LAYOFFS AND REDUCTION IN WORKFORCE (RIFs)
Reducing your workforce is never an easy decision. Many employers will do everything they can to cut costs, increase sales, secure loans, etc., in order to keep their workforce fully intact. However, sometimes these adjustments are simply not enough and a reduction in workforce, otherwise known as a layoff, becomes necessary.
Before notifying the affected employees of the reduction in force, it is very important to make sure that your business is legally protected. There are a number of laws and acts that protect employees, not employers, in reduction-in-force or layoff situations. It is critically important to keep these regulations in mind when determining how you execute a reduction in force, which employees to include in the reduction, and how to structure severance agreements if you choose to offer them.
Don’t rush your business into a legally and financially disadvantageous situation. Before you commit to a potentially disastrous restructuring of your workforce, contact the experienced employment law attorneys of Bellatrix PC for assistance. We will help your company safeguard its interests, advise you through each stage of the legal process, and most importantly, keep you compliant with state and federal laws. To arrange for a private consultation, call our law offices today at (800) 889-8376.
Does the WARN Act Apply to Your Business?
The main objective of the WARN Act, or the Worker Adjustment and Retraining Notification Act, is to ensure that employees have sufficient time to prepare for the transition between jobs. The WARN Act generally applies to private for-profit businesses and private non-profit organizations, as well as quasi-public entities separate from the government, which employ:
- A minimum of 100 full-time employees, excluding employees with fewer than six months on the job, as well as employees who work under 20 hours per week.
- A minimum of 100 employees who collectively work a combined minimum of 4,000 hours per week.
Under the WARN Act, employers are generally required to provide the affected employees with 60 days’ advance notice, which must contain specific information, of the following:
- The temporary or permanent closing of an employment site where a business intends to lay off 50+ full-time employees.
- A mass layoff, where there will be at least 50-499 employees laid off at a single employment site and that number of laid off employees will be a 33% reduction in workforce at that employment site.
- Any reduction in workforce of 500+ employees at a single employment site.
If adequate notice is not given, the employer could be liable for back pay and benefits for the time period of the violation, up to 60 days, which can be reduced by any wages the employer pays over the notice period. Employers can also be subject to civil penalties and paying an opposing party’s attorneys’ fees for WARN Act violations.
There are certain exceptions to providing WARN Act notice, including if a natural disaster is behind the plant closing or layoff, if the business could not have reasonably foreseen within 60 days the events leading to the layoff or closing, and when a business is actively seeking capital to try to avoid layoffs.
Avoiding Employment Discrimination Lawsuits
In California, employers are not permitted to layoff an employee solely based on sex, gender, age, national origin, religion, or sexual orientation. When a reduction in force impacts or targets employees in one of these protected classes, it can lead to claims of discrimination. The most common of these claims are made for age discrimination, when an employee states that he or she was eliminated because of the expense of their continued employment to their employer.
When planning for a reduction in force, employers should analyze their workforce to determine what it looked like before and what it will look like after making the reduction decisions. For example, if the employer statistically had 40% minorities before the reduction and 5% after, the employer needs to have a legitimate business rationale for this result that will withstand a charge of discrimination, if one is made. The employer may want to rethink their method of restructuring in a situation such as this one.
The Older Workers Benefit Protection Act (OWBPA)
The Older Workers Benefit Protection Act (OWBPA) is an amendment to the Age Discrimination in Employment Act (ADEA) directed at protecting the benefits of workers over the age of 40. Generally, whenever employers seek a release from federal age discrimination claims, such as in severance packages or settlement agreements, employers must comply with the OWBPA.
The requirements of the OWBPA are generally triggered in the four following release scenarios:
- An employee is involuntarily terminated, but does not bring a lawsuit or file a complaint with the Equal Employment Opportunity Commission (EEOC).
- A release by an employee who was involuntarily terminated in a mass layoff or group workforce reduction, but does not file a lawsuit or complaint alleging age discrimination.
- A release in the settlement of a disputed claim, including lawsuits and EEOC claims.
- A release by an employee who voluntarily quit the job as part of an incentive program.
Regardless of the originating scenario, when the OWBPA is triggered, the Act requires that releases be drafted in plain language contain certain provisions, including a written advisory for the worker to consult with an attorney prior to signing the release, state a specified period for the worker to review the release (21 or 45 days, depending on the circumstances), and provide for a seven-day period to revoke the release after signing. If a release is not in compliance with the OWBPA, it can be invalidated, so it is important to ensure that you comply with this Act.
Union Contracts and ERISA Compliance
Employers planning to lay off union workers should review the collective bargaining agreement (“CBA”), as it defines employee rights and ensures that they are not violating provisions of the CBA. Certain parts of the agreement may need to be renegotiated with the union, or you may have to adjust your method of laying off union workers.
Employers should also be aware that some severance and voluntary incentive pay plans may be plans covered by the Employee Retirement Income Security Act, commonly known as ERISA. This act generally establishes minimum standards for pension plans in private industry and gives extensive rules in the area of employee benefit plans.
All members of your management team that are given the responsibility of notifying employees of the reduction in force should be educated to ensure consistency. Your management team should know exactly what procedures to follow in conducting exit interviews, what statements should or should not be made, and how to answer employee questions.
Your team should also conduct the process as quickly as business conditions permit to maintain acceptable productivity levels and employee morale. Human resource administration should continue as normally as possible, administering performance reviews and counseling notices. Do not use selection for layoff as a substitute for incomplete performance management.
If your business is considering a reduction in force, or layoff, receiving advice from an employment attorney is recommended. Bellatrix PC can help ensure that your reduction in force is executed in compliance with all of state and federal laws. We can also help draft or review severance agreements for affected employees.
To arrange for a confidential legal consultation with the experienced business attorneys of Bellatrix PC, call us today at (800) 889-8376. We have offices in San Diego, St. Louis, and Riverside, CA.
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