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Mass Layoffs Lead to Federal Lawsuit Against California Video Game Developer

Businesses are subject to a variety of California employment laws affecting the employer/employee relationship. These include laws setting a minimum wage, establishing rules for overtime compensation and standards for workplace safety, and addressing employment discrimination and harassment. A lawsuit recently filed in a Northern California federal court alleges that a company violated state and federal laws that deal with employers’ obligations prior to mass layoffs of employees. Roberts, Jr. v. Telltale Games, Inc., No. 3:18-cv-05850, complaint (N.D. Cal., Sep. 24, 2018). The defendant, a video game developer in the Bay Area, recently announced that it had laid off most of its workforce in anticipation of closing its operations. The plaintiffs allege that the company failed to give advance notice as required by law.

The federal Worker Adjustment and Retraining Notification (WARN) Act of 1988 applies to employers with one hundred or more full-time employees. An employer must give notice in advance of a “plant closing” or a “mass layoff.” A “plant closing” occurs when an employer’s closure of a work site causes at least fifty employees to lose their jobs within a span of thirty days. 29 U.S.C. § 2101(a)(2). The Roberts case cited above involves an alleged “mass layoff.” The WARN Act defines this as a “reduction in force” within a thirty-day period that causes the loss of either (1) five hundred or more jobs, or (2) fifty or more jobs when that number accounts for at least one-third of the company’s total workforce. Id. at § 2101(a)(3).

California law applies more broadly than the federal WARN Act. The state statute applies to any employer with at least seventy-five employees, including part-time workers. Cal. Lab. Code § 1400(a). A “mass layoff” includes any incident that results in the loss of fifty or more jobs in thirty days. Id. at § 1400(d). Under both statutes, employers must give notice to affected employees or their representatives at least sixty days in advance of a mass layoff. 29 U.S.C. § 2102(a), Cal. Lab. Code § 1401.

If an employer fails to provide the required notice, both federal and state law allow aggrieved employees to file suit for damages. The WARN Act and California law both allow plaintiffs to collect back pay and benefits as damages, up to an amount that would have been payable during a sixty-day period. 29 U.S.C. § 2104(a)(1), Cal. Lab. Code § 1402(b). The rate of pay used to calculate damages is equal to the employee’s average rate for the previous three years of employment.

The defendant in Roberts is a video game developer that built a following through games based on popular media franchises, particularly the AMC television series The Walking Dead. The company announced in late September 2018 that it had laid off about 250 employees, leaving behind only twenty-five people. This was reportedly in preparation for the company ceasing operations altogether.

Within days of the announcement, the plaintiffs filed suit in the Northern District of California, on behalf of a putative class, under the WARN Act and California law. The lawsuit’s sole cause of action alleges failure to provide the sixty days’ notice required by the two statutes.

James G. Schwartz is a business litigation and employment attorney with over forty years’ experience representing Bay Area businesses and business owners in both transactional and litigation matters. Please contact us online or at (925) 463-1073 today to schedule a free and confidential consultation to see how we can assist you.

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