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 Real Workplace Issues |
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Welcome to the latest
installment
of "Real Workplace Issues," a newsletter
dedicated to
providing our clients and friends with practical,
everyday employment law and HR
information.
The current economic crisis is leading to widespread
job reductions. Downsizing, reductions in force (RIF),
layoffs, restructuring - these terms usually mean the
same thing.
And due to today's challenging economic climate,
employers all over the country reviewing their budgets
to determine if they must reduce their workforce in
order to stay economically profitable. In light of the numerous business and legal issues to consider when planning a RIF, we have put together the following 10-point checklist to serve as a helpful guide and "starting point."
Before planning a RIF, employers
should consider some of the many cost-saving
alternatives. Some alternatives to downsizing include:
Whenever an employer decides to
downsize or reduce its workforce, proper steps must
be taken to ensure that the employer is in compliance
with the myriad of applicable federal, state and local
laws. Employers
should be aware of the "plant closing laws," the most
well-known of which is the federal Worker Adjustment
and Retraining Notification Act (WARN). WARN
requires a covered employer (defined as an employer
that has 100 or more full-time employees nationwide
who in the aggregate work at least 4,000 hours per
week excluding overtime) to give 60 days' advance
written notice of a "plant closing" or "mass layoff" -
terms that are defined in the Act. Many states, including Maine, Maryland,
New Jersey, New York, and Pennsylvania
(Philadelphia), have their own laws which are
variations on the federal WARN act. Employers should also be aware of
state requirements for terminating employees.
Different states have different laws regarding when an
employee must receive his or her final paycheck,
whether an employee must be paid for all accrued but
unused vacation time, what deductions are allowed
from an employee's final paycheck, etc. In California,
for example, employees must be given their final
paycheck (regardless of whether or not they use direct
deposit) upon termination, along with any accrued but
unused vacation pay.
The answer to this question is "it
depends, but usually no."
In most cases, severance pay is not
required under law. Maine, however, has a law
requiring any employer who relocates or terminates
a "covered establishment" to provide affected
employees with one week of severance pay for every
year that employee was employed at the
establishment. Employers may also be required to
provide severance pay as a penalty for not complying
with a particular law. New Jersey's WARN Act provides
that employers with 100 or more full-time employees
must give those employees at least 60 days' notice
prior to any "mass layoff," or to any "transfer of
operations or termination of operations" as defined by
the Act. Employers who fail to comply with NJ WARN
must provide each of the affected employees with one
week's severance pay for each full year of service.
In other cases, while providing
departing employees with severance pay may not be
required by law, it may nevertheless be a wise
business-decision. Oftentimes, employers will offer
severance pay as consideration for signing a "waiver"
by which a departing employee waives his/her right to
sue the Company for situations arising out of his/her
employment (see the next section for more
information on releases/waivers). Other times,
employers offer severance simply as a way of
showing their gratitude for the departing employees'
hard work over the years and as a means of providing
those employees with some form of financial support
during their upcoming job search.
Generally speaking, it is wise for
employers to have employees sign a "release"
or "waiver" when conducting a reduction in force. It is
important, however, that these legal documents be
drafted by an attorney, as there are specific clauses
that must be included in a valid release.
In addition, employers who want
employees to forego their rights to bring a lawsuit
under the Age Discrimination in Employment Act
(ADEA) in exchange for severance (or some other
form of consideration) must make sure their waivers
conform to the requirements of the Older Workers
Benefit Protection Act (OWBPA). The OWBPA contains
specific rules regarding information that must both
accompany and be contained in a release to make
it "valid as to age." There are additional requirements if the
waiver is being requested in connection with an "exit
incentive or other employment termination program"
offered to a group or class of employees.
A common concern amongst
employers who implement a reduction in force is that
affected employees will come back and sue the
company for discrimination based on race, age, sex,
national origin, etc. One way employers can protect
themselves is to document the business reasons for
the reduction in force beforehand. This document
should explain the reasons behind each and every job
reduction (i.e., "a need for cost savings"), and adds
credibility to an employer's argument that its reduction
in force was implemented for legitimate reasons and
through a process that was free of illegal
discrimination.
Employers must pay special attention to the
requirements for terminating an employee who is on a
temporary employment visa.
In any restructuring, it is vital to do whatever you can
throughout the downsizing process to preserve the
dignity of the individual who is affected.
This article is provided for informational
purposes only and is not intended to be legal
advice nor does it create an attorney-client
relationship between Halpern Employment Law
Advisors and any reader. 330 Madison Avenue :: 6th Floor :: New York, NY
10017 |
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