WARN Act Sale of A Business Warn Notice
We invite your attention to our disclaimer.
WARN applies when all or part of a business is sold. If a covered plant closing or mass layoff occurs, which employer—the seller or buyer—is responsible for giving notice depends on when the event occurs. The seller must give you notice for a covered plant closing or mass layoff that occurs before the sale becomes effective. The buyer must give you notice for a covered plant closing or mass layoff that occurs after the sale becomes effective.
Employees of the seller automatically become employees of the buyer for purposes of WARN. That means that even though there is a technical termination of your employment when you stop working for the seller and start working for the buyer, the technical termination does not trigger WARN. See the FAQ section for additional information on sale of a business and bankruptcy issues.
Seller or Buyer Responsible and Liable for Giving WARN Notice
If an employee was terminated without notice at the instant the sale of the business becomes effective, which party is liable—the seller who employed me or the new buyer of the business?
The seller. In the case of the sale of part or all of a business, the seller is responsible for providing notice of any plant closing or mass layoff that takes place up to and including the effective date (time) of the sale. The buyer is responsible for providing notice of any plant closing or mass layoff that takes place after the sale is complete. Employees of the seller automatically become employees of the buyer for purposes of the WARN notice requirement.
Refusal of Job Offer by Buyer of Business
If I am offered a job with the buyer of the business and I refuse it, is this considered a voluntary departure?
The refusal of the offer is considered a voluntary departure unless the job offered represents a “constructive discharge,” which includes situations where very significant changes are made in employee’s wage, benefits, working conditions, or job description.
Buyer Decrease Wage/Salary and Constructive Discharge/Termination
If the buyer of the business continues to employ me but decreases my wages and benefits, has the buyer “constructively discharged” the employee?
If a drastic change in wages or working conditions causes a person to believe that he or she was being fired or would be unable to continue working for the buyer, this may constitute a constructive discharge (see glossary).
This determination is often a matter of your state’s laws and can be a strict one. Contact your State Rapid Response Dislocated Worker Unit for specific information or referral to a knowledgeable staff member in the appropriate state agency. See the Directory of Information and Contacts at the end of this brochure for additional sources of information and assistance.
Constructive Discharge:
In general, a constructive discharge is when a worker’s resignation or retirement may be found to be involuntary because the employer has created a hostile or intolerable work environment or has applied other forms of pressure or coercion that forced the employee to quit or resign.
Legal Reference
In Lab. Code, § 1400, the California Legislature has set out the definition of a number of key terms used in the California Worker Adjustment and Retraining Notification Act (WARN Act), Lab. Code, § 1400 et seq. Section 1400, subd. (d), defines “mass layoff.” Under that provision, a “mass layoff” is a layoff during any 30-day period of 50 or more employees at a covered establishment. § 1400, subd. (d). The word “layoff,” in turn, is defined in the immediately preceding subdivision as a separation from a position for lack of funds or lack of work. § 1400, subd. (c). Thus, the plain language of the relevant provisions of § 1400 and Lab. Code, § 1401 indicates that the notice obligation is triggered for employers operating covered establishments when 50 or more employees are separated from their positions within a 30-day period. MacIsaac v. Waste Management Collection & Recycling, Inc., 134 Cal. App. 4th 1076.
MacIsaac v. Waste Management Collection & Recycling, Inc., 134 Cal. App. 4th 1076
An employer, a waste management company, sold the remainder of a city contract to another company. Of those employees, 42 were transferred to the purchasing company. In a separate action, the company laid off 20 employees. One transferred employee sued the original employer, alleging that the employer failed to provide the notice required by the California Worker Adjustment and Retraining Notification Act, Lab. Code, § 1400 et seq., specifically Lab. Code, § 1401, subd. (a). The trial court granted summary judgment for the employer, finding that there was no “mass layoff” triggering the notice requirements. (Superior Court of Sonoma County, No. SCV232957, Raymond J. Giordano, Judge.)
The Court of Appeal affirmed the summary judgment for the employer, agreeing with the trial court there was no “mass layoff.” Under the statute’s unambiguous definition of “layoff,” the determining factor is whether an employee has been separated from “a position,” not whether the employee is separated from an “employer.” The transferred employees were not separated from their positions because there was no change in the terms of their employment. They continued to perform the same functions at the new employer that they had performed at the old employer. The drivers drove the same routes, used the same trucks, received the same pay, benefits, and seniority, and they lost no work. (Opinion by Kline, P. J., with Haerle and Ruvolo, JJ., concurring.)