The pandemic brought the world to its knees and forced everyone to a standstill. This has had an immeasurable impact on businesses. The pressure of the shutdown has forced companies to tighten their belts on their expenses. In response, millions of workers have been furloughed, which is mandatory but temporary, unpaid leave. Companies furlough their employees to help weather a financial storm, hoping that business will improve, and the company can hire their employees back. When a company furloughs its employees, they save money by reducing labor costs without adding new expenses such as severance packages and outplacement services.
The COVID-19 crisis closed Disney parks worldwide, and in April, Walt Disney Co. furloughed 43,000 employees. Since the pandemic is a health crisis, employees were afraid that the furlough would result in a lack of medical coverage. However, Disney committed to pay 100% of insurance including “all insurance benefits: medical, dental, life, etc. with no exceptions” during the furlough. The Service Trade Council Union, which represents various union groups that make up 43,000 Disney workers, stated that the settlement was “a great agreement for the worst of times.” In the settlement, Disney employees received: “worker jobs, seniority, wage rate and benefits guaranteed through the furlough,” and insurance coverage for the duration of the furlough up to 12 months, including full-time and part-time workers who qualify for the Affordable Care Act. The employees were encouraged to file for unemployment benefits, in hopes of outlasting this persistent virus. Unfortunately, the virus has shown no signs of slowing down.
Disney parks have started to reopen at significantly lower capacity due to social-distancing requirements. Disney has tried to decrease human interaction by adopting more technology responses to the pandemic to follow the social distancing protocols. These changes include online restaurant menus and mobile-pay systems, requiring fewer employees. The Chairman of the Parks, Josh D’Amaro, said in a letter to employees, “we’ve cut expenses, suspended capital projects, furloughed our cast members while still paying benefits, and modified our operations to run as efficiently as possible.” However, D’Amaro states that “the prolonged impact of COVID-19 on business, including limited capacity due to physical distancing requirements and continued uncertainty regarding the duration of the pandemic has made the very difficult decision to begin the process of reducing the workforce at parks, experiences, and products segments at all levels.”
Walt Disney Co. announced that they would be laying off 28,000 workers at its parks in California and Florida. A layoff occurs when there is a legitimate business reason to eliminate a position or positions from the corporate structure, such as an off-season slow down. While a furlough is a temporary unpaid leave, a layoff is a full separation from the company. These layoffs mark one of the most profound workforce reductions of the COVID-19 Era. These layoffs will impact about 13% of Disney’s 223,000- person global workforce. Disney also reported that of the 28,000 workers being laid off, 67% were part-time workers, including 6,700 non-union employees. Disney has previously covered the health care costs for furloughed employees; however, this coverage will likely not extend to those employees who have been laid off. Disney encourages the employees to talk with the unions to determine the next steps.
In California, unions that represent Disney employees urged California Governor Newsom to sign a state bill known as AB 3216. This bill would establish a right-to-return requirement for the hospitality industry, meaning that if employees lose their job due to the pandemic, they could return based on seniority when business returns to normal. In other words, if the bill were to pass, some Disneyland employees would have preferential treatment during the rehiring process once Disney decides to rehire. The bill passed the Assembly floor on August 21; however, on September 30, Governor Newsom vetoed the bill. This begs the question, is there other recourse for Disney employees?
The Agreement between Walt Disney Parks and Resorts and the Service Trades Council Union (full-time) has a provision that deals with layoffs, recalls, and furloughs. Section 1 of the Agreement provides that layoffs will be according to seniority in the job classification. The Agreement also provides that employees will be recalled after being laid off in accordance with seniority in their permanent job classifications.
Is there a notice requirement for layoffs? The Agreement also requires that Disney provide the employees, whenever possible, with one week’s advance notice of layoff. Further, the Worker Adjustment and Retraining Notification Act (“WARN ACT”) requires employers to notify state and local leaders of mass layoffs. The WARN Act offers protection to workers and their families by requiring employers to provide notice 60 days in advance of covered mass layoffs. The notice must be provided to either the affected workers or to their unions. Suppose an employer violated the WARN Act provisions by not providing appropriate notice. In that case, each aggrieved employee would receive back pay benefits for the period of the violation, up to 60 days.
However, the WARN ACT provides an exception from the requirement to provide timely WARN notice if the layoff was caused by “some sudden, dramatic, and unexpected action or condition outside of the employer’s control.” While the economic downturn associated with the COVID-19 pandemic seems to fit within the “unforeseen business circumstances” exception, it is essential to note that courts narrowly construe the exception. Thus, an employer needs to identify why the workforce reductions were necessary. Unlike the federal WARN Act, the California WARN Act does not have a safe harbor provision for unforeseen business circumstances. However, Governor Newsom has responded to the COVID-19 concerns and issued an executive order to provide some relief to employers during these unprecedented times. Under Executive Order N-21-20, the notice requirement is suspended if the event was caused by COVID-19 related business circumstances that “were not reasonably foreseeable” at the time notice would have been required.
Thus, the laid-off Disney employees may be forced to file for unemployment, hoping that their beloved jobs come back at some point. If the economy begins to boom and people are not as afraid to travel, those employees with seniority in their positions may be considered for recall. At a time of such uncertainty, employees can only hope that the parks’ magic and their careers will be recalled.