibit an employer who is required to give notice from offering an employee a separate agreement that includes a general release, waiver of claims, or nondisparagement or nondisclosure agreement, unless the agreement is offered in exchange for reasonable consideration that is in addition to anything of value to which the individual already is entitled and includes a statement to this effect, as specified. The bill would provide that any agreement in violation of this prohibition is void as a matter of law and against public policy, and would make an employer who violates this provision subject to a civil penalty of up to $500 for each violation.

Existing law, the California Worker Adjustment and Retraining Act, governs relocations, terminations, and mass layoffs. Existing law prohibits an employer from ordering a mass layoff, relocation, or termination at a covered establishment unless, 60 days before the order takes effect, the employer gives prescribed written notice of the order, as prescribed. order to specified entities, including the local workforce investment board and the chief elected official of each city and county government within which the termination, relocation, or mass layoff occurs. Existing law exempts certain types of employment from the act, including seasonal employment where the employees were hired with the understanding that their employment was seasonal and temporary (seasonal employment exemption). Existing law makes an employer who fails to give notice as required liable to each employee entitled to notice who lost their employment for prescribed compensation, calculated for the period of the employers violation, up to a maximum of 60 days, or ¹/₂ the number of days that the employee was employed by the employer, whichever period is smaller. Existing law authorizes the Labor Commissioner to enforce specified provisions of existing law, as prescribed. Existing law defines terms for its purposes, including definitions for the terms employer and employee. Existing law defines mass layoff for purposes of the act to mean a layoff during any 30-day period of 50 or more employees at a covered establishment, and defines covered establishment as an industrial or commercial facility that employs, or has employed within the preceding 12 months, 75 or more persons.

This bill would require the prescribed notice 90 75 days before the order takes effect, and would make a conforming change to the calculation of employer liability. The bill would modify the requirement for notice to the local workforce investment board and the chief elected official of each city and county government within which the termination, relocation, or mass layoff occurs to apply only to a termination, relocation, or mass layoff that impacts 50 or more employees at a single location. The bill would require a labor contractor to remit to the employee the payment provided to the client employer in the full amount calculated, as specified, for a violation of the notice requirement, and would define a labor contractor for purposes of the act.

This bill would additionally require for the application of the seasonal employment exemption that the season be complete.

This bill would include within the term employer a client employer of a labor contractor. The bill would include within the term employee a person employed by a labor contractor and performing labor with the client employer for at least 6 months of the 12 months and for at least 60 hours preceding the date on which notice is required. The bill would revise the definition of covered establishment to instead mean a place of employment that employs, or has employed within the preceding 12 months, 75 or more persons, and would specify that a covered establishment may be a single location or a group of locations, as specified. The bill would revise the definition of mass layoff to also include employees reporting to a covered establishment.

This bill would prohibit an employer from utilizing compliance with the act in connection with a severance agreement and waiver of an employees right to claims. The bill would provide that any general release, waiver of claims, or nondisparagement or nondisclosure agreement that is made a condition of the payment of amounts for which the employer is liable is void as a matter of law and against public policy. The bill would prohibit an employer who is required to give notice from offering an employee a separate agreement that includes a general release, waiver of claims, or nondisparagement or nondisclosure agreement, unless the agreement is offered in exchange for reasonable consideration that is in addition to anything of value to which the individual already is entitled and includes a statement to this effect, as specified. The bill would provide that any agreement in violation of this prohibition is void as a matter of law and against public policy, and would make an employer who violates this provision subject to a civil penalty of up to $500 for each violation.

Existing law, the California Worker Adjustment and Retraining Act, governs relocations, terminations, and mass layoffs. Existing law prohibits an employer from ordering a mass layoff, relocation, or termination at a covered establishment unless, 60 days before the order takes effect, the employer gives written notice of the order, as prescribed. Existing law exempts certain types of employment from the act, including seasonal employment where the employees were hired with the understanding that their employment was seasonal and temporary (seasonal employment exemption). Existing law makes an employer who fails to give notice as required liable to each employee entitled to notice who lost their employment for prescribed compensation, calculated for the period of the employers violation, up to a maximum of 60 days, or ¹/₂ the number of days that the employee was employed by the employer, whichever period is smaller. Existing law authorizes the Labor Commissioner to enforce specified provisions of existing law, as prescribed. Existing law defines terms for its purposes, including definitions for the terms employer and employee. Existing law defines mass layoff for purposes of the act to mean a layoff during any 30-day period of 50 or more employees at a covered establishment, and defines covered establishment as an industrial or commercial facility that employs, or has employed within the preceding 12 months, 75 or more persons.

This bill would require the prescribed notice 90 days before the order takes effect, and would make a conforming change to the calculation of employer liability. The bill would require a labor contractor to remit to the employee the payment provided to the client employer in the full amount calculated, as specified, for a violation of the notice requirement, and would define a labor contractor for purposes of the act.

This bill would additionally require for the application of the seasonal employment exemption that the season be complete.

This bill would include within the term employer a client employer of a labor contractor. The bill would include within the term employee a person employed by a labor contractor and performing labor with the client employer for at least 6 months of the 12 months preceding the date on which notice is required. The bill would revise the definition of covered establishment to instead mean a place of employment that employs, or has employed within the preceding 12 months, 75 or more persons, and would specify that a covered establishment may be a single location or a group of locations, as specified. The bill would revise the definition of mass layoff to also include employees reporting to a covered establishment.

This bill would prohibit an employer from utilizing compliance with the act in connection with a severance agreement and waiver of an employees right to claims. The bill would provide that any general release, waiver of claims, or nondisparagement or nondisclosure agreement that is made a condition of the payment of amounts for which the employer is liable is void as a matter of law and against public policy. The bill would prohibit an employer who is required to give notice from offering an employee a separate agreement that includes a general release, waiver of claims, or nondisparagement or nondisclosure agreement, unless the agreement is offered in exchange for reasonable consideration that is in addition to anything of value to which the individual already is entitled and includes a statement to this effect, as specified. The bill would provide that any agreement in violation of this prohibition is void as a matter of law and against public policy, and would make an employer who violates this provision subject to a civil penalty of up to $500 for each violation.

Existing law, the California Worker Adjustment and Retraining Act, governs relocations, terminations, and mass layoffs. Existing law prohibits an employer from ordering a mass layoff, relocation, or termination at a covered establishment unless, 60 days before the order takes effect, the employer gives written notice of the order, as prescribed. Existing law exempts certain types of employment from the act, including seasonal employment where the employees were hired with the understanding that their employment was seasonal and temporary (seasonal employment exemption). Existing law makes an employer who fails to give notice as required liable to each employee entitled to notice who lost their employment for prescribed compensation, calculated for the period of the employers violation, up to a maximum of 60 days, or ¹/₂ the number of days that the employee was employed by the employer, whichever period is smaller. Existing law authorizes the Labor Commissioner to enforce specified provisions of existing law, as prescribed. Existing law defines terms for its purposes, including definitions for the terms employer and employee. Existing law defines mass layoff for purposes of the act to mean a layoff during any 30-day period of 50 or more employees at a covered establishment, and defines covered establishment as an industrial or commercial facility that employs, or has employed within the preceding 12 months, 75 or more persons.

This bill would require the prescribed notice 90 days before the order takes effect. The bill effect, and would make a conforming change to the calculation of employer liability. The bill would require that an employee working with the employer through a labor contractor and affected by a mass layoff be compensated for the remainder of the contract or 90 days, whichever is fewer, by the equivalent of the pay and benefits received by the employee during the last month of employment, or the employees final rate of compensation, whichever is higher. The bill would require a labor contractor to remit the payment provided to the client employer in the full amount calculated, as specified, for a violation of the notice requirement, and would define a labor contractor for purposes of the act.

This bill would additionally require for the application of the seasonal employment exemption that the season be complete.

This bill would include within the term employer a client employer of a labor contractor. The bill would include within the term employee a person employed by a labor contractor and performing labor with the client employer for at least 6 months of the 12 months preceding the date on which notice is required. The bill would revise the definition of covered establishment to instead mean a place of employment that employs, or has employed within the preceding 12 months, 75 or more persons, and would specify that a covered establishment may be a single location or a group of locations, as specified. The bill would revise the definition of mass layoff to also include employees reporting to a covered establishment.

This bill would prohibit an employer from utilizing compliance with the act in connection with a severance agreement and waiver of an employees right to claims. The bill would provide that any general release, waiver of claims, or nondisparagement or nondisclosure agreement that is made a condition of the payment of amounts for which the employer is liable is void as a matter of law and against public policy. The bill would prohibit an employer who is required to give notice from offering an employee a separate agreement that includes a general release, waiver of claims, or nondisparagement or nondisclosure agreement, unless the agreement is offered in exchange for reasonable consideration that is in addition to anything of value to which the individual already is entitled. entitled and includes a statement to this effect, as specified. The bill would provide that any agreement in violation of this prohibition is void as a matter of law and against public policy. policy, and would make an employer who violates this provision subject to a civil penalty of up to $500 for each violation.

Existing law, the California Worker Adjustment and Retraining Act, governs relocations, terminations, and mass layoffs. Existing law prohibits an employer from ordering a mass layoff, relocation, or termination at a covered establishment unless, 60 days before the order takes effect, the employer gives written notice of the order, as prescribed. Existing law exempts certain types of employment from the act, including seasonal employment where the employees were hired with the understanding that their employment was seasonal and temporary (seasonal employment exemption). Existing law makes an employer who fails to give notice as required liable to each employee entitled to notice who lost their employment for prescribed compensation, calculated for the period of the employers violation, up to a maximum of 60 days, or ¹/₂ the number of days that the employee was employed by the employer, whichever period is smaller. Existing law authorizes the Labor Commissioner to enforce specified provisions of existing law, as prescribed. Existing law defines terms for its purposes, including definitions for the terms employer and employee.

This bill would require the prescribed notice 90 days before the order takes effect. The bill would make a conforming change to the calculation of employer liability. The bill would require that an employee working with the employer through a labor contractor and affected by a mass layoff be compensated for the remainder of the contract or 90 days, whichever is fewer, by the equivalent of the pay and benefits received by the employee during the last month of employment, or the employees final rate of compensation, whichever is higher.

This bill would additionally require for the application of the seasonal employment exemption that the season be complete.

This bill would include within the term employer a client employer of a labor contractor. The bill would include within the term employee a person employed by a labor contractor and performing labor with the client employer for at least 6 months of the 12 months preceding the date on which notice is required.

This bill would prohibit an employer from utilizing compliance with the act in connection with a severance agreement and waiver of an employees right to claims. The bill would provide that any general release, waiver of claims, or nondisparagement or nondisclosure agreement that is made a condition of the payment of amounts for which the employer is liable is void as a matter of law and against public policy. The bill would prohibit an employer who is required to give notice from offering an employee a separate agreement that includes a general release, waiver of claims, or nondisparagement or nondisclosure agreement, unless the agreement is offered in exchange for reasonable consideration that is in addition to anything of value to which the individual already is entitled. The bill would provide that any agreement in violation of this prohibition is void as a matter of law and against public policy.

GOVERNOR'S VETO

GV Bill Id:AB 1356

Author:(Haney)

As Enrolled Ver:September 14, 2023

2/3 vote

SUMMARY

Revises the California Worker Adjustment and Retraining Act (Cal/WARN) to: 1) include a "client employer" of a "labor contractor" in the definition of "employer"; and 2) increase from 60 to 75 days, the length of notice an employer must provide to employees prior to ordering terminations, relocations, or mass layoffs, as specified.

Senate Amendments

Exempt employees who are employed by a labor contractor to fulfill the needs of a temporary project with a defined end date, as specified, from the provisions of this bill.

1. Require that a person employed by a labor contractor and performs labor with the client employer for at least six months of the 12 months and for at least 60 hours preceding the date on which notice is required in order to be included in the definition of "employee" under this bill.
2. Reduce from 90 to 75 days, the length of notice an employer must provide to employees prior to ordering terminations, relocations, or mass layoffs, as specified.
3. Specify that an employer is required to provide notification of a mass layoff, relocation, or termination to both a local workforce investment board and the principal elected official of each city and county government encompassing the site where the termination, relocation, or mass layoff is affecting 50 or more employees at a single location.
4. Reduce, from 90 to 75 days, the period of an employer's liability for specified back pay and benefits owed to affected employees for an employer's violation of the Cal/WARN notice requirement.

Governor's Veto Message

This bill would amend the California Worker Adjustment and Retraining Act (Cal/WARN) to, among other things, increase the amount of notice that an employer must provide before a mass layoff, termination, or relocation from 60 days to 75 days; expand the law's coverage to include contract workers among the employees that an employer must notify; and significantly revise the definition of "covered establishment" to include a single location or a group of locations, including any facilities located in California.

The inclusion of employees of labor contractors, while laudable in its intent, risks imposing liability on client employers who cannot reasonably be expected to know whether their actions will cause job loss for employees of their subcontractors and may not have the information necessary to provide the required notice.

In addition, the bill expands the definition of "covered establishment" to include a group of locations anywhere in the state and subjects chain businesses, such as restaurants, to the law's requirements even where layoffs are unrelated and occur in geographically disparate regions of the state. It is not clear that this change is consistent with the purpose of Cal/WARN to protect local communities and enable a rapid response to a potential shock to a local economy and workforce.

I urge the author to work with my Administration to develop solutions that may better address the problem, while fulfilling the objectives of Cal/WARN.

COMMENTS

According to an article by Mercury News, "Just before the COVID pandemic hit, Google's parent company Alphabet had 119,000 full-time employees. As public health orders and fears of the deadly virus drove people out of the physical world and into online life and shopping, the digital-advertising giant's workforce ballooned – to 190,000 by the end of last year. Then last month the company axed 12,000 workers, including 1,600 in the Bay Area."^[1]

Additionally, the article reported that "Many other Bay Area firms, including Facebook's parent company Meta of Menlo Park, Santa Clara computer chip maker Intel, San Jose video-conferencing company Zoom and San Jose payments platform PayPal also staffed up heavily during the pandemic before slashing jobs in recent months. The carnage has just topped 20,000 newly or soon-to-be unemployed workers since mid-2022."^[2]

According to a report by the Tech Equity Collaborative, "The use of contracting agencies to fill staffing needs has become increasingly popular across all industries as part of a larger trend to cut costs and increase shareholder value. But this practice has been particularly appealing to Silicon Valley companies who have an imperative (driven by the demands of venture capital investors) to gain massive market share and valuation as quickly as possible."^[3]

Additionally the report found that "Demographic trends of the contingent workforce at tech companies – those who are hired through and employed by third-party entities, often on tenuous contracts – differ substantially from the directly employed workforce. Contract and temp workers are more likely to be Black, Indigenous, Latinx, Asian, women, and nonbinary people than those hired in the direct workforce. For every single racialized category, the rate of employment in contract work was greater than the rate of employment of those same racialized groups in directly employed roles at the tech company."^[4]

In an effort to avoid liability, "tech companies avoid, at all costs, being considered joint employers for contract workers. To avoid triggering a joint employer finding, corporate policies keep contract workers structurally isolated – without a clear manager, without a clear pathway into direct employment, without direct access to necessary resources and tools for their work."^[5]

According to the Author

"Innovative industries like tech are a critical part of our state's economy, and we know that tech companies start here in California because of our highly skilled workforce. [This bill] will protect that workforce – from the engineers to the janitors – by making sure they're treated fairly during a job transition.

To be pro tech, we have to be pro tech-worker. If we don't take care of our tech workers then we'll lose one of California's greatest resources to states like Texas, Washington, or New York. While we respect that downsizing is sometimes an unavoidable part of business, discarding employees that have done nothing wrong – with little to no notice – isn't right and it hurts the competitiveness of our state's tech industry. If all of our workers have enough time to look for other work, they're more likely to stay here in California. [This bill] closes the loopholes in critical layoff protection laws and gives contract workers the basic protections that all workers at these large companies deserve."

In addition, the author points out that this bill will promote equity solutions and maximize benefits for underserved and marginalized communities because, "For many low wage and middle class families, an unexpected job loss can mean financial catastrophe. Providing a 90 day notice period is a critical change that recognizes the reality of the high cost of living in California and helps increase the economic safety net for some of our most vulnerable communities."

Arguments in Support

The California Labor Federation, co-sponsor of the bill, states, "The contract workforce in California is estimated at 1.9 million workers and that number continues to grow. Contract workers serve some of the largest and most profitable companies in the state, but they are employed by third-parties, labor contractors, and other smaller entities. Contract workers are often exempted from many employment protections. They do the work of mega-corporations, but they are not directly employed by them, so they fall into gaps of our worker protection laws. Black workers and other workers of color make up a disproportionate percent of the workforce and contract workers of color are less likely to be converted to permanent, direct employment than their white counterparts, further institutionalized inequity in the industry.

[This bill] will expand California's WARN Act to protect contract workers and update protections for all workers. The bill increases the advance notice requirement from 60 days to 90 days to give workers adequate time to prepare for the loss of a job. It decouples severance negotiations, including waiver of claims, from meeting WARN Act obligations. The bill also extends WARN Act coverage to include client employers, third-party agencies, and labor contractors in the definition of "covered employers" to ensure contract workers, that are directly impacted by a mass layoff, receive the same protections as direct employees.

Basic labor protections at a time of mass lay-offs should cover all workers in California. [This bill] expands the proven success of the WARN Act to cover more workers and updates the law to reflect the changing economy."

Arguments in Opposition

A coalition of employer organizations, including the California Chamber of Commerce, state, "[This bill] unnecessarily expands existing WARN Act requirements and is overly broad in its application to employees of a labor contractor, including failing to take into account the terms of a contract or agreement between the labor contractor and client.

First, it increases the amount of notice time from 60 days to 90 days without justification. Increasing the number of days is actually likely to disadvantage workers. If notices must be issued 90 days in advance, this means employers must know well before the 90 day mark who is subject to the closure or layoff at issue.

Second, recent amendments change the definition of "covered establishment" so that instead of applying to single locations with 75 or more employees, it now covers any business that employs 75 or more employees between all of their locations. That affects the definitions of mass layoff, relocation, and termination. For example, if a company lays off a few employees at different locations that altogether total 50 workers, the WARN Act is now triggered. This is a significant expansion of the law, imposing new burdensome requirements on small locations that were previously never subject to the WARN Act."

FISCAL COMMENTS

According to the Senate Appropriations Committee, the Department of Industrial Relations (DIR) indicates that it would incur first-year costs of $1.11 million, and $1.06 million annually thereafter, to implement the provisions of this bill (Labor Enforcement and Compliance Fund). Additionally, this bill could result in a minor increase in civil penalty revenue.

VOTES

ASM LABOR AND EMPLOYMENT: 5-0-2

YES: Kalra, Haney, Ortega, Reyes, Ward

ABS, ABST OR NV: Flora, Chen

ASM JUDICIARY: 8-2-1

YES: Maienschein, Connolly, Haney, Kalra, Pacheco, Papan, Reyes, Robert Rivas

NO: Dixon, Sanchez

ABS, ABST OR NV: Essayli

ASM APPROPRIATIONS: 11-4-1

YES: Holden, Bryan, Calderon, Wendy Carrillo, Mike Fong, Hart, Lowenthal, Papan, Pellerin, Weber, Ortega

NO: Megan Dahle, Dixon, Mathis, Sanchez

ABS, ABST OR NV: Robert Rivas

ASSEMBLY FLOOR: 60-14-6

YES: Addis, Aguiar-Curry, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Cervantes, Connolly, Mike Fong, Friedman, Garcia, Gipson, Grayson, Haney, Hart, Holden, Irwin, Jackson, Jones‑Sawyer, Kalra, Lee, Low, Lowenthal, Maienschein, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Pellerin, Petrie-Norris, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Santiago, Schiavo, Soria, Ting, Valencia, Villapudua, Ward, Weber, Wicks, Wilson, Wood, Zbur, Rendon

NO: Alanis, Megan Dahle, Davies, Dixon, Essayli, Vince Fong, Gallagher, Hoover, Jim Patterson, Joe Patterson, Sanchez, Ta, Waldron, Wallis

ABS, ABST OR NV: Chen, Flora, Gabriel, Lackey, Mathis, Quirk-Silva

SENATE FLOOR: 29-9-2

YES: Allen, Archuleta, Ashby, Atkins, Becker, Blakespear, Bradford, Cortese, Dodd, Durazo, Eggman, Gonzalez, Hurtado, Laird, Limón, McGuire, Menjivar, Min, Newman, Padilla, Portantino, Roth, Rubio, Skinner, Smallwood-Cuevas, Stern, Umberg, Wahab, Wiener

NO: Alvarado-Gil, Dahle, Grove, Jones, Nguyen, Niello, Ochoa Bogh, Seyarto, Wilk

ABS, ABST OR NV: Caballero, Glazer

ASSEMBLY FLOOR: 62-15-3

YES: Addis, Aguiar-Curry, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Cervantes, Chen, Connolly, Mike Fong, Friedman, Gabriel, Garcia, Gipson, Grayson, Haney, Hart, Holden, Irwin, Jackson, Jones-Sawyer, Kalra, Lee, Low, Lowenthal, Maienschein, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Papan, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Rendon, Reyes, Luz Rivas, Rodriguez, Blanca Rubio, Santiago, Schiavo, Soria, Ting, Valencia, Villapudua, Ward, Weber, Wicks, Wilson, Wood, Zbur, Robert Rivas

NO: Alanis, Megan Dahle, Davies, Dixon, Essayli, Vince Fong, Gallagher, Hoover, Mathis, Jim Patterson, Joe Patterson, Sanchez, Ta, Waldron, Wallis

ABS, ABST OR NV: Flora, Lackey, Pacheco

UPDATED

VERSION: September 14, 2023

CONSULTANT: Martin Vindiola / L. & E. / (916) 319-2091 FN: 0002469

1. Baron, Ethan. Silicon Valley tech layoffs: Why so many jobs were slashed, and who's hiring amid fierce competition? The Mercury News, February 2023. ↑

2. Ibid. ↑

3. Tech Equity Collaborative. Contract Worker Disparity Project: Shining a Light on Tech's Shadow Workforce, January 2022. ↑

4. Ibid. ↑

5. Ibid. ↑

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 1356

Author:(Haney)

As Amended Ver:September 1, 2023

Majority vote

SUMMARY

Revises the California Worker Adjustment and Retraining Act (Cal/WARN) to: 1) include a "client employer" of a "labor contractor" in the definition of "employer"; and 2) increase from 60 to 75 days, the length of notice an employer must provide to employees prior to ordering terminations, relocations, or mass layoffs, as specified.

Senate Amendments

1. Exempt employees who are employed by a labor contractor to fulfill the needs of a temporary project with a defined end date, as specified, from the provisions of this bill.
2. Require that a person employed by a labor contractor and performs labor with the client employer for at least six months of the 12 months and for at least 60 hours preceding the date on which notice is required in order to be included in the definition of "employee" under this bill.
3. Reduce from 90 to 75 days, the length of notice an employer must provide to employees prior to ordering terminations, relocations, or mass layoffs, as specified.
4. Specify that an employer is required to provide notification of a mass layoff, relocation, or termination to both a local workforce investment board and the principal elected official of each city and county government encompassing the site where the termination, relocation, or mass layoff is affecting 50 or more employees at a single location.
5. Reduce, from 90 to 75 days, the period of an employer's liability for specified back pay and benefits owed to affected employees for an employer's violation of the Cal/WARN notice requirement.

COMMENTS

According to an article by Mercury News, "Just before the COVID pandemic hit, Google's parent company Alphabet had 119,000 full-time employees. As public health orders and fears of the deadly virus drove people out of the physical world and into online life and shopping, the digital-advertising giant's workforce ballooned – to 190,000 by the end of last year. Then last month the company axed 12,000 workers, including 1,600 in the Bay Area."^[1]

Additionally, the article reported that "Many other Bay Area firms, including Facebook's parent company Meta of Menlo Park, Santa Clara computer chip maker Intel, San Jose video-conferencing company Zoom and San Jose payments platform PayPal also staffed up heavily during the pandemic before slashing jobs in recent months. The carnage has just topped 20,000 newly or soon-to-be unemployed workers since mid-2022."^[2]

According to a report by the Tech Equity Collaborative, "The use of contracting agencies to fill staffing needs has become increasingly popular across all industries as part of a larger trend to cut costs and increase shareholder value. But this practice has been particularly appealing to Silicon Valley companies who have an imperative (driven by the demands of venture capital investors) to gain massive market share and valuation as quickly as possible."^[3]

Additionally the report found that "Demographic trends of the contingent workforce at tech companies—those who are hired through and employed by third-party entities, often on tenuous contracts—differ substantially from the directly employed workforce. Contract and temp workers are more likely to be Black, Indigenous, Latinx, Asian, women, and nonbinary people than those hired in the direct workforce. For every single racialized category, the rate of employment in contract work was greater than the rate of employment of those same racialized groups in directly employed roles at the tech company."^[4]

In an effort to avoid liability, "tech companies avoid, at all costs, being considered joint employers for contract workers. To avoid triggering a joint employer finding, corporate policies keep contract workers structurally isolated—without a clear manager, without a clear pathway into direct employment, without direct access to necessary resources and tools for their work."^[5]

According to the Author

"Innovative industries like tech are a critical part of our state's economy, and we know that tech companies start here in California because of our highly skilled workforce. [This bill] will protect that workforce – from the engineers to the janitors – by making sure they're treated fairly during a job transition.

To be pro tech, we have to be pro tech-worker. If we don't take care of our tech workers then we'll lose one of California's greatest resources to states like Texas, Washington, or New York. While we respect that downsizing is sometimes an unavoidable part of business, discarding employees that have done nothing wrong – with little to no notice – isn't right and it hurts the competitiveness of our state's tech industry. If all of our workers have enough time to look for other work, they're more likely to stay here in California. [This bill] closes the loopholes in critical layoff protection laws and gives contract workers the basic protections that all workers at these large companies deserve."

In addition, the author points out that this bill will promote equity solutions and maximize benefits for underserved and marginalized communities because, "For many low wage and middle class families, an unexpected job loss can mean financial catastrophe. Providing a 90 day notice period is a critical change that recognizes the reality of the high cost of living in California and helps increase the economic safety net for some of our most vulnerable communities."

Arguments in Support

The California Labor Federation, co-sponsor of the bill, states, "The contract workforce in California is estimated at 1.9 million workers and that number continues to grow. Contract workers serve some of the largest and most profitable companies in the state, but they are employed by third-parties, labor contractors, and other smaller entities. Contract workers are often exempted from many employment protections. They do the work of mega-corporations, but they are not directly employed by them, so they fall into gaps of our worker protection laws. Black workers and other workers of color make up a disproportionate percent of the workforce and contract workers of color are less likely to be converted to permanent, direct employment than their white counterparts, further institutionalized inequity in the industry.

[This bill] will expand California's WARN Act to protect contract workers and update protections for all workers. The bill increases the advance notice requirement from 60 days to 90 days to give workers adequate time to prepare for the loss of a job. It decouples severance negotiations, including waiver of claims, from meeting WARN Act obligations. The bill also extends WARN Act coverage to include client employers, third-party agencies, and labor contractors in the definition of "covered employers" to ensure contract workers, that are directly impacted by a mass layoff, receive the same protections as direct employees.

Basic labor protections at a time of mass lay-offs should cover all workers in California. [This bill] expands the proven success of the WARN Act to cover more workers and updates the law to reflect the changing economy."

Arguments in Opposition

A coalition of employer organizations, including the California Chamber of Commerce, state, "[This bill] unnecessarily expands existing WARN Act requirements and is overly broad in its application to employees of a labor contractor, including failing to take into account the terms of a contract or agreement between the labor contractor and client.

First, it increases the amount of notice time from 60 days to 90 days without justification. Increasing the number of days is actually likely to disadvantage workers. If notices must be issued 90 days in advance, this means employers must know well before the 90 day mark who is subject to the closure or layoff at issue.

Second, recent amendments change the definition of "covered establishment" so that instead of applying to single locations with 75 or more employees, it now covers any business that employs 75 or more employees between all of their locations. That affects the definitions of mass layoff, relocation, and termination. For example, if a company lays off a few employees at different locations that altogether total 50 workers, the WARN Act is now triggered. This is a significant expansion of the law, imposing new burdensome requirements on small locations that were previously never subject to the WARN Act."

FISCAL COMMENTS

According to the Senate Appropriations Committee, the Department of Industrial Relations (DIR) indicates that it would incur first-year costs of $1.11 million, and $1.06 million annually thereafter, to implement the provisions of this bill (Labor Enforcement and Compliance Fund). Additionally, this bill could result in a minor increase in civil penalty revenue.

VOTES:

ASM LABOR AND EMPLOYMENT: 5-0-2

YES: Kalra, Haney, Ortega, Reyes, Ward

ABS, ABST OR NV: Flora, Chen

ASM JUDICIARY: 8-2-1

YES: Maienschein, Connolly, Haney, Kalra, Pacheco, Papan, Reyes, Robert Rivas

NO: Dixon, Sanchez

ABS, ABST OR NV: Essayli

ASM APPROPRIATIONS: 11-4-1

YES: Holden, Bryan, Calderon, Wendy Carrillo, Mike Fong, Hart, Lowenthal, Papan, Pellerin, Weber, Ortega

NO: Megan Dahle, Dixon, Mathis, Sanchez

ABS, ABST OR NV: Robert Rivas

ASSEMBLY FLOOR: 60-14-6

YES: Addis, Aguiar-Curry, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Cervantes, Connolly, Mike Fong, Friedman, Garcia, Gipson, Grayson, Haney, Hart, Holden, Irwin, Jackson, Jones-Sawyer, Kalra, Lee, Low, Lowenthal, Maienschein, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Pellerin, Petrie-Norris, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Santiago, Schiavo, Soria, Ting, Valencia, Villapudua, Ward, Weber, Wicks, Wilson, Wood, Zbur, Rendon

NO: Alanis, Megan Dahle, Davies, Dixon, Essayli, Vince Fong, Gallagher, Hoover, Jim Patterson, Joe Patterson, Sanchez, Ta, Waldron, Wallis

ABS, ABST OR NV: Chen, Flora, Gabriel, Lackey, Mathis, Quirk-Silva

SENATE FLOOR: 29-9-2

YES: Allen, Archuleta, Ashby, Atkins, Becker, Blakespear, Bradford, Cortese, Dodd, Durazo, Eggman, Gonzalez, Hurtado, Laird, Limón, McGuire, Menjivar, Min, Newman, Padilla, Portantino, Roth, Rubio, Skinner, Smallwood-Cuevas, Stern, Umberg, Wahab, Wiener

NO: Alvarado-Gil, Dahle, Grove, Jones, Nguyen, Niello, Ochoa Bogh, Seyarto, Wilk

ABS, ABST OR NV: Caballero, Glazer

UPDATED

VERSION: September 1, 2023

CONSULTANT: Martin Vindiola / L. & E. / (916) 319-2091 FN: 0002309

1. Baron, Ethan. Silicon Valley tech layoffs: Why so many jobs were slashed, and who's hiring amid fierce competition? The Mercury News, February 2023. ↑

2. Ibid. ↑

3. Tech Equity Collaborative. Contract Worker Disparity Project: Shining a Light on Tech's Shadow Workforce, January 2022. ↑

4. Ibid. ↑

5. Ibid. ↑

 THIRD READING  

Bill No: AB 1356

Author: Haney (D), et al.

Amended: 9/1/23 in Senate

Vote: 21

SENATE LABOR, PUB. EMP. & RET. COMMITTEE: 4-0, 6/22/23

AYES: Cortese, Durazo, Laird, Smallwood-Cuevas

NO VOTE RECORDED: Wilk

SENATE JUDICIARY COMMITTEE: 9-1, 7/11/23

AYES: Umberg, Allen, Ashby, Caballero, Durazo, Laird, Min, Stern, Wiener

NOES: Niello

NO VOTE RECORDED: Wilk

SENATE APPROPRIATIONS COMMITTEE: 5-2, 9/1/23

AYES: Portantino, Ashby, Bradford, Wahab, Wiener

NOES: Jones, Seyarto

ASSEMBLY FLOOR: 60-14, 5/31/23 - See last page for vote

SUBJECT: Relocations, terminations, and mass layoffs

SOURCE: Alphabet Workers Union – Communication Workers of America California Employment Lawyers Association

California Labor Federation

National Employment Law Project

National Legal Advocacy Network

TechEquity Collaborative

Temp Worker Justice

DIGEST:

This bill revises the California Worker Adjustment and Retraining (CalWARN) Act to include a “client employer” of a “labor contractor” in the definition of “employer;” increases from 60 to 90 days the length of notice an employer must provide to employees prior to terminations, relocations, or mass layoffs; prohibits employers from making a general release, waiver of claims, nondisparagement, or nondisclosure agreement a condition of the payment of amounts for which the employer is liable under CalWARN; and makes other changes to the CalWARN Act.

ANALYSIS:

Existing federal law:

1. Establishes the federal Worker Adjustment and Retraining Notification (WARN) Act, which prohibits an employer of 100 or more full-time employees from ordering a mass layoff, relocation, or termination at a covered establishment, as defined, unless, 60 days before the order takes effect, the employer gives written notice of the order to the employees.
2. Makes WARN applicable to businesses that have 100 or more full-time employees that have been employed more than six out of the preceding 12 months and businesses that have 100 or more employees, including part-time employees who work more than 4,000 regular hours per week, collectively.

Existing state law:

1. Establishes CalWARN, which requires employers with 75 or more full and part time employees to provide 60 days’ written notice before employee termination, relocation, or mass layoff of 50 or more employees. Written notice must be provided to the employees of the covered establishment, the Employment Development Department, the local workforce investment board, and the chief elected official of each city and county government.
2. Exempts, from the provisions of CalWARN, seasonal employees and employees that are laid off as a result of the completion of a project in specified industries, where the employers are subject to specified wage orders, and the employees were hired with the understanding that their employment was seasonal and temporary.
3. States that an employer that fails to give the required CalWARN notice before ordering a mass layoff, relocation, or termination, is liable to each employee entitled to notice, for specified compensation and benefits, calculated for the period of the employer’s violation, up to a maximum of 60 days, or half the number of days that the employee was employed by the employer, whichever period is smaller.
4. States that an employer who fails to give the notice, as required by CalWARN, is subject to a civil penalty of not more than $500 for each day of the employer’s violation. Exempts an employer from this civil penalty if the employer pays all applicable employees within three weeks from the date the employer ordered the mass layoff, relocation, or termination.
5. Permits a person, including a local government, or an employee representative, seeking to establish liability against an employer for violation of CalWARN to bring a civil action on behalf of the person other persons similarly situated, or both, in any court of competent jurisdiction. Additionally, permits a court to award reasonable attorney’s fees as part of the costs to any plaintiff who prevails in a civil action.
6. Provides up to $450 per week for up to 26 weeks for laid off employees, not including independent contractors, self-employed individuals, informal workers, and undocumented workers.

This bill:

1. Requires employers subject to CalWARN with 75 or more full and part time employees to provide 75 days’ written notice before employee termination, relocation, or mass layoff of 50 or more employees at a covered establishment.
2. Defines “labor contractor” as an individual or entity that supplies, either with or without a contract, a client employer with workers to perform labor within the client employer’s usual course of business.
3. Provides that a “covered establishment” is any place of employment and may be a single location or a group of locations, including any facilities located in this state.
4. Adds to the definition of “employee” a person employed by a labor contractor and performing labor with the client employer for at least six months of the 12 months and for at least 60 hours preceding the date on which the CalWARN notice is required.
5. Revises the seasonal employee exemption under CalWARN to instead require that the season must be complete for the exemption to apply.
6. Exempts from CalWARN employees who are employed by a labor contractor to fulfill the needs of a temporary project with a defined end date and are laid off due to completion of the temporary contract.
7. Increases, from 60 to 75 days or one-half the number of days employed, the period of an employer’s liability for specified back pay and benefits owed to affected employees for an employer’s violation of the CalWARN notice requirement.
8. Requires a labor contractor to remit the payment provided by a client employer, to affected employees, in the full amount calculated, as specified, for a violation of the CalWARN notice requirement.
9. States that an employer that includes a general release, waiver of claims, nondisparagement agreement, or nondisclosure agreement, as a condition of payment owed to an employee under CalWARN, is subject to a civil penalty of up to $500 for each violation.
10. States that any general release, waiver of claims, or nondisparagement or nondisclosure agreement that is made a condition of the payment of amounts for which the employer is liable under CalWARN, as specified, is void as a matter of law and against public policy.
11. Prohibits an employer that is required to give notice, pursuant to CalWARN, from offering an employee a separate agreement that includes a general release, waiver of claims, or nondisparagement or nondisclosure agreement, unless the agreement is offered in exchange for reasonable consideration that is in addition to anything of value to which the individual already is entitled to.

Background

Home to some of the largest companies in the world, California has established itself as a tech capital, which utilizes contract workers to fulfill critical roles. In 2019, the New York Times reported on the tech industry’s reliance on contracted workers, or workers who are primarily employed by a temp agency and contracted out to “client employers.” During this time, Google’s overall workforce consisted of 121,000 temp workers as compared to 102,000 full-time employees. Contract workers fulfill roles like software engineers, content moderators, data scientists, quality assurance associates, cafeteria workers, janitors, warehouse workers, and administrative specialists. In many cases, contract workers perform similar roles as direct hire employees. Due to the changing economy, since the spring of 2022, tech companies have laid off about 187,000 people; however, those numbers don’t capture contract workers, who are directly affected by mass layoffs but are largely ineligible for the same protections under CalWARN.

Comments

Purpose of the bill. According to the author, “Innovative industries like tech are a critical part of our state's economy, and we know that tech companies start here in California because of our highly skilled workforce. AB 1356 will protect that workforce—from the engineers to the janitors— by making sure they’re treated fairly during a job transition. To be pro tech, we have to be pro tech-worker. If we don’t take care of our tech workers then we’ll lose one of California’s greatest resources to states like Texas, Washington, or New York. While we respect that downsizing is sometimes an unavoidable part of business, discarding employees that have done nothing wrong – with little to no notice – isn't right and it hurts the competitiveness of our state’s tech industry. If all of our workers have enough time to look for other work, they’re more likely to stay here in California. AB 1356 closes the loopholes in critical layoff protection laws and gives contract workers the basic protections that all workers at these large companies deserve.”

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Senate Appropriations Committee, the Department of Industrial Relations indicates that it would incur first-year costs of $1.11 million, and $1.06 million annually thereafter, to implement the provisions of this bill (Labor Enforcement and Compliance Fund). Additionally, this bill could result in a minor increase in civil penalty revenue.

SUPPORT: (Verified 9/8/23)

Alphabet Workers Union – Communication Workers of America (co-source) California Employment Lawyers Association (co-source)

California Labor Federation (co-source)

National Employment Law Project (co-source)

National Legal Advocacy Network (co-source)

TechEquity Collaborative (co-source)

Temp Worker Justice (co-source)

Office of the Attorney General

Action American Sustainable Business Council

Alliance of Californians for Community Empowerment

American Sustainable Business Network

Asian Law Alliance

Board of Supervisors for the City and County of San Francisco

California Commission on the Status of Women and Girls

California Conference Board of the Amalgamated Transit Union

California Conference of Machinists

California Environmental Voters

California Faculty Association

California Federation of Teachers, AFL-CIO

California Immigrant Policy Center

California Nurses Association

California School Employees Association

California State Council of Service Employees International Union

California Teamsters Public Affairs Council

Center for Responsible Lending

Communications Workers of America, District 9

Courage California

East Bay Alliance for a Sustainable Economy

Economic Policy Institute

End Poverty in California

Engineers & Scientists of California, Local 20, IFPTE, AFL-CIO

Equal Rights Advocates

Freelancers Union

Grace Institute - End Child Poverty in California

Indivisible CA Statestrong

Lawyers' Committee for Civil Rights of the San Francisco Bay Area

Legal Aid at Work

National Council of Jewish Women Los Angeles

People's Collective for Environmental Justice

Santa Clara County Wage Theft Coalition

State Building and Construction Trades Council of California

Unite Here, AFL-CIO

United Food and Commercial Workers - Western States Council

Utility Workers Union of America, AFL-CIO

Voices for Progress

Warehouse Worker Resource Center

Western Center on Law and Poverty

Women's Foundation California

Worksafe

OPPOSITION: (Verified 9/1/23)

Acclamation Insurance Management Services

Allied Managed Care

Bay Area Council

California Association for Health Services At Home

California Association of Winegrape Growers

California Attractions and Parks Association

California Building Industry Association

California Business Properties Association

California Business Roundtable

California Chamber of Commerce

California Hispanic Chamber of Commerce

California League of Food Producers

California Lodging Industry Association

California Restaurant Association

California Retailers Association

Coalition of Small and Disabled Veteran Businesses

Family Business Association of California

Flasher Barricade Association

Hollywood Chamber of Commerce

Independent Lodging Industry Association

Official Police Garage Association of Los Angeles

Silicon Valley Leadership Group

Technet

Valley Industry and Commerce Association

ARGUMENTS IN SUPPORT: The co-sources state, “California has expanded on the federal [WARN] Act through state protections, but thousands of workers are still falling through the cracks. Recent layoffs in the tech industry have captured headlines, with 187,000 workers laid off since the beginning of 2022. Since July of 2022, nearly 64,000 workers in California alone have been affected by a mass layoff. Twitter, the poster child of recent downsizing, laid off 3,700 workers in November of the same year—a move that drew headlines and widespread concern. Largely missing from the coverage, however, was that 4,400 contract workers were also laid off, and sent home with nothing because the WARN Act currently does not cover many of them.

“WARN has left behind thousands of workers, with the potential to leave millions in the lurch. California’s contract and temporary workforce comprises approximately 1.9 million employees. In 2018, contract workers at Google outnumbered direct-hire employees, 150,000 to 144,000. The recent layoffs at Meta—noted at the time for their generous layoff packages — did not include contract workers such as campus cafeteria workers, who now must urge the company to provide severance…

“Employment of third-party contract workers is not isolated to the tech industry. Since the Great Recession, temporary employment in all sectors has increased by 75% compared to 19% in total employment. This large and disproportionately diverse workforce often does not have the same protections as the rest of the workforce. This bill changes that by explicitly extending the WARN Act to millions of contract and temporary workers in California…

“The bill also ensures that employers cannot use the WARN Act notice pay to create the false impression that employees are receiving a “severance benefit.” People recently laid off from tech companies are reporting that companies are providing some or all of the 60 days of pay in lieu of their WARN-mandated notice along with a separation agreement that waives their legal rights. By offering payments that are already guaranteed under the law in the guise of a separation negotiation, employers induce employees to sign agreements with general releases, waivers of claims, nondisparagement, and nondisclosure provisions. WARN Act rights are already guaranteed to workers impacted by mass downsizing, and AB 1356 makes that clear by requiring any severance agreement to include something of additional value in exchange for signing any waiver of claims or waiver of rights agreement.”

ARGUMENTS IN OPPOSITION: The California Chamber of Commerce and other opponents write, “AB 1356 unnecessarily expands the requirements under California’s WARN Act in two ways. First, it increases the amount of notice time …without justification… The further that date moves up, the more the employer is in a position where it is guessing with less certainty exactly how many workers this could impact. Out of fear of violating the statute, the employer has no choice but to be overinclusive in who is receiving notices, leading to layoffs that may not actually be necessary or having to tell workers they are being laid off and then walking that back later, which is poor for worker morale and may lead workers to finding other jobs unnecessarily…

“The new group of workers that would fall under the WARN Act requirements is far too broad. “Labor contractor” is defined as “an individual or entity that supplies, either with or without a contract, a client employer with workers to perform labor within the client employer’s usual course of business.” That definition has been interpreted broadly in other statutes. For example, just last year, Government Code Section 12999 was amended to require pay data reporting regarding employees of a labor contractor. Labor contractor has the same definition as is used here…To avoid liability, employers would therefore be forced to take a sweeping interpretation of who qualifies as an employee of a labor contractor. Further, “employee” for purposes of those employed by labor contractors should be narrowed. Presently, the bill only requires that the worker has performed labor with the client employer for at least 6 of the 12 months. There is no requirement as to how much work or how frequently. A worker could have worked on a worksite once or twice and now fall under the purview of the bill. It is unlikely the employer even has the most current contact information for that worker.

“The bill and these definitions also do not take into account whether the worker performs work at other sites, whether they can be reassigned by the contractor, or the terms of the contract. If the client employer is just one of a worker’s five assignments, the justification for receiving a WARN Act notice of a closure is far less than a worker who performs work at one site every single day. Or, if the labor contractor is able to immediately assign the worker to a new client upon learning of a closure or layoff, again the need to follow all of the WARN Act steps is obviated. The bill also does not address the terms of the contract or agreement between the labor contractor and client. This would include a situation where the length of the contract is set to expire before the anticipated closure or layoff or where there is no set term. Further, the payment requirements under section 1402 do not consider the fact that a contract between the labor contractor and employer may already address worker compensation in the event of a closure or layoff. The applicability of the bill to contract workers must be narrowed and reworked.”

ASSEMBLY FLOOR: 60-14, 5/31/23

AYES: Addis, Aguiar-Curry, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Cervantes, Connolly, Mike Fong, Friedman, Garcia, Gipson, Grayson, Haney, Hart, Holden, Irwin, Jackson, Jones-Sawyer, Kalra, Lee, Low, Lowenthal, Maienschein, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Pellerin, Petrie-Norris, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Santiago, Schiavo, Soria, Ting, Valencia, Villapudua, Ward, Weber, Wicks, Wilson, Wood, Zbur, Rendon

NOES: Alanis, Megan Dahle, Davies, Dixon, Essayli, Vince Fong, Gallagher, Hoover, Jim Patterson, Joe Patterson, Sanchez, Ta, Waldron, Wallis

NO VOTE RECORDED: Chen, Flora, Gabriel, Lackey, Mathis, Quirk-Silva

Prepared by: Dawn Clover / L., P.E. & R. / (916) 651-1556

9/8/23 9:29:13

**** END ****

SENATE COMMITTEE ON

Senator Anthony Portantino, Chair

2023 - 2024 Regular Session

AB 1356 (Haney) - Relocations, terminations, and mass layoffs

Bill Summary:

AB 1356 would (1) revise the California Worker Adjustment and Retraining (WARN) Act to include a “client employer” of a “labor contractor” in the definition of “employer,” (2) increase from 60 to 75 days the length of notice an employer must provide to employees prior to terminations, relocations, or mass layoffs, and (3) prohibit employers from making a general release, waiver of claims, or nondisparagement or nondisclosure agreement a condition of the payment of amounts for which the employer is liable under CalWARN.

*********** ANALYSIS ADDENDUM – SUSPENSE FILE ***********

The following information is revised to reflect amendments

adopted by the committee on September 1, 2023

Fiscal Impact:

The Department of Industrial Relations (DIR) indicates that it would incur first-year costs of $1.11 million, and $1.06 million annually thereafter, to implement the provisions of this bill (Labor Enforcement and Compliance Fund). Additionally, this bill could result in a minor increase in civil penalty revenue.

Author Amendments:

Clarify that the bill does not apply to any person that was hired with a contract that has a specific end date.

-- END --

SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2023 - 2024 Regular Session

AB 1356 (Haney) - Relocations, terminations, and mass layoffs

Bill Summary:

AB 1356 would (1) revise the California Worker Adjustment and Retraining (WARN) Act to include a “client employer” of a “labor contractor” in the definition of “employer,” (2) increase from 60 to 75 days the length of notice an employer must provide to employees prior to terminations, relocations, or mass layoffs, and (3) prohibit employers from making a general release, waiver of claims, or nondisparagement or nondisclosure agreement a condition of the payment of amounts for which the employer is liable under CalWARN.

Fiscal Impact:

The Department of Industrial Relations (DIR) indicates that it would incur first-year costs of $1.11 million, and $1.06 million annually thereafter, to implement the provisions of this bill (Labor Enforcement and Compliance Fund). Additionally, this bill could result in a minor increase in civil penalty revenue.

Background:

The WARN Act requires an employer with 75 or more employees at a single establishment to give 60 days’ notice when 50 or more workers during a single 30-day period may be impacted by a mass layoff, relocation, or termination. Notice must also be provided to specified government entities, including the Employment Development Department, local workforce development board, and chief elected officials of the impacted city and county. Thus, the WARN Act allows impacted employees to prepare for the potential loss of income and alerts impacted communities of the need to provide resources. Failure to provide appropriate notice exposes the employer to significant monetary penalties, specifically liability for backpay and the value of the cost of benefits to which an employee would have been entitled. Furthermore, an employer that does not compensate employees accordingly is subject to a civil penalty of $500 per day the employer is in violation.

WARN Act protections do not, however, extend to temporary workers who work alongside employees at a covered establishment. Thus, temporary workers have no recourse in the event of a mass layoff, relocation, or termination. The growth of the temporary workforce has been particularly noticeable in the technology industry, with approximately half of such companies relying on a temporary labor force that comprises nearly 50 percent of their total.

Proposed Law:

This bill would, among other things, do the following:

• Define “labor contractor” as an individual or entity that supplies, either with or without a contract, a client employer with workers to perform labor within the client employer’s usual course of business.
• Clarify that a “covered establishment” may be a single location or a group of locations, including any facilities located in this state.
• Revise the definition of “mass layoff” to mean a layoff during any 30-day period of 50 or more employees at, or reporting to, a covered establishment.
• Add to the definition of “employee” a person employed by a labor contractor and performing labor with the client employer for at least six months of the 12 months and for at least 60 hours preceding the date on which the CalWARN notice is required.
• Revise the seasonal employee exemption under CalWARN to instead require that the season must be complete for the exemption to apply.
• Prohibit an employer from utilizing compliance with the provisions of CalWARN in connection with a severance agreement and waiver of an employee’s right to claims.
• Increase, from 60 to 75 days, the period of an employer’s liability for specified back pay and benefits owed to affected employees for an employer’s violation of the CalWARN notice requirement.
• Require a labor contractor to remit the payment provided by a client employer, to affected employees, in the full amount calculated, as specified, for a violation of the CalWARN notice requirement.
• State that an employer that includes a general release, waiver of claims, nondisparagement agreement, or nondisclosure agreement, as a condition of payment owed to an employee under CalWARN, is subject to a civil penalty of up to $500 for each violation.
• State that any general release, waiver of claims, or nondisparagement or nondisclosure agreement that is made a condition of the payment of amounts for which the employer is liable under CalWARN, as specified, is void as a matter of law and against public policy.
• Prohibit an employer that is required to give notice, pursuant to CalWARN, from offering an employee a separate agreement that includes a general release, waiver of claims, or nondisparagement or nondisclosure agreement, unless the agreement is offered in exchange for reasonable consideration that is in addition to anything of value to which the individual already is entitled to.

Related Legislation:

AB 1601 (Weber, Chapter 752, Statutes of 2022) prohibited a call center employer from relocating the call center outside the state, unless a 60-day notice of relocation is provided to affected employees and specified government entities.

-- END --

SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2023 - 2024 Regular Session

AB 1356 (Haney) - Relocations, terminations, and mass layoffs

Bill Summary:

AB 1356 would (1) revise the California Worker Adjustment and Retraining (WARN) Act to include a “client employer” of a “labor contractor” in the definition of “employer,” (2) increase from 60 to 75 days the length of notice an employer must provide to employees prior to terminations, relocations, or mass layoffs, and (3) prohibit employers from making a general release, waiver of claims, or nondisparagement or nondisclosure agreement a condition of the payment of amounts for which the employer is liable under CalWARN.

Fiscal Impact:

The Department of Industrial Relations (DIR) indicates that it would incur first-year costs of $1.11 million, and $1.06 million annually thereafter, to implement the provisions of this bill (Labor Enforcement and Compliance Fund). Additionally, this bill could result in a minor increase in civil penalty revenue.

Background:

The WARN Act requires an employer with 75 or more employees at a single establishment to give 60 days’ notice when 50 or more workers during a single 30-day period may be impacted by a mass layoff, relocation, or termination. Notice must also be provided to specified government entities, including the Employment Development Department, local workforce development board, and chief elected officials of the impacted city and county. Thus, the WARN Act allows impacted employees to prepare for the potential loss of income and alerts impacted communities of the need to provide resources. Failure to provide appropriate notice exposes the employer to significant monetary penalties, specifically liability for backpay and the value of the cost of benefits to which an employee would have been entitled. Furthermore, an employer that does not compensate employees accordingly is subject to a civil penalty of $500 per day the employer is in violation.

WARN Act protections do not, however, extend to temporary workers who work alongside employees at a covered establishment. Thus, temporary workers have no recourse in the event of a mass layoff, relocation, or termination. The growth of the temporary workforce has been particularly noticeable in the technology industry, with approximately half of such companies relying on a temporary labor force that comprises nearly 50 percent of their total.

Proposed Law:

This bill would, among other things, do the following:

• Define “labor contractor” as an individual or entity that supplies, either with or without a contract, a client employer with workers to perform labor within the client employer’s usual course of business.
• Clarify that a “covered establishment” may be a single location or a group of locations, including any facilities located in this state.
• Revise the definition of “mass layoff” to mean a layoff during any 30-day period of 50 or more employees at, or reporting to, a covered establishment.
• Add to the definition of “employee” a person employed by a labor contractor and performing labor with the client employer for at least six months of the 12 months and for at least 60 hours preceding the date on which the CalWARN notice is required.
• Revise the seasonal employee exemption under CalWARN to instead require that the season must be complete for the exemption to apply.
• Prohibit an employer from utilizing compliance with the provisions of CalWARN in connection with a severance agreement and waiver of an employee’s right to claims.
• Increase, from 60 to 75 days, the period of an employer’s liability for specified back pay and benefits owed to affected employees for an employer’s violation of the CalWARN notice requirement.
• Require a labor contractor to remit the payment provided by a client employer, to affected employees, in the full amount calculated, as specified, for a violation of the CalWARN notice requirement.
• State that an employer that includes a general release, waiver of claims, nondisparagement agreement, or nondisclosure agreement, as a condition of payment owed to an employee under CalWARN, is subject to a civil penalty of up to $500 for each violation.
• State that any general release, waiver of claims, or nondisparagement or nondisclosure agreement that is made a condition of the payment of amounts for which the employer is liable under CalWARN, as specified, is void as a matter of law and against public policy.
• Prohibit an employer that is required to give notice, pursuant to CalWARN, from offering an employee a separate agreement that includes a general release, waiver of claims, or nondisparagement or nondisclosure agreement, unless the agreement is offered in exchange for reasonable consideration that is in addition to anything of value to which the individual already is entitled to.

Related Legislation:

AB 1601 (Weber, Chapter 752, Statutes of 2022) prohibited a call center employer from relocating the call center outside the state, unless a 60-day notice of relocation is provided to affected employees and specified government entities.

-- END --

SENATE COMMITTEE ON LABOR, PUBLIC EMPLOYMENT AND RETIREMENT

Senator Dave Cortese, Chair

2023 - 2024 Regular

Bill No: AB 1356 Hearing Date: June 22, 2023

SUBJECT: Relocations, terminations, and mass layoffs

KEY ISSUE

Should the Legislature revise the California Worker Adjustment and Retraining Act to include a “client employer” of a “labor contractor” in the definition of “employer?”

Should the Legislature increase from 60 to 90 days the length of notice an employer must provide to employees prior to terminations, relocations, or mass layoffs?

Should the Legislature prohibit employers from making a general release, waiver of claims, or nondisparagement or nondisclosure agreement a condition of the payment of amounts for which the employer is liable under CalWARN?

ANALYSIS

Existing federal law: establishes the federal Worker Adjustment and Retraining Notification (WARN) Act, which prohibits an employer of 100 or more full-time employees from ordering a mass layoff, relocation, or termination at a covered establishment, as defined, unless, 60 days before the order takes effect, the employer gives written notice of the order to the employees. This applies to businesses that have 100 or more full-time employees that have been employed more than 6 out of the preceding 12 months and businesses that have 100 or more employees, including part-time employees who work more than 4,000 regular hours per week, collectively. (29 U.S.C. §§2101)

Existing state law:

1. Establishes the California WARN (CalWARN) Act, which requires employers with 75 or more full and part-time employees to provide 60 days’ notice before employee termination, relocation, or mass layoff of 50 or more employees. (Labor Code §1400-1400.5)
   
2. Exempts, from the provisions of CalWARN, seasonal employees and employees that are laid off as a result of the completion of a project in specified industries, where the employers are subject to specified wage orders, and the employees were hired with the understanding that their employment was seasonal and temporary. (Labor Code §1400.5)
   
3. States that an employer that fails to give the required notice, as required by CalWARN, before ordering a mass layoff, relocation, or termination, is liable to each employee entitled to notice, for specified compensation and benefits, calculated for the period of the employer’s violation, up to a maximum of 60 days, or half the number of days that the employee was employed by the employer, whichever period is smaller. (Labor Code §1402)
   
4. States that an employer who fails to give the notice, as required by CalWARN, is subject to a civil penalty of not more than five hundred dollars ($500) for each day of the employer’s violation. Exempts an employer from this civil penalty if the employer pays all applicable employees within three weeks from the date the employer ordered the mass layoff, relocation, or termination. (Labor Code §1403)
   
5. Permits a person, including a local government, or an employee representative, seeking to establish liability against an employer for violation of CalWARN to bring a civil action on behalf of the person other persons similarly situated, or both, in any court of competent jurisdiction. Additionally, permits a court to award reasonable attorney’s fees as part of the costs to any plaintiff who prevails in a civil action. (Labor Code §1404)
   
6. Provides up to $450 per week for up to 26 weeks for laid off employees, not including independent contractors, self-employed individuals, informal workers, and undocumented workers. (Unemployment Insurance Code §2655)

This bill:

1. Defines “labor contractor” as an individual or entity that supplies, either with or without a contract, a client employer with workers to perform labor within the client employer’s usual course of business.
   
2. Clarifies that a “covered establishment” may be a single location or a group of locations, including any facilities located in this state.
   
3. Revises the definition of “mass layoff” to mean a layoff during any 30-day period of 50 or more employees at, or reporting to, a covered establishment.
   
4. Adds to the definition of “employee” a person employed by a labor contractor and performing labor with the client employer for at least six months of the 12 months preceding the date on which the CalWARN notice is required.
   
5. Revises the seasonal employee exemption under CalWARN to instead require that the season must be complete for the exemption to apply.
   
6. Prohibits an employer from utilizing compliance with the provisions of CalWARN in connection with a severance agreement and waiver of an employee’s right to claims.
   
7. Increases, from 60 to 90 days, the period of an employer’s liability for specified back pay and benefits owed to affected employees for an employer’s violation of the CalWARN notice requirement.
   
8. Requires a labor contractor to remit the payment provided by a client employer, to affected employees, in the full amount calculated, as specified, for a violation of the CalWARN notice requirement.
   
9. States that an employer that includes a general release, waiver of claims, nondisparagement agreement, or nondisclosure agreement, as a condition of payment owed to an employee under CalWARN, is subject to a civil penalty of up to five hundred dollars ($500) for each violation.
   
10. States that any general release, waiver of claims, or nondisparagement or nondisclosure agreement that is made a condition of the payment of amounts for which the employer is liable under CalWARN, as specified, is void as a matter of law and against public policy.
    
11. Prohibits an employer that is required to give notice, pursuant to CalWARN, from offering an employee a separate agreement that includes a general release, waiver of claims, or nondisparagement or nondisclosure agreement, unless the agreement is offered in exchange for reasonable consideration that is in addition to anything of value to which the individual already is entitled to.

COMMENTS

1. Background
   

Home to some of the largest companies in the world, California has established itself as a tech capitol. As of 2020, California’s workforce consisted of approximately 1.38 million tech workers, representing about 10 percent of the overall workforce in California.^[1] The state is home to some of the largest and most profitable companies in the world. The tech industry, in particular, has grown significantly over the last decade.

The tech industry has shifted to using contract workers to fulfill critical parts of their business. In 2019, the New York Times reported on the tech industry’s reliance on contracted workers, or workers who are primarily employed by a temp agency and contracted out to “client employers.” During this time, Google’s overall workforce consisted of 121,000 temp workers as compared to 102,000 full-time employees.^[2] Contract workers fulfill roles like software engineers, content moderators, data scientists, quality assurance, cafeteria workers, janitors, warehouse workers, and administrative specialists. This is a growing practice both in tech and other industries. In many cases, contract workers perform similar roles as directly hired employees. Due to the changing economy, since the Spring of 2022, tech companies have laid off about 187,000 people; however, those numbers don’t capture contract workers, who are directly affected by mass layoffs, but are largely ineligible for the same protections under CalWARN.

1. Need for this bill?

According to the author, “Innovative industries like tech are a critical part of our state's economy, and we know that tech companies start here in California because of our highly skilled workforce. AB 1356 will protect that workforce—from the engineers to the janitors—by making sure they’re treated fairly during a job transition.

To be pro tech, we have to be pro tech-worker. If we don’t take care of our tech workers then we’ll lose one of California’s greatest resources to states like Texas, Washington, or New York. While we respect that downsizing is sometimes an unavoidable part of business, discarding employees that have done nothing wrong – with little to no notice – isn't right and it hurts the competitiveness of our state’s tech industry. If all of our workers have enough time to look for other work, they’re more likely to stay here in California. AB 1356 closes the loopholes in critical layoff protection laws and gives contract workers the basic protections that all workers at these large companies deserve.”

1. Committee Discussion

While existing law provides some time to find new employment while the worker can obtain partial wage replacement, hopefully in a timely manner, it may not be sufficient enough time for the individual to find gainful employment or enough resources to obtain training for an opportunity in another sector and cover living expenses. The CalWARN Act requires a 60 day notice for an employer with 75 or more full and part time employees before ordering a mass layoff, relocation, or termination at a commercial or industrial establishment in order to allow the employee time to find another job. Additionally, UI benefits provide some protection, but payments can be significantly delayed. The Legislative Analyst’s Office reports 15-20 percent of those who apply for unemployment benefits during ordinary economic times experience a delay.

Amendments

The author is working with stakeholders on future amendments, some of which would add an hour requirement for contract workers in order for them to qualify for the WARN Act. Additionally, the parties are also discussing limiting the local jurisdiction notices to circumstances where there are more than 50 layoffs in one location.

1. Proponent Arguments

The co-sponsors state “California has expanded on the federal [WARN] Act through state protections, but thousands of workers are still falling through the cracks. Recent layoffs in the tech industry have captured headlines, with 187,000 workers laid off since the beginning of 2022. Since July of 2022, nearly 64,000 workers in California alone have been affected by a mass layoff. Twitter, the poster child of recent downsizing, laid off 3,700 workers in November of the same year—a move that drew headlines and widespread concern. Largely missing from the coverage, however, was that 4,400 contract workers were also laid off, and sent home with nothing because the WARN Act currently does not cover many of them.

WARN has left behind thousands of workers, with the potential to leave millions in the lurch. California’s contract and temporary workforce comprises approximately 1.9 million employees. In 2018, contract workers at Google outnumbered direct-hire employees, 150,000 to 144,000. The recent layoffs at Meta—noted at the time for their generous layoff packages — did not include contract workers such as campus cafeteria workers, who now must urge the company to provide severance.

Research shows that contract and temporary workers are more likely to be from diverse and underrepresented backgrounds. In Illinois, which has tracked temporary and contract worker demographics since 2018, 85% of the temporary workforce are people of color, despite the fact that people of color comprise just 35% of the overall state workforce. The temporary workforce of California-based tech companies was similarly found to be disproportionately people of color, women, and nonbinary than the directly-employed workforce. A recent survey conducted by Alphabet Workers Union found that Google often did not enforce its own minimum employment standard for ‘temps, vendors, and contractors,’ and that there was disparate pay based on race, sexual orientation, and ability.

Employment of third-party contract workers is not isolated to the tech industry. Since the Great Recession, temporary employment in all sectors has increased by 75% compared to 19% in total employment. This large and disproportionately diverse workforce often does not have the same protections as the rest of the workforce. This bill changes that by explicitly extending the WARN Act to millions of contract and temporary workers in California…

The bill also ensures that employers cannot use the WARN Act notice pay to create the false impression that employees are receiving a “severance benefit.” People recently laid off from tech companies are reporting that companies are providing some or all of the 60 days of pay in lieu of their WARN-mandated notice along with a separation agreement that waives their legal rights. By offering payments that are already guaranteed under the law in the guise of a separation negotiation, employers induce employees to sign agreements with general releases, waivers of claims, nondisparagement, and nondisclosure provisions. WARN Act rights are already guaranteed to workers impacted by mass downsizing, and AB 1356 makes that clear by requiring any severance agreement to include something of additional value in exchange for signing any waiver of claims or waiver of rights agreement.”

5. Opponent Arguments

According to a coalition of opponents, “AB 1356 unnecessarily expands the requirements under California’s WARN Act in two ways. First, it increases the amount of notice time from 60 days to 90 days without justification. Increasing the number of days is actually likely to disadvantage workers. If notices must be issued 90 days in advance, this means employers must know well before the 90 day mark who is subject to the closure or layoff at issue. The further that date moves up, the more the employer is in a position where it is guessing with less certainty exactly how many workers this could impact. Out of fear of violating the statute, the employer has no choice but to be over-inclusive in who is receiving notices, leading to layoffs that may not actually be necessary or having to tell workers they are being laid off and then walking that back later, which is poor for worker morale and may lead workers to finding other jobs unnecessarily…Second, recent amendments change the definition of “covered establishment” so that instead of applying to single locations with 75 or more employees, it now covers any business that employs 75 or more employees between all of their locations. That affects the definitions of mass layoff, relocation, and termination. For example, if a company lays off a few employees at different locations that altogether total 50 workers, the WARN Act is now triggered. This is a significant expansion of the law, imposing new burdensome requirements on small locations that were previously never subject to the WARN Act. It would also mean that if 100 layoffs were happening at a facility and one layoff was happening at a second facility across the state, that second facility is now also required to issue a WARN Act notice…

The new group of workers that would fall under the WARN Act requirements is far too broad. “Labor contractor” is defined as “an individual or entity that supplies, either with or without a contract, a client employer with workers to perform labor within the client employer’s usual course of business.” That definition has been interpreted broadly in other statutes…Further, “employee” for purposes of those employed by labor contractors should be narrowed. Presently, the bill only requires that the worker has performed labor with the client employer for at least 6 of the 12 months. There is no requirement as to how much work or how frequently. A worker could have worked on a worksite once or twice and now fall under the purview of the bill. It is unlikely the employer even has the most current contact information for that worker.

The bill and these definitions also do not take into account whether the worker performs work at other sites, whether they can be reassigned by the contractor, or the terms of the contract. If the client employer is just one of a worker’s five assignments, the justification for receiving a WARN Act notice of a closure is far less than a worker who performs work at one site every single day. Or, if the labor contractor is able to immediately assign the worker to a new client upon learning of a closure or layoff, again the need to follow all of the WARN Act steps is obviated. The bill also does not address the terms of the contract or agreement between the labor contractor and client. This would include a situation where the length of the contract is set to expire before the anticipated closure or layoff or where there is no set term. Further, the payment requirements under section 1402 do not consider the fact that a contract between the labor contractor and employer may already address worker compensation in the event of a closure or layoff. The applicability of the bill to contract workers must be narrowed and reworked.”

1. Double Referral

This bill has been double referred to the Senate Committee on Judiciary.

1. Prior Legislation

SB 627 (Smallwood-Cuevas, 2023) would prohibit an employer from closing a large chain establishment of 100 or more chains unless the employer gives a displacement notice to workers 60 days before the closure takes effect. This bill was referred to the Assembly Committee on Labor and Employment and the Assembly Committee on Judiciary.

SB 1162 (Limon – Chapter 559, Statutes of 2022) required employers of 100 or more workers hired through labor contractors to provide the Department of Fair Employment and Housing with specified information, including pay data, about their workers. This bill also required employers to provide the pay scale for a position to an applicant for employment and include it in job postings.

SUPPORT

Alphabet Workers Union – Communication Workers of America (co-sponsor)

California Employment Lawyers Association (co-sponsor)

California Labor Federation (co-sponsor)

National Employment Law Project (co-sponsor)

National Legal Advocacy Network (co-sponsor)

TechEquity Collaborative (co-sponsor)

Temp Worker Justice (co-sponsor)

Alliance of Californians for Community Empowerment (ACCE) Action

American Sustainable Business Council
American Sustainable Business Network
Asian Law Alliance
Board of Supervisors for the City and County of San Francisco
California Commission on the Status of Women and Girls

California Conference Board of the Amalgamated Transit Union

California Conference of Machinists
California Environmental Voters

California Faculty Association
California Immigrant Policy Center
California Nurses Association

California School Employees Association
California State Council of Service Employees International Union (SEIU California)

California Teamsters Public Affairs Council
Center for Responsible Lending

Communications Workers of America, District 9
Courage California
East Bay Alliance for a Sustainable Economy
Economic Policy Institute
End Poverty in California

Engineers & Scientists of California, Local 20, IFPTE, AFL-CIO
Equal Rights Advocates
Freelancers Union

Grace Institute - End Child Poverty in Ca
Indivisible CA Statestrong
Lawyers' Committee for Civil Rights of The San Francisco Bay Area
Legal Aid At Work
National Council of Jewish Women Los Angeles
People's Collective for Environmental Justice
Santa Clara County Wage Theft Coalition
State Building and Construction Trades Council of California
United Food and Commercial Workers - Western States Council
Voices for Progress
Warehouse Worker Resource Center
Western Center on Law and Poverty

Women's Foundation California
Worksafe

OPPOSITION

Acclamation Insurance Management Services
Allied Managed Care
California Association for Health Services At Home
California Association of Winegrape Growers
California Attractions and Parks Association
California Building Industry Association
California Business Properties Association
California Business Roundtable
California Chamber of Commerce
California Hispanic Chamber of Commerce
California League of Food Producers
California Lodging Industry Association
California Restaurant Association
California Retailers Association
Coalition of Small and Disabled Veteran Businesses
Family Business Association of California
Flasher Barricade Association
Hollywood Chamber of Commerce
Independent Lodging Industry Association.
Official Police Garage Association of Los Angeles
Technet

-- END --

1. CompTIA Cyberstates 2021 vFinal ↑

2. Google’s Shadow Work Force: Temps Who Outnumber Full-Time Employees - The New York Times (nytimes.com) ↑

SENATE JUDICIARY COMMITTEE

Senator Thomas Umberg, Chair

2023-2024 Regular Session

Bill No: AB 1356 (Author:Haney)

Version: April 26, 2023

Hearing Date: July 11, 2023

Fiscal: Yes

Urgency: No

Consultant: ME

SUBJECT

Relocations, terminations, and mass layoffs

DIGEST

This bill strengthens California’s Worker Adjustment and Retraining Notification Act (CalWARN) by creating an obligation on employers to give workers 90 day notice of the closure of a covered establishment instead of the 60 day notice already required by statute and expands the universe of workers who are required to be provided CalWARN Act notice, among other things.

EXECUTIVE SUMMARY

This bill would increase the universe of workers that are entitled to CalWARN notification to include specified contract workers and workers who work remotely. The bill also requires employers to give workers 90 day notice of the closure of a covered establishment instead of the 60 day notice currently required by statute.

There is evidence that California’s workforce, especially in the tech industry, is changing. Companies have been allowing for more remote workers and at the same time have been utilizing workers who are not directly employed by them but instead are provided to the business by contractor companies. The author also points to how Twitter has had employees, who were subject to CalWARN, sign agreements such as nondisclosure agreements in exchange only for what they are statutorily entitled to under CalWARN. The author and sponsors also argue that workers can better prepare for their future when they are given 90 day notice instead of just 60 days as required under the current CalWARN Act.

This bill is sponsored by TechEquity Collaborative, the California Labor Federation, Alphabet Workers Union-CWA, Temp worker Justice, California Employment Lawyers Association, National Employment Law Project and the National Legal Advocacy Network, and supported by numerous organizations who advocate for worker rights. The bill is opposed by a coalition of 21 organizations led by the California Chamber of Commerce. This bill passed out of the Senate Labor, Public Employment and Retirement Committee on a vote of 4 to 0.

PROPOSED CHANGES TO THE LAW

Existing law:

1. Establishes the federal Worker Adjustment and Retraining Notification (CalWARN) Act, under federal law, which prohibits an employer of 100 or more full-time employees from ordering a mass layoff, relocation, or termination at a covered establishment, as defined, unless, 60 days before the order takes effect, the employer gives written notice of the order to the employees. This applies to businesses that have 100 or more full-time employees that have been employed more than 6 out of the preceding 12 months and businesses that have 100 or more employees, including part-time employees who work more than 4,000 regular hours per week, collectively. (29 U.S.C. §§2101.)
2. Establishes within the Department of Industrial Relations (DIR) and under the direction of the Labor Commissioner, the Division of Labor Standards Enforcement (DLSE) tasked with administering and enforcing labor code provisions concerning wages, hours and working conditions. (Labor Code § 56.)
3. Under the Worker Adjustment and Retraining Notification Act (CalWARN), prohibits an employer from ordering a mass layoff, relocation, or termination at a covered establishment, as defined, unless, 60 days before the order takes effect, the employer gives written notice of the order to the employees, the Employment Development Department, the local workforce investment board, and the chief elected official of each city and county government within which the termination, relocation, or mass layoff occurs. CalWARN applies to employers with 75 or more full and part-time employees when there is going to be a termination or relocation or a mass layoff of 50 or more employees. (Labor Code §§ 1400-1413.)
4. Exempts, from the provisions of CalWARN, seasonal employees and employees that are laid off as a result of the completion of a project in specified industries, where the employers are subject to specified wage orders, and the employees were hired with the understanding that their employment was seasonal and temporary. (Labor Code §1400.5.)
5. States that an employer that fails to give the required notice, as required by CalWARN, before ordering a mass layoff, relocation, or termination, is liable to each employee entitled to notice, for specified compensation and benefits, calculated for the period of the employer’s violation, up to a maximum of 60 days, or half the number of days that the employee was employed by the employer, whichever period is shorter. (Labor Code §1402.)
6. States that an employer who fails to give the notice, as required by CalWARN, is subject to a civil penalty of not more than five hundred dollars ($500) for each day of the employer’s violation. Exempts an employer from this civil penalty if the employer pays all applicable employees within three weeks from the date the employer ordered the mass layoff, relocation, or termination. (Labor Code §1403.)
7. Permits a person, including a local government, or an employee representative, seeking to establish liability against an employer for violation of CalWARN to bring a civil action on behalf of the person other persons similarly situated, or both, in any court of competent jurisdiction. Also permits a court to award reasonable attorney’s fees as part of the costs to any plaintiff who prevails in a civil action. (Labor Code §1404.)
8. Provides up to $450 per week for up to 26 weeks for laid off employees, not including independent contractors, self-employed individuals, informal workers, and undocumented workers. (Unemployment Ins. Code §2655)

This bill:

1. Defines “labor contractor” as an individual or entity that supplies, either with or without a contract, a client employer with workers to perform labor within the client employer’s usual course of business.
2. Clarifies that a “covered establishment” may be a single location or a group of locations, including any facilities located in this state.
3. Revises the definition of “mass layoff” to mean a layoff during any 30-day period of 50 or more employees at, or reporting to, a covered establishment.
4. Adds to the definition of “employee” a person employed by a labor contractor and performing labor with the client employer for at least six months of the 12 months preceding the date on which the CalWARN notice is required.
5. Revises the seasonal employee exemption under CalWARN to instead require that the season must be complete for the exemption to apply.
6. Prohibits an employer from utilizing compliance with the provisions of CalWARN in connection with a severance agreement and waiver of an employee’s right to claims.
7. Increases, from 60 to 90 days, the period of an employer’s liability for specified back pay and benefits owed to affected employees for an employer’s violation of the CalWARN notice requirement.
8. Requires a labor contractor to remit the payment provided by a client employer, to affected employees, in the full amount calculated, as specified, for a violation of the CalWARN notice requirement.
9. States that an employer that includes a general release, waiver of claims, nondisparagement agreement, or nondisclosure agreement, as a condition of payment owed to an employee under CalWARN, is subject to a civil penalty of up to $500 for each violation.
10. States that any general release, waiver of claims, or nondisparagement or nondisclosure agreement that is made a condition of the payment of amounts for which the employer is liable under CalWARN, as specified, is void as a matter of law and against public policy.
11. Prohibits an employer that is required to give notice, pursuant to CalWARN, from offering an employee a separate agreement that includes a general release, waiver of claims, or nondisparagement or nondisclosure agreement, unless the agreement is offered in exchange for reasonable consideration that is in addition to anything of value to which the individual already is entitled to.

COMMENTS

1. Impetus for the bill

The Senate Labor, Public Employment and Retirement Committee analysis explains the following^[1]:

Home to some of the largest companies in the world, California has established itself as a tech capitol. As of 2020, California’s workforce consisted of approximately 1.38 million tech workers, representing about 10 percent of the overall workforce in California.^[2] The state is home to some of the largest and most profitable companies in the world. The tech industry, in particular, has grown significantly over the last decade.

The tech industry has shifted to using contract workers to fulfill critical parts of their business. In 2019, the New York Times reported on the tech industry’s reliance on contracted workers, or workers who are primarily employed by a temp agency and contracted out to “client employers.” During this time, Google’s overall workforce consisted of 121,000 temp workers as compared to 102,000 full-time employees.^[3] Contract workers fulfill roles like software engineers, content moderators, data scientists, quality assurance, cafeteria workers, janitors, warehouse workers, and administrative specialists. This is a growing practice both in tech and other industries. In many cases, contract workers perform similar roles as directly hired employees. Due to the changing economy, since the Spring of 2022, tech companies have laid off about 187,000 people; however, those numbers don’t capture contract workers, who are directly affected by mass layoffs, but are largely ineligible for the same protections under CalWARN.

According to the author:

Innovative industries like tech are a critical part of our state's economy, and we know that tech companies start here and grow here because of our highly skilled workforce. This bill is about protecting that workforce, from the engineers to the janitors, and making sure they’re treated fairly during a job transition. To be pro tech, we have to be pro tech-worker. Our workers are why these companies are in California. If we don’t take care of our tech workers then we’ll lose one of California’s greatest resources to states like Texas, Washington, or New York. We respect that downsizing is sometimes an unavoidable part of business. But discarding employees that have done nothing wrong, with little to no notice, isn't right and it hurts the competitiveness of our state’s tech industry. If our workers are given notice and have enough time to look for other work, they’re more likely to stay here in California. AB 1356 closes the gaping loopholes in critical layoff protection laws and gives contract workers the basic protections that all workers at these large companies deserve.

In support, the sponsors of the bill write:

California has expanded on the federal [WARN] Act through state protections, but thousands of workers are still falling through the cracks. Recent layoffs in the tech industry have captured headlines, with 187,000 workers laid off since the beginning of 2022. Since July of 2022, nearly 64,000 workers in California alone have been affected by a mass layoff. Twitter, the poster child of recent downsizing, laid off 3,700 workers in November of the same year—a move that drew headlines and widespread concern. Largely missing from the coverage, however, was that 4,400 contract workers were also laid off, and sent home with nothing because the WARN Act currently does not cover many of them.

WARN has left behind thousands of workers, with the potential to leave millions in the lurch. California’s contract and temporary workforce comprises approximately 1.9 million employees. In 2018, contract workers at Google outnumbered direct-hire employees, 150,000 to 144,000. The recent layoffs at Meta—noted at the time for their generous layoff packages — did not include contract workers such as campus cafeteria workers, who now must urge the company to provide severance.

Research shows that contract and temporary workers are more likely to be from diverse and underrepresented backgrounds. In Illinois, which has tracked temporary and contract worker demographics since 2018, 85% of the temporary workforce are people of color, despite the fact that people of color comprise just 35% of the overall state workforce. The temporary workforce of California-based tech companies was similarly found to be disproportionately people of color, women, and nonbinary [people] than the directly-employed workforce. A recent survey conducted by Alphabet Workers Union found that Google often did not enforce its own minimum employment standard for ‘temps, vendors, and contractors,’ and that there was disparate pay based on race, sexual orientation, and ability.

Employment of third-party contract workers is not isolated to the tech industry. Since the Great Recession, temporary employment in all sectors has increased by 75% compared to 19% in total employment. This large and disproportionately diverse workforce often does not have the same protections as the rest of the workforce. This bill changes that by explicitly extending the WARN Act to millions of contract and temporary workers in California. [ . . . ]

The bill also ensures that employers cannot use the WARN Act notice pay to create the false impression that employees are receiving a “severance benefit.” People recently laid off from tech companies are reporting that companies are providing some or all of the 60 days of pay in lieu of their WARN-mandated notice along with a separation agreement that waives their legal rights. By offering payments that are already guaranteed under the law in the guise of a separation negotiation, employers induce employees to sign agreements with general releases, waivers of claims, nondisparagement, and nondisclosure provisions. WARN Act rights are already guaranteed to workers impacted by mass downsizing, and AB 1356 makes that clear by requiring any severance agreement to include something of additional value in exchange for signing any waiver of claims or waiver of rights agreement.

2. Obligation to give workers 90 day notice of relocation, termination, or mass layoff at a covered establishment instead of the 60 day notice already required by statute

CalWARN prohibits specified employers from ordering a mass layoff, relocation, or termination at a covered establishment unless, 60 days before the order takes effect, the employer gives written notice of the order to the employees of the covered establishment affected by the order and to the Employment Development Department, the local workforce investment board, and the chief elected official of each city and county government within which the termination, relocation, or mass layoff occurs. An employer is not required to provide notice if a mass layoff, relocation, or termination is necessitated by a physical calamity or act of war. Additionally an employer is not required to comply with the notice requirement if the employer was actively seeking capital or business, at the time the notice would have been required.

The Cal-WARN Act protects and supports workers during company closures and layoffs. Advance notice provides workers time to prepare for unemployment, look for a job, seek training, and prepare financially. The notice also prepares communities and local and state government for the loss of jobs and economic activity in the area. This bill would extend the required notice period from a 60 day notice to 90 days before the closure takes effect. Proponents assert that more time is necessary. The Lawyers Committee for Civil Rights of the San Francisco Bay Area writes the following in support of this provision:

AB 1356 would strengthen the economic safety net for over 7 million workers by increasing the notice period to 90 days. This change is critical as more than 33% of Californians do not have 3 months of savings to cover basic necessities in the event of an unexpected job loss. Layoffs have lasting negative impacts on workers’ health, well-being, and finances.

Employers who fail to appropriately notice their employees or the required agencies are subject to penalties including back pay for each employee, and the value of benefits that the employee would have been entitled to. A failure to sufficiently notice the appropriate agency exposes the employer to a civil penalty of $500 per day of the violation.

In opposition, a coalition of business and employer trade associations led by the California Chamber of Commerce writes:

[ . . . ] Increasing the number of days is actually likely to disadvantage workers. If notices must be issued 90 days in advance, this means employers must know well before the 90 day mark who is subject to the closure or layoff at issue. The further that date moves up, the more the employer is in a position where it is guessing with less certainty exactly how many workers this could impact. Out of fear of violating the statute, the employer has no choice but to be over-inclusive in who is receiving notices, leading to layoffs that may not actually be necessary or having to tell workers they are being laid off and then walking that back later, which is poor for worker morale and may lead workers to finding other jobs unnecessarily.

The author has agreed to amend the bill to provide that the notice period is 75 days instead of 90.

Amendment

1401. (a) An employer shall not order a mass layoff, relocation, or termination at a covered establishment unless, 75 90 days before the order takes effect, the employer gives written notice of the order to the following.

(1) [ . . . ]

3. Strengthens the Cal-WARN Act in other ways

a. Modifies the definition of “covered establishment” to cover any business that employs 75 or more employees at all of their locations instead of applying to a single location with 75 or more employees

The author, sponsors, and supporters highlight how the California workforce has changed in such a way to justify a change in CalWARN. The California Chamber of Commerce and the members of the opposition coalition write:

[ . . . ] [R]ecent amendments change the definition of “covered establishment” so that instead of applying to single locations with 75 or more employees, it now covers any business that employs 75 or more employees between all of their locations. That affects the definitions of mass layoff, relocation, and termination. For example, if a company lays off a few employees at different locations that altogether total 50 workers, the WARN Act is now triggered. This is a significant expansion of the law, imposing new burdensome requirements on small locations that were previously never subject to the WARN Act. It would also mean that if 100 layoffs were happening at a facility and one layoff was happening at a second facility across the state, that second facility is now also required to issue a WARN Act notice.

In response the author proposes to amend the provision regarding local notices. The amendment would specify that the employer must give written notice of the order of mass layoff, relocation, or termination to the workforce investment board, and the chief elected official of each city and county government within which the termination, relocation, or mass layoff occurs for any layoff that impacts 50 or more employees at a single location. In other words, unless there are 50 employees impacted in a single location, the employer would not have to give notice to the workforce investment board and chief elected official of the city or county.

Amendment

1401. (a) [. . . ]

(2) The Employment Development Department, the local workforce investment board, and the chief elected official of each city and county government within which the termination, relocation, or mass layoff occurs.

(3) The local workforce investment board, and the chief elected official of each city and county government within which the termination, relocation, or mass layoff occurs for any layoff that impacts 50 or more employees at a single location.

(b) [ . . . ]

b. Includes contracted workers if the workers perform labor within the client employer’s usual course of business

Currently, the CalWARN Act does not require employers to give notice to contract workers, regardless of the type of work they perform or whether they are full-time workers. The author has provided the Committee with examples of workers who were doing similar jobs at the same company but one group, the employees, received CalWARN Act notification while the other group, the contracted workers, did not receive the CalWARN Act notice. Workers need advance notice of layoff, closures, and relocations so they can make decisions based on the reality of what is happening with their employment. It makes no policy sense to provide notice to one set of workers and not the other simply because one set is contracted and the other set was hired as employees. The expansion of warnings to contracted workers and temporary workers seems appropriate. Opponents of this bill contend that the definition of contract workers is too broad and therefore captures too many workers. Pursuant to the bill, a contracted worker who is employed by a labor contractor and performing labor with the client employer for at least 6 months of the 12 months preceding the date on which notice is required would be covered under the CalWARN Act.

The opponents of this bill write the following regarding the provisions of the bill that bring contracted workers into CalWARN:

The new group of workers that would fall under the WARN Act requirements is far too broad. “Labor contractor” is defined as “an individual or entity that supplies, either with or without a contract, a client employer with workers to perform labor within the client employer’s usual course of business.” That definition has been interpreted broadly in other statutes…Further, “employee” for purposes of those employed by labor contractors should be narrowed. Presently, the bill only requires that the worker has performed labor with the client employer for at least 6 of the 12 months. There is no requirement as to how much work or how frequently. A worker could have worked on a worksite once or twice and now fall under the purview of the bill. It is unlikely the employer even has the most current contact information for that worker.

In response the author has agreed to an hour requirement to qualify a labor contractor to be covered by this bill.

Amendment

1400.5. 

(h) (1) [ . . . ]

(2) This chapter does not apply to employees who are employed in seasonal employment when the season is complete and the employees were hired with the understanding that their employment was seasonal and temporary.

(i) “Employee” means a person employed by an employer for at least 6 months of the 12 months preceding the date on which notice is required. “Employee” includes a person employed by a labor contractor and performing labor with the client employer for at least 6 months of the 12 months and for at least 60 hours preceding the date on which notice is required.

[ . . . ]

c. Prohibits an employer from utilizing compliance with the CalWARN Act in connection with a severance agreement and waiver of an employee’s right to claims

According to the California Labor Federation, a sponsor of this bill, “CEO Elon Musk promised 60 days of pay to laid-off Twitter workers to meet WARN Act requirements, but asked that employees sign a severance agreement. The agreement required employees to waive their rights to future litigation, sign non-disparagement agreements, and more to receive their legally required compensation through the provisions of the CalWARN Act. Workers were forced to choose between receiving severance pay as they were laid-off or signing away their legal rights, an unfair choice in any situation, doubly so as workers face a loss of a job.”

In response, this bill prohibits an employer from utilizing compliance with the CalWARN Act in connection with a severance agreement and waiver of an employee’s right to claims. An employer who includes a general release, waiver of claims, or nondisparagement or nondisclosure agreement that is made a condition of payment of amounts for which the employer is liable under CalWARN is subject to a civil penalty not to exceed $500 for each violation. Additionally, any general release, waiver of claims, or nondisparagement or nondisclosure agreement that is made a condition of the payment of amounts for which the employer is liable under CalWARN is void as a matter of law and against public policy. The bill also prohibits an employer who is required to give the notice pursuant to CalWARN to offer an employee a separate agreement that includes a general release, waiver of claims, or nondisparagement or nondisclosure agreement, unless the agreement is offered in exchange for reasonable consideration that is in addition to anything of value to which the individual already is entitled to under CalWARN and states in unequivocal language that the consideration being offered to the employee is in addition to anything of value to which the individual already is entitled under CalWARN. Any agreement in violation of this requirement is void as a matter of law and against public policy.

SUPPORT

Alphabet Workers Union – Communication Workers of America (Sponsor)

California Employment Lawyers Association (Sponsor)

California Labor Federation (Sponsor)

National Employment Law Project (Sponsor)

National Legal Advocacy Network (Sponsor)

TechEquity Collaborative (Sponsor)

Temp Worker Justice (Sponsor)

Alliance of Californians for Community Empowerment (ACCE) Action
Alphabet Workers Union - Communication Workers of America
American Sustainable Business Council
California Commission on The Status of Women and Girls
California Employment Lawyers Association
California Environmental Voters
California Faculty Association
California Labor Federation
California Labor Federation, AFL-CIO
California School Employees Association
Center for Responsible Lending
Communications Workers of America, District 9
Courage California
Economic Policy Institute
End Poverty in California (EPIC)
Equal Rights Advocates
Freelancers Union
Grace Institute - End Child Poverty in Ca
Indivisible CA Statestrong
Lawyers' Committee for Civil Rights of The San Francisco Bay Area
Legal Aid At Work
National Council of Jewish Women Los Angeles
National Employment Law Project
National Legal Advocacy Network
People's Collective for Environmental Justice
Santa Clara County Wage Theft Coalition
State Building and Construction Trades Council of Ca
Techequity Collaborative
Temp Worker Justice
UFCW - Western States Council
Warehouse Worker Resource Center
Western Center on Law and Poverty
Worksafe

OPPOSITION

Acclamation Insurance Management Services
Allied Managed Care
California Association for Health Services At Home
California Association of Winegrape Growers
California Attractions and Parks Association
California Building Industry Association
California Business Properties Association
California Business Roundtable
California Chamber of Commerce
California League of Food Producers
California Lodging Industry Association
California Restaurant Association
California Retailers Association
Coalition of Small and Disabled Veteran Businesses
Family Business Association of California
Flasher Barricade Association
Hollywood Chamber of Commerce
Independent Lodging Industry Association.
Official Police Garage Association of Los Angeles
Technet

Valley Industry and Commerce Association

RELATED LEGISLATION

Pending Legislation: SB 627 (Smallwood-Cuevas, 2023) prohibits an employer from closing a chain establishment, as defined, unless the employer gives a displacement notice to workers 60 days before the closure takes effect. SB 627 is pending before the Assembly Judiciary Committee.

Prior Legislation: SB 1162 (Limon, Ch. 559, Stats. 2022) required employers of 100 or more workers hired through labor contractors to provide the Department of Fair Employment and Housing with specified information, including pay data, about their workers. This bill also required employers to provide the pay scale for a position to an applicant for employment and include it in job postings.

PRIOR VOTES:

Senate Labor, Public Employment and Retirement Committee (Ayes 4, Noes 0)

Assembly Floor (Ayes 60, Noes 14)

Assembly Appropriations Committee (Ayes 11, Noes 4)

Assembly Judiciary Committee (Ayes 8, Noes 2)

Assembly Labor and Employment Committee (Ayes 5, Noes 0)

**************

1. California State Senate Labor, Public Employment and Retirement Committee Analysis of AB 1356 (Haney, 2023) prepared for the June 22, 2023 hearing. ↑

2. CompTIA Cyberstates 2021 vFinal [available as of 7/7/23] ↑

3. Google’s Shadow Work Force: Temps Who Outnumber Full-Time Employees - The New York Times (nytimes.com) [available as of 7/7/23] ↑

ASSEMBLY THIRD READING

ATR Bill Id:AB 1356

Author:(Haney)

As Amended Ver:April 26, 2023

Majority vote

SUMMARY

Revises the California Worker Adjustment and Retraining Act (Cal/WARN) to: 1) include a "client employer" of a "labor contractor" in the definition of "employer"; and 2) increase from 60 to 90 days, the length of notice an employer must provide to employees prior to ordering terminations, relocations, or mass layoffs, as specified.

Major Provisions

1. Defines "labor contractor" as an individual or entity that supplies, either with or without a contract, a client employer with workers to perform labor within the client employer's usual course of business.
2. Revises the seasonal employee exemption under Cal/WARN to require that the season must be complete, as specified.
3. Clarifies that a "covered establishment" may be a single location or a group of locations, including any facilities located in this state.
4. Revises the definition of "mass layoff" to mean a layoff during any 30-day period of 50 or more employees at, or reporting to, a covered establishment.
5. Adds to the definition of "employee", a person employed by a labor contractor and performing labor with the client employer for at least six months of the 12 months preceding the date on which the Cal/WARN notice is required.
6. Prohibits an employer from utilizing compliance with the provisions of Cal/WARN in connection with a severance agreement and waiver of an employee's right to claims.
7. Increases, from 60 to 90 days, the period of an employer's liability for specified back pay and benefits owed to affected employees for an employer's violation of the Cal/WARN notice requirement.
8. Requires a labor contractor to remit the payment provided by a client employer, to affected employees, in the full amount calculated, as specified, for a violation of the Cal/WARN notice requirement.
9. States that an employer that includes a general release, waiver of claims, nondisparagement agreement, or nondisclosure agreement, as a condition of payment owed to an employee under Cal/WARN, is subject to a civil penalty of up to five hundred dollars ($500) for each violation.
10. States that any general release, waiver of claims, or nondisparagement or nondisclosure agreement that is made a condition of the payment of amounts for which the employer is liable under Cal/WARN, as specified, is void as a matter of law and against public policy.
11. Prohibits an employer that is required to give notice, pursuant to Cal/WARN, from offering an employee a separate agreement that includes a general release, waiver of claims, or nondisparagement or nondisclosure agreement, unless the agreement is offered in exchange for reasonable consideration that is in addition to anything of value to which the individual already is entitled to, as specified.

COMMENTS

Tech Industry Layoffs

According to an article by Mercury News, "Just before the COVID pandemic hit, Google's parent company Alphabet had 119,000 full-time employees. As public health orders and fears of the deadly virus drove people out of the physical world and into online life and shopping, the digital-advertising giant's workforce ballooned — to 190,000 by the end of last year. Then last month the company axed 12,000 workers, including 1,600 in the Bay Area."^[1]

Additionally, the article reported that "Many other Bay Area firms, including Facebook's parent company Meta of Menlo Park, Santa Clara computer chip maker Intel, San Jose video-conferencing company Zoom and San Jose payments platform PayPal also staffed up heavily during the pandemic before slashing jobs in recent months. The carnage has just topped 20,000 newly or soon-to-be unemployed workers since mid-2022."^[2]

Tech Industry Contract Workers

According to a report by the Tech Equity Collaborative, "The use of contracting agencies to fill staffing needs has become increasingly popular across all industries as part of a larger trend to cut costs and increase shareholder value. But this practice has been particularly appealing to Silicon Valley companies who have an imperative (driven by the demands of venture capital investors) to gain massive market share and valuation as quickly as possible."^[3]

Additionally the report found that "Demographic trends of the contingent workforce at tech companies—those who are hired through and employed by third-party entities, often on tenuous contracts—differ substantially from the directly employed workforce. Contract and temp workers are more likely to be Black, Indigenous, Latinx, Asian, women, and nonbinary people than those hired in the direct workforce. For every single racialized category, the rate of employment in contract work was greater than the rate of employment of those same racialized groups in directly employed roles at the tech company."^[4]

In an effort to avoid liability, "tech companies avoid, at all costs, being considered joint employers for contract workers. To avoid triggering a joint employer finding, corporate policies keep contract workers structurally isolated—without a clear manager, without a clear pathway into direct employment, without direct access to necessary resources and tools for their work."^[5]

According to the Author

"Innovative industries like tech are a critical part of our state's economy, and we know that tech companies start here in California because of our highly skilled workforce. [This bill] will protect that workforce – from the engineers to the janitors – by making sure they're treated fairly during a job transition.

To be pro tech, we have to be pro tech-worker. If we don't take care of our tech workers then we'll lose one of California's greatest resources to states like Texas, Washington, or New York. While we respect that downsizing is sometimes an unavoidable part of business, discarding employees that have done nothing wrong – with little to no notice – isn't right and it hurts the competitiveness of our state's tech industry. If all of our workers have enough time to look for other work, they're more likely to stay here in California. [This bill] closes the loopholes in critical layoff protection laws and gives contract workers the basic protections that all workers at these large companies deserve."

In addition, the author points out that this bill will promote equity solutions and maximize benefits for underserved and marginalized communities because, "For many low wage and middle class families, an unexpected job loss can mean financial catastrophe. Providing a 90 day notice period is a critical change that recognizes the reality of the high cost of living in California and helps increase the economic safety net for some of our most vulnerable communities."

Arguments in Support

The California Labor Federation, co-sponsor of the bill, states, "The contract workforce in California is estimated at 1.9 million workers and that number continues to grow. Contract workers serve some of the largest and most profitable companies in the state, but they are employed by third-parties, labor contractors, and other smaller entities. Contract workers are often exempted from many employment protections. They do the work of mega-corporations, but they are not directly employed by them, so they fall into gaps of our worker protection laws. Black workers and other workers of color make up a disproportionate percent of the workforce and contract workers of color are less likely to be converted to permanent, direct employment than their white counterparts, further institutionalized inequity in the industry.

[This bill] will expand California's WARN Act to protect contract workers and update protections for all workers. The bill increases the advance notice requirement from 60 days to 90 days to give workers adequate time to prepare for the loss of a job. It decouples severance negotiations, including waiver of claims, from meeting WARN Act obligations. The bill also extends WARN Act coverage to include client employers, third-party agencies, and labor contractors in the definition of "covered employers" to ensure contract workers, that are directly impacted by a mass layoff, receive the same protections as direct employees.

Basic labor protections at a time of mass lay-offs should cover all workers in California. [This bill] expands the proven success of the WARN Act to cover more workers and updates the law to reflect the changing economy."

Arguments in Opposition

A coalition of employer organizations, including the California Chamber of Commerce, state, "[This bill] unnecessarily expands existing WARN Act requirements and is overly broad in its application to employees of a labor contractor, including failing to take into account the terms of a contract or agreement between the labor contractor and client.

First, it increases the amount of notice time from 60 days to 90 days without justification. Increasing the number of days is actually likely to disadvantage workers. If notices must be issued 90 days in advance, this means employers must know well before the 90 day mark who is subject to the closure or layoff at issue.

Second, recent amendments change the definition of "covered establishment" so that instead of applying to single locations with 75 or more employees, it now covers any business that employs 75 or more employees between all of their locations. That affects the definitions of mass layoff, relocation, and termination. For example, if a company lays off a few employees at different locations that altogether total 50 workers, the WARN Act is now triggered. This is a significant expansion of the law, imposing new burdensome requirements on small locations that were previously never subject to the WARN Act."

FISCAL COMMENTS

According to the Assembly Appropriations Committee, annual costs of an unknown, but likely significant amount, potentially in excess of $150,000, to the Division of Labor Standards Enforcement to administer expansion of the WARN Act (Labor Enforcement and Compliance Fund). Additionally, this bill could result in a minor increase in civil penalty revenue.

VOTES

ASM LABOR AND EMPLOYMENT: 5-0-2

YES: Kalra, Haney, Ortega, Reyes, Ward

ABS, ABST OR NV: Flora, Chen

ASM JUDICIARY: 8-2-1

YES: Maienschein, Connolly, Haney, Kalra, Pacheco, Papan, Reyes, Robert Rivas

NO: Dixon, Sanchez

ABS, ABST OR NV: Essayli

ASM APPROPRIATIONS: 11-4-1

YES: Holden, Bryan, Calderon, Wendy Carrillo, Mike Fong, Hart, Lowenthal, Papan, Pellerin, Weber, Ortega

NO: Megan Dahle, Dixon, Mathis, Sanchez

ABS, ABST OR NV: Robert Rivas

UPDATED

VERSION: April 26, 2023

CONSULTANT: Martin Vindiola / L. & E. / (916) 319-2091 FN: 0000537

1. Baron, Ethan. Silicon Valley tech layoffs: Why so many jobs were slashed, and who's hiring amid fierce competition? The Mercury News, February 2023. ↑

2. Ibid. ↑

3. Tech Equity Collaborative. Contract Worker Disparity Project: Shining a Light on Tech's Shadow Workforce, January 2022. ↑

4. Ibid. ↑

5. Ibid. ↑

Date of Hearing: May 10, 2023

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Chris Holden, Chair

ABPCA Bill Id:AB 1356

Author:(Haney) – As Amended Ver:April 26, 2023

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill expands the California Worker Adjustment and Retraining Act (WARN Act) to include the client employer of a labor contractor as an “employer” and require an employer to provide notice 90 days, instead of 60 days, prior to ordering a mass layoff, relocation, or termination at a covered establishment.

Specifically, this bill:

1. Expands the WARN Act to apply to a person employed by a labor contractor and performing labor with the client employer for at least six months of the 12 months preceding the date on which a mass layoff, relocation, or termination notice is required.
2. Prohibits an employer from ordering a mass layoff, relocation, or termination at a covered establish unless written notice is provided 90 days, expanded from 60 days, before the order takes effect.
3. Prohibits an employer from conditioning an employee’s right to backpay and the value of the cost of lost benefits under the WARN Act on signing a general release, waiver of claims, or non-disparagement or non-disclosure agreement. An employer in violation of this prohibition is subject to a civil penalty of up to $500 per violation, and any such agreement is void as a matter of law and against public policy.

FISCAL EFFECT:

Annual costs of an unknown, but likely significant amount, potentially in excess of $150,000, to the Division of Labor Standards Enforcement to administer expansion of the WARN Act (Labor Enforcement and Compliance Fund). Additionally, this bill could result in a minor increase in civil penalty revenue.

COMMENTS:

1. Purpose. According to the author:

We respect that downsizing is sometimes an unavoidable part of business. But discarding employees that have done nothing wrong, with little to no notice, isn’t right and it hurts the competitiveness of our state’s tech industry. If our workers are given notice and have enough time to look for other work, they’re more likely to stay here in California. AB 1356 closes the gaping loopholes in critical layoff protection laws and gives contract workers the basic protections that all workers at these large companies deserve.

1. Support and Opposition. This bill is co-sponsored by the TechEquity Collaborative, California Labor Federation, Alphabet Workers Union – Communication Workers of America, Temp Worker Justice, California Employment Lawyers Association, National Employment Law Project, and National Legal Advocacy Network, which argue the WARN Act “has left behind thousands of workers, with the potential to leave millions in the lurch” since “California’s contract and temporary workforce comprises approximately 1.9 million employees.” The co-sponsors further note “The recent layoffs at Meta – noted at the time for their generous layoff packages – did not include contract workers such as campus cafeteria workers, who now must urge the company to provide severance.” This bill is also supported by many other labor organizations and workers’ rights groups.

This bill is opposed, unless amended, by a coalition of business organizations led by the California Chamber of Commerce, which argues this bill “unnecessarily expands WARN Act requirements” and that definitions of “labor contractor” and “employee” must be narrowed to “take into account whether the worker performs work at other sites, whether they can be reassigned by the contractor, [and] the terms of the contract.”

1. WARN Act. The WARN Act requires an employer with 75 or more employees at a single establishment to give 60 days’ notice when 50 or more workers during a single 30-day period may be impacted by a mass layoff, relocation, or termination. Notice must also be provided to specified government entities, including the Employment Development Department, local workforce development board, and chief elected officials of the impacted city and county. Thus, the WARN Act allows impacted employees to prepare for the potential loss of income and alerts impacted communities of the need to provide resources. Failure to provide appropriate notice exposes the employer to significant monetary penalties, specifically liability for backpay and the value of the cost of benefits to which an employee would have been entitled. Furthermore, an employer that does not compensate employees accordingly is subject to a civil penalty of $500 per day the employer is in violation.

However, WARN Act protections do not extend to temporary workers who toil alongside employees at a covered establishment, leaving temporary workers with no recourse in the event of a mass layoff, relocation, or termination. The growth of the temporary workforce has been particularly noticeable in the technology industry, with approximately half of such companies relying on a temporary labor force that comprises nearly 50% of their overall workforce. This bill extends WARN Act protections to labor contractors, extends the notice period to 90 days, and prohibits an employer from conditioning any payment to which a worker may be owed under the WARN Act on the worker’s acceptance of a severance agreement or waiver of an employee’s right to claims.

1. Prior Legislation. AB 1601 (Weber), Chapter 752, Statutes of 2022, prohibited a call center employer from relocating the call center outside the state, unless a 60-day notice of relocation is provided to affected employees and specified government entities.

Analysis Prepared by: Irene Ho / APPR. / (916) 319-2081

Date of Hearing: April 25, 2023

ASSEMBLY COMMITTEE ON JUDICIARY

Brian Maienschein, Chair

ABPCA Bill Id:AB 1356

Author:(Haney) – As Amended Ver:March 30, 2023

As Proposed to be Amended

SUBJECT: Relocations, terminations, and mass layoffs

KEY ISSUES:

1. SHOULD THE CALIFORNIA WARN ACT, WHICH REQUIRES SPECIFIED EMPLOYERS TO PROVIDE AT LEAST 60 DAYS NOTICE TO IMPACTED EMPLOYEES OF A POTENTIAL MASS LAYOFF, relocation, OR TERMINATION, AS DEFINED, BE increased TO PROVIDE 90 DAYS NOTICE AND INCLUDE CONTRACT WORKERS?
2. should employers who order a mass layoff, relocation, or termination be prohibited from making an employees’ receipt of the pay required pursuant to the warn act contingent on the employees’ acceptance of a severance agreement or waiver of their right to claims?

SYNOPSIS

The temporary hiring industry functions through contracts between a staffing agency (labor contractor) and a host employer (client employer). A host employer will contract with a staffing agency for a specified number of workers to perform work for the host employer. Details surrounding the worker’s compensation rate and benefits are determined by a contract between the staffing agency and worker, while the contractual relationship between the host employer and staffing agency is often limited to providing a simple total amount the host employer will pay in compliance with their contract. Often, the host employer will have no idea how much the temp workers are paid by the staffing agency. Frequently temp workers are paid at a lower rate than direct-hire counterparts, despite performing the same work. Moreover, temp workers are often subjected to significant rates of wage theft, workplace injury, and retaliation. This further marginalizes a population of workers that are already more likely to live in poverty than their direct-hire counterparts. The growth of the temp industry has been particularly noticeable in the tech industry, with approximately half of tech companies relying on a temporary labor force that makes up nearly 50% of their overall workforce.

Under current law, the WARN Act requires certain employers to give 60 days’ notice to workers who may be impacted by a mass layoff, relocation, or termination of 50 or more workers. Today, this law does not include a requirement to provide such notice to temp workers, and appears to leave this population with no recourse in the event of such an event despite often being indistinguishable from traditional hires. In light of the flurry of layoffs throughout the tech industry in recent months, many temporary workers were left unemployed with almost no notice.

This bill proposes to modify the WARN Act in several important ways. First, the bill increases the amount of notice employers are obligated to give employees in the case of a mass layoff, relocation, or termination from 60 to 90 days. Second, the bill expands which employers are required to provide the 90-day notice to include client employers of a labor contractor, as defined, and likewise expands the definition of employee to include temporary employees performing labor for the client employer for at least six months of the preceding 12 months. The bill also requires labor contractors to remit the entire payment calculated by the WARN Act to the contracted workers. Fourth, the bill prohibits an employer from conditioning a worker’s payment on the worker’s acceptance of an additional contract or general release of claims and makes an employer who conditions payment of the full amount due to the worker on the worker’s general waiver of claims subject to a civil penalty of $500 per violation. While this bill will undoubtedly impact the tech industry, it will ultimately effect contract workers and their employers across the state, regardless of the industry.

The bill is co-sponsored by the Alphabet Workers Union-CWA, the California Employment Lawyers Association, the California Labor Federation, the National Employment Law Project, the National Legal Advocacy Network, TechEquity Collaborative, and Temp Worker Justice. A coalition of business organizations have submitted an oppose unless amended position. Their concerns are detailed in the COMMENTS section of the analysis. This bill was previously heard by the Assembly Committee on Labor and Employment and was approved by a vote of 5-0.

SUMMARY: Revises the California Worker Adjustment and Retraining Act (Cal/WARN) to include a “client employer” of a “labor contractor” in the definition of “employer,” and to increase from 60 to 90 days the length of notice an employer must provide to employees prior to ordering terminations, relocations, or mass layoffs. Specifically, this bill:

1. Defines “labor contractor” as an individual or entity that supplies, either with or without a contract, a client employer with workers to perform labor within the client employer’s usual course of business.
2. Revises the seasonal employee exemption under Cal/WARN to require that the season must be complete, as specified.
3. Clarifies that a “covered establishment” may be a single location or a group of locations, including any facilities located in this state.
4. Revises the definition of “mass layoff” to mean a layoff during any 30-day period of 50 or more employees at, or reporting to, a covered establishment.
5. Adds to the definition of “employee” a person employed by a labor contractor and performing labor with the client employer for at least six months of the 12 months preceding the date on which the Cal/WARN notice is required.
6. Prohibits an employer from utilizing compliance with the provisions of Cal/WARN in connection with a severance agreement and waiver of an employee’s right to claims.
7. Increases, from 60 to 90 days, the period of an employer’s liability for specified back pay and benefits owed to affected employees for an employer’s violation of the Cal/WARN notice requirement.
8. Requires a labor contractor to remit the payment provided by a client employer, to affected employees, in the full amount calculated, as specified, for a violation of the Cal/WARN notice requirement.
9. States that an employer that includes a general release, waiver of claims, nondisparagement agreement, or nondisclosure agreement, as a condition of payment owed to an employee under Cal/WARN, is subject to a civil penalty of up to five hundred dollars ($500) for each violation.
10. States that any general release, waiver of claims, or nondisparagement or nondisclosure agreement that is made a condition of the payment of amounts for which the employer is liable under Cal/WARN, as specified, is void as a matter of law and against public policy.
11. Prohibits an employer that is required to give notice, pursuant to Cal/WARN, from offering an employee a separate agreement that includes a general release, waiver of claims, or nondisparagement or nondisclosure agreement, unless the agreement is offered in exchange for reasonable consideration that is in addition to anything of value to which the individual already is entitled to, as specified.

EXISTING LAW:

1. Establishes the California WARN Act (Cal/WARN), which requires, among other things, employers with 75 or more full-time and part-time employees at a covered establishment, as defined, to provide 60 days' notice before implementing terminations, relocations, or mass layoffs, as specified. (Labor Code Section 1400 et seq. Unless otherwise noted all further references are to the Labor Code.)
2. Defines “covered establishment,” for purposes of Cal/WARN, as any industrial or commercial facility or part thereof that employs, or has employed within the preceding 12 months, 75 or more persons. (Section 1400.5 (a).)
3. Defines “employer,” for purposes of Cal/WARN, as any person, association, organization, partnership, business trust, limited liability company or corporation that directly or indirectly owns and operates a covered establishment. (Section 1400.5 (b).)
4. Exempts, from the provisions of Cal/WARN, employees that are laid off as a result of the completion of a project in specified industries, where the employers are subject to specified wage orders, and the employees were hired with the understanding that their employment was seasonal and temporary. (Section 1400.5 (g)(1).)
5. Exempts seasonal employees, as specified, from the provisions of Cal/WARN. (Section 1400.5 (g)(2).)
6. Defines “employee,” for purposes of Cal/WARN, as a person employed by an employer for at least 6 months of the 12 months preceding the date on which the notice is required. (Section 1400.5 (h).)
7. Defines “client employer” as a business entity, regardless of its form, that obtains or is provided workers to perform labor within its usual course of business from a labor contractor. (Section 2810.3 (a)(1)(A).)
8. States that an employer that fails to give the required notice, as required by Cal/WARN, before ordering a mass layoff, relocation, or termination, is liable to each employee entitled to notice, for specified compensation and benefits, calculated for the period of the employer’s violation, up to a maximum of 60 days, or half the number of days that the employee was employed by the employer, whichever period is smaller. (Section 1402.)
9. States that an employer who fails to give the notice, as required by Cal/WARN, is subject to a civil penalty of not more than five hundred dollars ($500) for each day of the employer’s violation.
   1. Exempts an employer from this civil penalty, if the employer pays, to all applicable employees, the amounts for which the employer is liable, as specified, within three weeks from the date the employer ordered the mass layoff, relocation, or termination. (Section 1403.)
10. Permits a person, including a local government, or an employee representative, seeking to establish liability against an employer, for violation of Cal/WARN, to bring a civil action on behalf of the person or other persons similarly situated, or both, in any court of competent jurisdiction. Additionally, permits a court to award reasonable attorney’s fees as part of the costs to any plaintiff who prevails in a civil action. (Section 1404.)
11. Authorizes the Labor Commissioner (LC) to enforce Cal/WARN notice requirements by investigating alleged violations and ordering appropriate temporary relief to mitigate the violation, pending the completion of a full investigation, as specified. (Section 1406 (b).)

FISCAL EFFECT: As currently in print this bill is keyed fiscal.

COMMENTS: California has long been viewed as a paradise for tech-industry startups and a hub for innovation. Global companies such as Apple, Google, and Oracle found their start within the state, while others such as Meta, drawn by the depth of resources and talented workforce, ultimately relocated to California’s Silicon Valley. As of 2020, California’s workforce consisted of approximately 1.38 million tech-sector workers, equaling about 10% of the state’s overall workforce. (Cyberstates 2021: The definitive guide to the U.S. tech industry and tech workforce, (CompTIA), March 2021 available at: https://www.cyberstates.org/pdf/CompTIA_Cyberstates_2021.pdf, at p. 22.) During 2020, the economic benefit to the state of these workers rose to an estimated $519.5 billion. During the COVID-19 pandemic, the tech sector appeared to be one of the few industries able to not only maintain its workforce, but increase it. As people moved indoors during the early days of the pandemic, more and more activity occurred on the internet – online sales skyrocketed, businesses became dependent on remote workspaces such as Zoom, and in response tech companies providing those services experienced a massive workforce expansion. (Big Tech Binged on Workers During Covid. Now, the Purge, Justin Fox (The Washington Post) January 27, 2023 available at: https://www.washingtonpost.com/business/big-tech-binged-on-workers-during-covid-now-the-purge/2023/01/26/cb8a4c70-9d6a-11ed-93e0-38551e88239c_story.html.)

Within three years of this boom, as the pandemic appeared to ease, the seemingly indestructible tech industry’s luck likewise shifted. Spring of 2022 saw the beginning of the impending wave of layoffs. For example, in May 2022, Carvana, a company which facilitated online car shopping, announced its plan to layoff 2,500 workers. As time passed, both the number of layoffs and the number of impacted workers began to grow. In November 2022, Carvana announced it would complete a second round of layoffs, affecting an additional 1,500 workers (Carvana lays of 1,500 employees following stock free fall, Michael Wayland and Scott Wapner (CNBC) November 18, 2022 available at: https://www.cnbc.com/2022/11/18/carvana-to-lay-off-1500-employees-amid-economic-uncertainty-.html.) On November 9^th, 2022, Meta announced its plan to layoff around 25% of its total workforce, or about 66,000 people. (Facebook-parent Meta plans to layoff another 10,000 employees, Catherine Thorbecke (CNN) March 23, 2023 available at: https://www.cnn.com/2023/03/14/tech/meta-layoffs/index.html#:~:text=As%20of%20September%202022%2C%20Meta,a%20reduction%20of%20about%2025%25.) Shortly after Elon Musk purchased Twitter, the company began a series of rolling layoffs, first announcing in November 2022 that approximately 50% of the company’s overall workforce would be impacted. (Twitter says 50% of staff laid off, moves to reassure on content moderation, Sheila Dang (Reuters) November 4, 2022 available at: https://www.reuters.com/technology/twitter-exec-says-50-employees-lost-jobs-following-acquisition-2022-11-04/.) Since then, the company has continued to hemorrhage workers, both due to workers’ own decisions to leave and continuing layoffs. As of February 2023, yet another round of layoffs saw the additional loss of 10% of the company’s remaining staff. By February, Twitter had less than 2,000 staff as compared to the 7,500 who worked for the multi-billion dollar company prior to Musk’s takeover in late 2022. (New York Times: Twitter lays off another 10% of staff, Chris Isidore (CNN) February 27, 2023 available at: https://www.cnn.com/2023/02/27/tech/twitter-layoffs/index.html.)

While some of these changes in the tech industry have undoubtedly affected traditional direct-hire employees, a significant portion of the job losses have been borne by contracted (or temp) workers. In 2019, the New York Times reported on the tech industry’s reliance on contracted workers – or workers who are primarily employed by a temp agency and contracted out to “client employers” – to perform a range of duties including some overlapping with traditional hires. The Times reported that as of March 2019, Google’s overall workforce consisted of 121,000 temp workers as compared to 102,000 full-time employees. (Google’s Shadow Work Force: Temps Who Outnumber Full-Time Employees, Daisuke Wakabayashi (New York Times), May 28, 2019 available at: Google’s Shadow Work Force: Temps Who Outnumber Full-Time Employees - The New York Times (nytimes.com).) Google and other tech companies’ reliance on a temp workforce is likely due to its financial benefits, including exemptions from providing vacation time and benefit contributions. While these benefits must ultimately be provided by the staffing agency, the client employer usually finds an economic upside in employing temporary workers. The lack of parity between temporary workers and full-time employees is particularly striking given the nearly identical work many temp workers complete compared to traditional employees. According to the New York Times reporting, “Google was the employer in all but name. It decides what jobs [temp workers] do, dictates where and what hours they work, and often decides if and when to hire them.” (Ibid.) The article further described that Google’s temp workers were “barred from company events like holiday parties and all-hand meetings [and were] not permitted to look at internal job postings or attend company fairs.” (Ibid.)

According to the author:

Innovative industries like tech are a critical part of our state's economy, and we know that tech companies start here and grow here because of our highly skilled workforce. This bill is about protecting that workforce, from the engineers to the janitors, and making sure they’re treated fairly during a job transition. To be pro tech, we have to be pro tech-worker. Our workers are why these companies are in California. If we don’t take care of our tech workers then we’ll lose one of California’s greatest resources to states like Texas, Washington, or New York. We respect that downsizing is sometimes an unavoidable part of business. But discarding employees that have done nothing wrong, with little to no notice, isn't right and it hurts the competitiveness of our state’s tech industry. If our workers are given notice and have enough time to look for other work, they’re more likely to stay here in California. AB 1356 closes the gaping loopholes in critical layoff protection laws and gives contract workers the basic protections that all workers at these large companies deserve.

A brief background on the WARN Act. The California Worker Adjustment and Retraining Notification Act (WARN Act, or Act) regulates the procedures for most mid-sized and large employers who engage in mass layoffs, relocations, or terminations. Under existing law, an employer with 75 or more employees at a single establishment who intends to layoff, relocate, or terminate positions impacting 50 or more employees during a single 30-day period must first provide the affected workers with a notice of the impending layoff at least 60 days before the order would take effect. (Labor Code Section 1400.5. Unless otherwise noted, all future references are to the Labor Code.) The WARN Act also requires the employer to provide notice to specified governmental agencies, including the Employment Development Department, local workforce investment board, and the chief elected official of each city and county government within the geographic jurisdiction where the layoff occurs. (Section 1401(a)(2).) The intent of the Act is multifold – first, noticing the effected employees allows them to prepare for the potential loss of income and make subsequent arrangements. Second, by alerting localities to a mass layoff, the Act grants impacted communities an opportunity to prepare to provide necessary resources.

The WARN Act subjects employers who fail to properly notice their employees or the required agencies to strict penalties. Failure to appropriately notice to impacted employees can expose the employer to significant monetary penalties including back pay for each employee, and the value of benefits that the employee would have been entitled to. (Section 1402.) A failure to sufficiently notice the appropriate agency would expose the employer to a civil penalty of $500 per day of the violation. (Section 1403.) However, employers can decrease their overall fines by continuing to pay employees throughout the time during which they should have provided notice, or providing additional payments to the employee beyond any legally obligated payment. (Section 1402 (c).) Additionally, an employer can avoid the civil penalty resulting from their failure to notice the appropriate agencies by providing the entire amount owed to each employee within three weeks of the order. (Section 1403.) Currently, the WARN Act does not require employers to give notice to contract or temp workers, regardless of the type of work they perform or whether they are full-time workers.

This bill proposes to modify the WARN Act in several important ways. First, the bill increases the amount of notice employers are obligated to give employees in the case of a mass layoff, relocation, or termination from 60 to 90 days. Second, the bill expands which employers are required to provide the 90-day notice to include client employers of a labor contractor, as defined, and likewise expands the definition of employee to include temporary employees performing labor for the client employer for at least six months of the preceding 12 months. The bill also requires labor contractors to remit the entire payment calculated by the WARN Act to the contracted workers. Fourth, the bill prohibits an employer from conditioning a worker’s payment on the worker’s acceptance of an additional contract or general release of claims and makes an employer who conditions payment of the full amount due to the worker on the worker’s general waiver of claims subject to a civil penalty of $500 per violation. While this bill will undoubtedly impact the tech industry, it will ultimately effect contract workers and their employers across the state, regardless of industry.

Including contract workers under the protections of the WARN Act would particularly benefit women and workers of color. The temp industry functions through contracts between a staffing agency and a host employer. A host employer contracts with a staffing agency for a specified number of workers to perform work for the host employer. Details surrounding the worker’s compensation rate and benefits are determined by contract between the staffing agency and worker, while the contractual relationship between the host employer and staffing agency is often limited to a simple total amount the host employer will owe under their contract. Often, the host employer will have no idea how much the temp workers provided by the staffing agency will be compensated. As discussed with relation to tech industry temp workers, oftentimes temp workers are paid at a lower rate than their full-time counterparts, despite performing the same work. Moreover, a report released February 3, 2022 by a coalition of economic and social justice organizations including the National Employment Law Project and Temp Worker Justice, found that temp workers are often subjected to significant rates of wage theft, workplace injury, and retaliation. (Temp Workers Demand Good Jobs: Survey reveals poverty pay, permatemping, deceptive recruitment practices, and other job quality issues, Chicago Workers Collaborative, National Employment Law Project, et. al, (February 2022) available at: https://s27147.pcdn.co/wp-content/uploads/Temp-Workers-Demand-Good-Jobs-Report-2022.pdf at p. 7.) According to the report, “[w]hen host employers subcontract work to temporary help and staffing agencies, lowest bidder dynamics in the contracting process may create a ‘race to the bottom’ that pushes down wages for temp workers.” (Id. at 8.) This further marginalizes a population of workers that are already more likely to live in poverty than their direct-hire coworkers, with temp workers experiencing poverty at nearly twice the rate as workers across all other industries. (Ibid.) The overall percentage of the workforce made up by temp workers has also grown consistently in recent years. According to the Bureau of Labor Statistics, in the decade between 2008 and 2018, the temp industry expanded by approximately 1.3 million jobs. (What happened to temps? Changes since the Great Recession, U.S. Bureau of Labor Statistics (February 2021) available at: https://www.bls.gov/opub/mlr/2021/article/temp-help.htm.)

The fact that Black and Latinx workers are also heavily overrepresented in temp worker demographics only exacerbates the inequities within the industry. Reflecting updated employment statistics, the Temp Workers Demand Good Jobs report noted that while Black workers occupied 12.2% of the country’s workforce, they constituted 23.2% of the nation’s temporary workforce. (Temp Workers Demand Good Jobs at p. 16.) Moreover, the study discussed a practice by some staffing agencies of targeting immigrants or low-income communities and setting up “temp towns,” or areas with a high concentration of staffing agencies in economically-vulnerable communities. (Ibid.)

Opponents to this bill argue that the scope of the bill’s application to temporary workers is overly broad. Specifically they argue,” [i]f the client employer is just one of a worker’s five assignments, the justification for receiving a WARN Act notice of a closure is far less than a worker who performs work at one site every single day.” Some temp workers may certainly piece together the equivalent of a full-time position by working several part-time assignments. However, considering California’s high cost of living and the reality that most temp workers are significantly under-compensated as compared to their full-time counterparts, it is likely that the loss of even one of multiple temporary assignments can present a significant hurdle for the worker.

Opponents also raise a concern that expanding the notice requirements as proposed by this bill would necessarily result in businesses over-noticing pending layoffs, and ultimately result in undue hardship on the noticed workers. To illustrate their point, the Chamber of Commerce writes:

Increasing the number of days is actually likely to disadvantage workers. If notices must be issued 90 days in advance, this means employers must know well before the 90 day mark who is subject to the closure or layoff at issue. The further that date moves up, the more the employer is in a position where it is guessing with less certainty exactly how many workers this could impact. Out of fear of violating the statute, the employer has no choice but to be overinclusive in who is receiving notices, leading to layoffs that may not actually be necessary or having to tell workers they are being laid off and then walking that back later, which is poor for worker morale and may lead workers to finding other jobs unnecessarily.

This concern is an understandable one – in order to ensure compliance with the provisions of this bill an employer may very well give notice of an impending layoff to a worker who may not ultimately be laid off and receiving a notice of potential layoff is undeniably anxiety-inducing. However, there are potential benefits to this risk that must ultimately be weighed against it. First, despite an overall healthy job market, identifying good job opportunities and accepting a position is a difficult process and one that takes time. Further, around one third of Californians have insufficient savings to last three months. (Many Californians have no emergency savings, Walter Hamilton (Los Angeles Times) January 31, 2012 available at: https://www.latimes.com/business/la-xpm-2012-jan-31-la-fi-mo-californians-emergency-savings-20120131-story.html.) While the LA Times story dates back to 2012, it is not unreasonable to conclude that, particularly in light of the economic toll of the pandemic, not much has changed in the past years. It would be imperative for these Californians to know with at least 3 months lead time that they may lose a source of income. Finally, while a noticed worker may ultimately find a new job after receiving notice of an impending layoff, in the event the layoff does not actually occur, theoretically that worker would then have the option to determine which role is a better fit. In the event one worker elects to move on to a new opportunity, the original employer could potentially retain another noticed worker, thereby reducing the overall number of laid off employees.

The opposition also raises a concern that the bill’s changes to the definition of “covered establishment” may improperly capture franchises. The concern appears to be that individual franchisees of the same franchisor who, in sum, may plan to layoff over 50 employees would, unbeknownst to the individual franchisees, be obligated to give notice under this bill. In this scenario, the individual franchisee may have no knowledge of the decisions of their fellow franchisees, and therefore would appear to inadvertently violate the bill’s provisions. In order to be required to give notice, an entity would have to both 1) be an employer who is planning a mass layoff at 2) a covered establishment. Acknowledging that the bill proposes to amend the definition of “covered establishment” to include multiple sites, the crux of this argument falls under the definition of “employer,” which is defined as a person who directly or indirectly owns and operates a covered establishment. Under this definition, the concern raised by the opposition doesn’t appear to bear out – the owner of an individual franchise “directly owns” only their individual franchise location. It is unlikely that a claim arguing that franchisee “A” with ownership of one franchise “indirectly owns” the franchise down the street owned by franchisee “B.” Therefore, franchisee “A” would only be obligated to give notice under the WARN Act if that individual franchisee planned to layoff 50 or more employees at their individual franchise. Moreover, it is reasonable to conclude that to the extent a single person may own and operate multiple franchises in a region and plans on laying off a significant portion of their workforce across multiple establishments, such situations are appropriately included within the proposed definitions.

Author’s amendments. The author proposes two minor clarifying amendments as follows:

First, in order to clarify to whom the labor contractor is obligated to provide the calculated payment, insert “to the employee” in Section 1402(d) as follows:

(d) The labor contractor shall remit to the employee the payment provided by the client employer in the full amount calculated pursuant to paragraphs (1) and (2) of subdivision (a).

Second, as currently written the bill refers to an employer’s unlawful reliance on severance agreements and waivers of an employee’s right to claims in multiple locations, leading to some ambiguity about what is or is not permissible. In order to ensure the greatest degree of clarity, the author proposes to strike the language in 1401 (c), and centralize all references to such severance agreements in Section 1403 as follows:

SEC. 4. Section 1403 of the Labor Code is amended to read:

[…]

(b) (1) An employer shall not utilize compliance with this chapter in connection with a severance agreement and waiver of an employee’s right to claims. An employer who includes a general release, waiver of claims, or nondisparagement or nondisclosure agreement that is made a condition of the payment of amounts for which the employer is liable under Section 1402 is subject to a civil penalty of not more than five hundred dollars ($500) for each violation.

(2) Any general release, waiver of claims, or nondisparagement or nondisclosure agreement that is made a condition of the payment of amounts for which the employer is liable under Section 1402 is void as a matter of law and against public policy.

ARGUMENTS IN SUPPORT: This bill is supported by a coalition of labor organizations and workplace rights advocates. It is sponsored by the Alphabet Workers Union-CWA, the California Employment Lawyers Association, the California Labor Federation, the National Employment Law Project, the National Legal Advocacy Network, and TechEquity Collaborative. They write the following in support of their bill:

California has expanded on the federal Worker Adjustment and Retraining Notification (WARN) Act through state protections, but thousands of workers are still falling through the cracks. Recent layoffs in the tech industry have captured headlines, with 187,000 workers laid off since the beginning of 2022. Since July of 2022, nearly 64,000 workers in California alone have been affected by a mass layoff. 2 Twitter, the poster child of recent downsizing, laid off 3,700 workers in November of the same year—a move that drew headlines and widespread concern. Largely missing from the coverage, however, was that 4,400 contract workers were also laid off, and sent home with nothing because the WARN Act currently does not cover many of them.

WARN has left behind thousands of workers, with the potential to leave millions in the lurch. California’s contract and temporary workforce comprises approximately 1.9 million employees. 4 In 2018, contract workers at Google outnumbered direct-hire employees, 150,000 to 144,000. The recent layoffs at Meta—noted at the time for their generous layoff packages — did not include contract workers such as campus cafeteria workers, who now must urge the company to provide severance.

[…]

The bill also ensures that employers cannot use the WARN Act notice pay to create the false impression that employees are receiving a “severance benefit.” People recently laid off from tech companies are reporting that companies are providing some or all of the 60 days of pay in lieu of their WARN-mandated notice along with a separation agreement that waives their legal rights. By offering payments that are already guaranteed under the law in the guise of a separation negotiation, employers induce employees to sign agreements with general releases, waivers of claims, nondisparagement, and nondisclosure provisions. WARN Act rights are already guaranteed to workers impacted by mass downsizing, and AB 1356 makes that clear by requiring any severance agreement to include something of additional value in exchange for signing any waiver of claims or waiver of rights agreement.

Improving layoff protections is good for workers and for companies. Layoffs have lasting negative impacts on workers’ health, well-being, and finances. Workers who lost their jobs in the 1981 recession earned 20% less than workers who had retained their jobs even twenty years later. In a study of manufacturing employees, workers ranked a job layoff as the seventh most stressful life event, higher than divorce and a sudden loss of hearing or vision. Research shows that stress created by layoffs hurts companies in the long run, too. A study of the effects of layoffs at a large tech firm found that creativity and innovation decline significantly during downsizing.

ARGUMENTS IN OPPOSITION: There is no formal opposition to this bill, although a coalition of business advocates have submitted a formal position of oppose unless amended. They write the following:

AB 1356 Unnecessarily Expands WARN Act Requirements

AB 1356 unnecessarily expands the requirements under California’s WARN Act in two ways. […] Out of fear of violating the statute, the employer has no choice but to be overinclusive in who is receiving notices, leading to layoffs that may not actually be necessary or having to tell workers they are being laid off and then walking that back later, which is poor for worker morale and may lead workers to finding other jobs unnecessarily. This happens, for example, with teachers. Teachers are generally required to be given notice by March 15 regarding layoffs that finalized on May 15 if the teacher will not have a job the following school year. However, the California Federation of Teachers specifically informs teachers that, because finances are not well understood at the time of the layoff notices, it often happens that teachers who were told they would be laid off will actually not be and are subsequently told after May 15. The same principle applies here – it is not realistic to think that a company will always have its finances worked out this far in advance, causing unnecessary layoff notices. There is no justification to increase the notice period to 90 days.

Second, recent amendments change the definition of “covered establishment” so that instead of applying to single locations with 75 or more employees, it now covers any business that employs 75 or more employees between all of their locations.

[…]

This is a significant expansion of the law, imposing new burdensome requirements on small locations that were previously never subject to the WARN Act. It would also mean that if 100 layoffs were happening at a facility and one layoff was happening at a second facility across the state, that second facility is now also required to issue a WARN Act notice. This does not make sense when considering the intent behind the California WARN Act is to notify local entities (local workforce investment boards and local city and county officials) of large closures or layoffs in their area. The analysis of the original bill, AB 2957 (2002), explains that the notification “allows local government agencies to explore alternatives with employers” and to fill in gaps of the federal WARN Act where “small communities” are impacted but will not receive notices under the federal law. Those entities will now be receiving additional notices unnecessarily.

The change in definition of “covered establishment” may also negatively impact franchisees given how “employer” is defined. California has nearly 76,000 franchise units. Franchise establishments are locally owned small businesses operating under a national brand or identity. The local business owners are in charge of all employment decisions and would not know if another franchisee under the same national brand or identity had conducted layoffs or closures. It would not make sense to have these independent stores trying to keep track of the operations of every single other franchisee and would be impossible to do. The definition of covered establishment should remain as it is presently.

The Definition of “Labor Contractor” and “Employee” as it Relates to Labor Contractors Must Be Narrowed

The new group of workers that would fall under the WARN Act requirements is far too broad. […] That definition has been interpreted broadly in other statutes. For example, just last year, Government Code Section 12999 was amended to require pay data reporting regarding employees of a labor contractor. Labor contractor has the same definition as is used here. The Civil Rights Department took significant liberty with the interpretation of that definition, far beyond what employers had understood when reading the statutory language. The CRD’s FAQ provides:

“A client employer’s “usual course of business” means the regular and customary work of the client employer. “Regular and customary work” means work that is performed on a regular or routine basis that is either part of the client employer’s customary business or necessary for its preservation or maintenance. “Regular and customary work” does not include isolated or one-time tasks.” (Emphasis added). An example would include cleaning or “general maintenance,” which was not how employers understood this language to apply. To avoid liability, employers would therefore be forced to take a sweeping interpretation of who qualifies as an employee of a labor contractor.

Further, “employee” for purposes of those employed by labor contractors should be narrowed. Presently, the bill only requires that the worker has performed labor with the client employer for at least 6 of the 12 months. There is no requirement as to how much work or how frequently. A worker could have worked on a worksite once or twice and now fall under the purview of the bill. It is unlikely the employer even has the most current contact information for that worker.

The bill and these definitions also do not take into account whether the worker performs work at other sites, whether they can be reassigned by the contractor, or the terms of the contract. If the client employer is just one of a worker’s five assignments, the justification for receiving a WARN Act notice of a closure is far less than a worker who performs work at one site every single day. Or, if the labor contractor is able to immediately assign the worker to a new client upon learning of a closure or layoff, again the need to follow all of the WARN Act steps is obviated. The bill also does not address the terms of the contract or agreement between the labor contractor and client. This would include a situation where the length of the contract is set to expire before the anticipated closure or layoff or where there is no set term. Further, the payment requirements under section 1402 do not consider the fact that a contract between the labor contractor and employer may already address worker compensation in the event of a closure or layoff. The applicability of the bill to contract workers must be narrowed and reworked.

REGISTERED SUPPORT / OPPOSITION:

Support

Alphabet Workers Union - Communication Workers of America (co –sponsor)

California Employment Lawyers Association (co-sponsor)

California Labor Federation (co-sponsor)
National Employment Law Project (co-sponsor)
National Legal Advocacy Network (co-sponsor)

TechEquity Collaborative (co-sponsor)
Temp Worker Justice (co-sponsor)
American Sustainable Business Network
Asian Law Alliance
Board of Supervisors for The City and County of San Francisco
California Commission on The Status of Women and Girls
California Environmental Voters
California Immigrant Policy Center
California Nurses Association
California State Council of Service Employees International Union (seiu California)
Center for Responsible Lending
Courage California
East Bay Alliance for A Sustainable Economy
Economic Policy Institute
End Poverty in California (EPIC)
Equal Rights Advocates
Freelancers Union
Grace Institute - End Child Poverty in Ca
Indivisible CA Statestrong
Lawyers' Committee for Civil Rights of The San Francisco Bay Area
Legal Aid At Work
National Council of Jewish Women Los Angeles
People's Collective for Environmental Justice
Santa Clara County Wage Theft Coalition
State Building and Construction Trades Council of Ca
UFCW - Western States Council
Voices for Progress
Warehouse Worker Resource Center
Western Center on Law and Poverty
Women's Foundation California
WorkSafe

Oppose Unless Amended

Acclamation Insurance Management Services
Allied Managed Care
California Association for Health Services At Home
California Association of Winegrape Growers
California Attractions and Parks Association
California Building Industry Association (CBIA)
California Business Properties Association
California Business Roundtable

California Chamber of Commerce
California League of Food Producers
California Lodging Industry Association
California Restaurant Association
California Retailers Association
Coalition for Small and Disabled Veteran Businesses
Family Business Association of California
Flasher Barricade Association
Hollywood Chamber of Commerce
Independent Lodging Industry Association.
Official Police Garage Association of Los Angeles
TechNet

Analysis Prepared by: Manuela Boucher-de la Cadena / JUD. / (916) 319-2334

Date of Hearing: April 12, 2023

ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT

Ash Kalra, Chair

ABPCA Bill Id:AB 1356 (

Author:Haney) – As Amended Ver:March 30, 2023

SUBJECT: Relocations, terminations, and mass layoffs

SUMMARY: Revises the California Worker Adjustment and Retraining Act (Cal/WARN) to: 1) include a “client employer” of a “labor contractor” in the definition of “employer”; and 2) increase from 60 to 90 days, the length of notice an employer must provide to employees prior to ordering terminations, relocations, or mass layoffs, as specified. Specifically, this bill:

1. Defines “labor contractor” as an individual or entity that supplies, either with or without a contract, a client employer with workers to perform labor within the client employer’s usual course of business.
2. Revises the seasonal employee exemption under Cal/WARN to require that the season must be complete, as specified.
3. Clarifies that a “covered establishment” may be a single location or a group of locations, including any facilities located in this state.
4. Revises the definition of “mass layoff” to mean a layoff during any 30-day period of 50 or more employees at, or reporting to, a covered establishment.
5. Adds to the definition of “employee”, a person employed by a labor contractor and performing labor with the client employer for at least six months of the 12 months preceding the date on which the Cal/WARN notice is required.
6. Prohibits an employer from utilizing compliance with the provisions of Cal/WARN in connection with a severance agreement and waiver of an employee’s right to claims.
7. Increases, from 60 to 90 days, the period of an employer’s liability for specified back pay and benefits owed to affected employees for an employer’s violation of the Cal/WARN notice requirement.
8. Requires a labor contractor to remit the payment provided by a client employer, to affected employees, in the full amount calculated, as specified, for a violation of the Cal/WARN notice requirement.
9. States that an employer that includes a general release, waiver of claims, nondisparagement agreement, or nondisclosure agreement, as a condition of payment owed to an employee under Cal/WARN, is subject to a civil penalty of up to five hundred dollars ($500) for each violation.
10. States that any general release, waiver of claims, or nondisparagement or nondisclosure agreement that is made a condition of the payment of amounts for which the employer is liable under Cal/WARN, as specified, is void as a matter of law and against public policy.
11. Prohibits an employer that is required to give notice, pursuant to Cal/WARN, from offering an employee a separate agreement that includes a general release, waiver of claims, or nondisparagement or nondisclosure agreement, unless the agreement is offered in exchange for reasonable consideration that is in addition to anything of value to which the individual already is entitled to, as specified.

EXISTING FEDERAL LAW:

Establishes the Worker Adjustment and Retraining Notification (WARN) Act, which requires, among other things, employers with 100 or more full-time employees, as specified, to provide 60 days' notice before implementing certain plant closings and mass layoffs. (29 U.S.C. § 2101 et seq.)

EXISTING STATE LAW:

1. Establishes Cal/WARN, which requires, among other things, employers with 75 or more full-time and part-time employees at a covered establishment, as defined, to provide 60 days' notice before implementing terminations, relocations, or mass layoffs, as specified. (Lab. Code, § 1400 et seq.)
2. Defines “covered establishment,” for purposes of Cal/WARN, as any industrial or commercial facility or part thereof that employs, or has employed within the preceding 12 months, 75 or more persons. (Lab. Code, § 1400.5 (a).)
3. Defines “employer,” for purposes of Cal/WARN, as any person, association, organization, partnership, business trust, limited liability company or corporation that directly or indirectly owns and operates a covered establishment. (Lab. Code, § 1400.5 (b).)
4. Exempts, from the provisions of Cal/WARN, employees that are laid off as a result of the completion of a project in specified industries, where the employers are subject to specified wage orders, and the employees were hired with the understanding that their employment was seasonal and temporary. (Lab. Code, § 1400.5 (g)(1).)
5. Exempts seasonal employees, as specified, from the provisions of Cal/WARN. (Lab. Code, § 1400.5 (g)(2).)
6. Defines “employee,” for purposes of Cal/WARN, as a person employed by an employer for at least 6 months of the 12 months preceding the date on which the notice is required. (Lab. Code, § 1400.5 (h).)
7. Defines “client employer” as a business entity, regardless of its form, that obtains or is provided workers to perform labor within its usual course of business from a labor contractor. (Lab. Code, § 2810.3 (a)(1)(A).)
8. States that an employer that fails to give the required notice, as required by Cal/WARN, before ordering a mass layoff, relocation, or termination, is liable to each employee entitled to notice, for specified compensation and benefits, calculated for the period of the employer’s violation, up to a maximum of 60 days, or half the number of days that the employee was employed by the employer, whichever period is smaller. (Lab. Code, § 1402.)
9. States that an employer who fails to give the notice, as required by Cal/WARN, is subject to a civil penalty of not more than five hundred dollars ($500) for each day of the employer’s violation.
   1. Exempts an employer from this civil penalty, if the employer pays, to all applicable employees, the amounts for which the employer is liable, as specified, within three weeks from the date the employer ordered the mass layoff, relocation, or termination. (Lab. Code, § 1403.)
10. Permits a person, including a local government, or an employee representative, seeking to establish liability against an employer, for violation of Cal/WARN, to bring a civil action on behalf of the person other persons similarly situated, or both, in any court of competent jurisdiction. Additionally, permits a court to award reasonable attorney’s fees as part of the costs to any plaintiff who prevails in a civil action. (Lab. Code, §1404.)
11. Authorizes the Labor Commissioner (LC) to enforce Cal/WARN notice requirements by investigating alleged violations and ordering appropriate temporary relief to mitigate the violation, pending the completion of a full investigation, as specified. (Lab. Code, § 1406 (b).)

FISCAL EFFECT: Unknown

COMMENTS: Note: This bill has been double-referred to the Assembly Judiciary Committee upon passage out of this Committee.

According to the author, “Innovative industries like tech are a critical part of our state's economy, and we know that tech companies start here in California because of our highly skilled workforce. [This bill] will protect that workforce—from the engineers to the janitors—by making sure they’re treated fairly during a job transition.

To be pro tech, we have to be pro tech-worker. If we don’t take care of our tech workers then we’ll lose one of California’s greatest resources to states like Texas, Washington, or New York. While we respect that downsizing is sometimes an unavoidable part of business, discarding employees that have done nothing wrong – with little to no notice – isn't right and it hurts the competitiveness of our state’s tech industry. If all of our workers have enough time to look for other work, they’re more likely to stay here in California. [This bill] closes the loopholes in critical layoff protection laws and gives contract workers the basic protections that all workers at these large companies deserve.”

In addition, the author points out that this bill will promote equity solutions and maximize benefits for underserved and marginalized communities because, “For many low wage and middle class families, an unexpected job loss can mean financial catastrophe. Providing a 90 day notice period is a critical change that recognizes the reality of the high cost of living in California and helps increase the economic safety net for some of our most vulnerable communities.”

Tech Industry Layoffs

According to an article by Mercury News, “Just before the COVID pandemic hit, Google’s parent company Alphabet had 119,000 full-time employees. As public health orders and fears of the deadly virus drove people out of the physical world and into online life and shopping, the digital-advertising giant’s workforce ballooned — to 190,000 by the end of last year. Then last month the company axed 12,000 workers, including 1,600 in the Bay Area.”^[1]

Additionally, the article reported that “Many other Bay Area firms, including Facebook’s parent company Meta of Menlo Park, Santa Clara computer chip maker Intel, San Jose video-conferencing company Zoom and San Jose payments platform PayPal also staffed up heavily during the pandemic before slashing jobs in recent months. The carnage has just topped 20,000 newly or soon-to-be unemployed workers since mid-2022.”^[2]

Tech Industry Contract Workers

According to a report by the Tech Equity Collaborative, “The use of contracting agencies to fill staffing needs has become increasingly popular across all industries as part of a larger trend to cut costs and increase shareholder value. But this practice has been particularly appealing to Silicon Valley companies who have an imperative (driven by the demands of venture capital investors) to gain massive market share and valuation as quickly as possible.”^[3]

Additionally the report found that “Demographic trends of the contingent workforce at tech companies—those who are hired through and employed by third-party entities, often on tenuous contracts—differ substantially from the directly employed workforce. Contract and temp workers are more likely to be Black, Indigenous, Latinx, Asian, women, and nonbinary people than those hired in the direct workforce. For every single racialized category, the rate of employment in contract work was greater than the rate of employment of those same racialized groups in directly employed roles at the tech company.”^[4]

In an effort to avoid liability, “tech companies avoid, at all costs, being considered joint employers for contract workers. To avoid triggering a joint employer finding, corporate policies keep contract workers structurally isolated—without a clear manager, without a clear pathway into direct employment, without direct access to necessary resources and tools for their work.”^[5]

Arguments in Support

The California Labor Federation, co-sponsor of the bill, states, “The contract workforce in California is estimated at 1.9 million workers and that number continues to grow. Contract workers serve some of the largest and most profitable companies in the state, but they are employed by third-parties, labor contractors, and other smaller entities. Contract workers are often exempted from many employment protections. They do the work of mega-corporations, but they are not directly employed by them, so they fall into gaps of our worker protection laws. Black workers and other workers of color make up a disproportionate percent of the workforce and contract workers of color are less likely to be converted to permanent, direct employment than their white counterparts, further institutionalized inequity in the industry.

[This bill] will expand California’s WARN Act to protect contract workers and update protections for all workers. The bill increases the advance notice requirement from 60 days to 90 days to give workers adequate time to prepare for the loss of a job. It decouples severance negotiations, including waiver of claims, from meeting WARN Act obligations. The bill also extends WARN Act coverage to include client employers, third-party agencies, and labor contractors in the definition of “covered employers” to ensure contract workers, that are directly impacted by a mass layoff, receive the same protections as direct employees.

Basic labor protections at a time of mass lay-offs should cover all workers in California. [This bill] expands the proven success of the WARN Act to cover more workers and updates the law to reflect the changing economy.”

Arguments in Opposition

A coalition of employer organizations, including the California Chamber of Commerce, state, “[This bill] unnecessarily expands existing WARN Act requirements and is overly broad in its application to employees of a labor contractor, including failing to take into account the terms of a contract or agreement between the labor contractor and client.

First, it increases the amount of notice time from 60 days to 90 days without justification. Increasing the number of days is actually likely to disadvantage workers. If notices must be issued 90 days in advance, this means employers must know well before the 90 day mark who is subject to the closure or layoff at issue.

Second, recent amendments change the definition of “covered establishment” so that instead of applying to single locations with 75 or more employees, it now covers any business that employs 75 or more employees between all of their locations. That affects the definitions of mass layoff, relocation, and termination. For example, if a company lays off a few employees at different locations that altogether total 50 workers, the WARN Act is now triggered. This is a significant expansion of the law, imposing new burdensome requirements on small locations that were previously never subject to the WARN Act.”

Related & Prior Legislation

SB 627 (Smallwood-Cuevas) of 2023 would require an employer, for a year after the closure of a covered establishment, to provide to all covered workers the opportunity to remain employed by the employer and to transfer to a location of the chain within 25 miles of the covered establishment subject to closure as positions become available. Would also require the employer to maintain a preferential transfer list of covered workers and make offers of transfer to qualified covered workers based on length of service, as specified. This bill is pending a hearing in the Senate Committee on Labor, Public Employment and Retirement.

SB 725 (Smallwood-Cuevas) of 2023 would prohibit a grocery establishment, where the change in control is a merger, from ordering a mass layoff, relocation, or termination at a covered establishment unless, 180 days before the order takes effect, the employer gives notice of the order to the employees of the covered establishment affected by the order, the Employment Development Department, the local workforce investment board, and the chief elected official of each city and county government within which the termination, relocation, or mass layoff occurs. This bill is pending a hearing in the Senate Committee on Labor, Public Employment and Retirement.

AB 1601 (Weber) Chapter 752, Statutes of 2022 prohibits a call center employer from ordering the relocation of its call center, as defined, unless 60 days before the order takes effect, the employer gives written notice of the order to affected employees.

SB 1162 (Limón) Chapter 559, Statutes of 2022 requires, among other things, private employers with 100 or more employees hired through labor contractors to submit a pay data report to the Civil Rights Department, as specified.

SB 93 (Committee on Budget and Fiscal Review) Chapter 16, Statutes of 2021 requires hospitality and service industry employers to offer to rehire qualified former employees who were laid off due to the COVID-19 pandemic. These employees must be notified for the same or similar positions as they last held.

AB 359 (Gonzalez) Chapter 212, Statutes of 2015 requires that a successor grocery employer retain their current workforce for a minimum of 90 days after a change in ownership.

AB 2957 (Koretz) Chapter 780, Statutes of 2002 established Cal/WARN and requires employers with 75 or more full-time and part-time employees at a covered establishment, as defined, to provide 60 days' notice before implementing terminations, relocations, or mass layoffs, as specified.

SB 20 (Alarcon) Chapter 795, Statutes of 2001 established the Displaced Janitor Opportunity Act and requires a contractor who enters into a contract for janitorial and building maintenance services at a job site to retain the employees of a former contractor providing such services at the job site during a 60-day transition employment period.

REGISTERED SUPPORT / OPPOSITION:

Support

Alphabet Workers Union (Co-Sponsor)
California Employment Lawyers Association (Co-Sponsor)
California Labor Federation (Co-Sponsor)
National Employment Law Project (Co-Sponsor)
National Legal Advocacy Network (Co-Sponsor)
Techequity Collaborative (Co-Sponsor)
Temp Worker Justice (Co-Sponsor)
American Sustainable Business Council
Asian Law Alliance
California Commission on The Status of Women and Girls
California Nurses Association
California State Council of Service Employees International Union (SEIU California)
Courage California
East Bay Alliance for A Sustainable Economy
Economic Policy Institute
End Poverty in California (EPIC)
Equal Rights Advocates
Freelancers Union
Grace Institute - End Child Poverty in CA
Indivisible CA Statestrong, et al
Legal Aid At Work
National Council of Jewish Women Los Angeles
People's Collective for Environmental Justice
Santa Clara County Wage Theft Coalition
State Building and Construction Trades Council of Ca
UFCW - Western States Council
Warehouse Worker Resource Center
Western Center on Law and Poverty
Women's Foundation California
Worksafe

Oppose

Acclamation Insurance Management Services
Allied Managed Care
California Association for Health Services At Home
California Association of Winegrape Growers
California Building Industry Association
California Business Properties Association
California Business Roundtable
California Chamber of Commerce
California League of Food Producers
California Lodging Industry Association
California Restaurant Association
California Retailers Association
Coalition of Small & Disabled Veteran Business
Family Business Association of California
Flasher Barricade Association
Hollywood Chamber of Commerce
Independent Lodging Industry Association.
Official Police Garage Association of Los Angeles
Technet

Analysis Prepared by: Martin Vindiola / L. & E. /

1. Baron, Ethan. Silicon Valley tech layoffs: Why so many jobs were slashed, and who’s hiring amid fierce competition? The Mercury News, February 2023. ↑

2. Ibid. ↑

3. Tech Equity Collaborative. Contract Worker Disparity Project: Shining a Light on Tech's Shadow Workforce, January 2022. ↑

4. Ibid. ↑

5. Ibid. ↑