By SARAH KELLY, Cozen O'Connor labor & employment attorney and a former employment law counsel for CoreStates Financial Corp. and senior employment counsel for PNC Bank Corp.
To start, employers can conduct layoffs. Unless your employees are unionized, or have individual employment agreements providing for a specific term of employment and/or specific reasons for termination, most U.S. workers are employed at will.The rights of unionized employees or employees with individual agreements are governed by the terms of their agreements.
Conducting a layoff fairly, and minimizing risk, requires planning.How quickly it can be accomplished depends on the number of employees affected.If applicable, ensure federal WARN Act compliance. This law applies to companies with 100 or more full-time employees, usually providing that employees be given 60 days notice of a plant closing or mass layoff. WARN is complicated, but generally, if 50 or more employees at a single location are affected, you should seek legal advice to see if the WARN Act applies.
Carefully decide who to layoff. Choosing is fraught with problems, and employers need to select employees in a manner that will not increase the likelihood of employment claims. Sometimes, it's as easy as knowing that an entire facility will close and that everyone will be let go. More frequently, employers must be selective. Seniority is the time-honored criteria for deciding who to retain, but it doesn't always yield a workforce that fits the employer's needs.
Distribute final pay in a timely way and provide payment for accrued vacation or other paid time off, in accordance with your policies and state laws. Provide COBRA notices and information on other benefits conversions, as required. These may seem like small details in the big picture of what your company is confronting, but they matter to the individual employee. Getting them wrong becomes fodder for employment claims.
Avoid lawsuits by paying severance and getting a release. To do that, you need to provide laid-off employees with something--severance pay usually--they are not otherwise entitled to. Many employers considering layoffs will design a severance program or an ERISA-governed severance plan and provide severance (usually based on an employee's length of service with the company, sometimes with minimum floors and maximum caps; in other cases, a flat number of weeks of pay per employee).
To obtain valid releases of claims from employees over age 40, employers must comply with the Older Workers' Benefits Protection Act, which in a layoff mandates that employees who are asked to sign a release be given 45 days to consider it, seven days to revoke it after signing and also be provided with certain information disclosures.Companies that have conducted layoffs and provided severance and releases in the past should consult with legal counsel to ensure they have the most up-to-date advice on these topics, as the law here is complex.
April 15, 2009
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