Tesla Cited for California Labor Code Violations

Tesla is a high-profile defendant with a high-profile CEO, but the California labor lawsuit itself is very similar to the more recent Jane Doe v. Technicolor Creative Services, Inc. and many other California WARN lawsuits. The facts of the Chin case are instructive, and the message is unavoidable. The combination of federal and California WARN statutes and California’s PAGA provisions is a powerful tool for protecting workers’ rights even against a corporate behemoth like Tesla.

Abruptly Fired Without WARNing

Chin and more than 14,000 employees at the Dublin, California facility lost their jobs when the plant closed. She had worked as a Parts Advisor at Tesla and neither she nor the other workers received the 60-day notice required by both laws. They lost wages, salaries, commissions, bonuses, accrued holiday pay, 401(k) contributions and medical insurance. Tesla also failed to pay them or provide benefits for the 60 days following their terminations, as also required by the laws when notice is not given.

In general, both WARN laws are intended to minimize the disruption of workers’ lives in the event of mass layoffs. They help workers prepare for job loss, find new jobs, or train for new opportunities.

Federal WARN

The federal law applies only to employers with 100 or more full-time employees who have been employed for at least 6 months of the 12 months preceding the date of required notice. The law applies to:

• plant closings involving 50 or more employees during a 30-day period; and
• layoffs within a 30-day period involving 50 to 499 full-time workers if that amounts to at least one third of the full-time workforce at a single site of employment; and
• layoffs of 500 or more are covered regardless of percentage of workforce.

Federal WARN requires an employer to provide a written 60-day notice of the plant closing or layoff to:

• employees or their representatives;
• the State dislocated worker unit (the Employment Development Department, Workforce Services Division in California); and
• the chief elected official of local government within which such closing or layoff is to occur.

If the employer fails to provide the required notice, it must pay each covered employee an amount equal to back pay and benefits for the period of the violation, up to 60 days.

California WARN

California WARN’s coverage appears to be more expansive than federal coverage, and benefits are calculated using a different formula.

California WARN applies to any employer that employs or has employed in the preceding 12 months, 75 or more full and part-time employees. As under the federal WARN, employees must have been employed for at least 6 months of the 12 months preceding the date of required notice.

California WARN similarly requires that employers provide workers with provide a 60-day notice before:

• plant closure affecting any number of employees;
• layoff of 50 or more employees within a 30-day period regardless of the percentage of workforce;
• relocation of at least 100 miles affecting any number of employees; and
• relocation of a call center to a foreign country regardless of the percentage of workforce affected. 

In addition to the notifications required under federal WARN, California requires employers to give notice to the Local Workforce Development Board, and the chief elected official of each city and county government within which the termination, relocation or mass layoff occurs. 

If a California employer fails to give the required notice, it must pay a possible civil penalty of $500 a day per violation. Employees may receive back pay to be paid at their final pay rate or 3-year average rate of compensation, whichever is higher. In addition, the employer is liable for the cost of any medical expenses incurred by employees that would have been covered under an employee benefit plan. The employer is liable for period of up to 60 days or one-half the number of days the employee was employed whichever period is smaller.

A call center employer who does not provide notice is ineligible to be awarded or have renewed any direct or indirect state grants or state-guaranteed loans for five years and is ineligible to claim a tax credit for five taxable years.

PAGA penalties

PAGA allows workers to bring California labor law claims against an employer or former employer. The workers act as “private attorneys general” and can pursue civil penalties as if they were a state agency. They are sue on behalf of the California Attorney General.

Depending on the case, labor law violations carry penalties ranging from a few dollars to $200 per employee, per pay period. Only 35 percent of recovered amounts are payable to the employees who were harmed. The bulk of the money goes to the State of California to be used to enforce the provisions of California worker protection laws.

If a large employer (like Tesla) has a long history of ignoring federal and California labor laws, the combination of federal and state WARN laws plus PAGA penalties can become financially quite painful.