Ending a relationship is a difficult undertaking—whether a personal relationship or an employment relationship. While not qualified to give advice about personal relationships, as an employment lawyer, I can advise on how to end the employment relationship. Keep in mind, however, that for the individual employee the end of an employment relationship may be perceived in deeply personal terms. With the current national unemployment rate at 8.1 percent per Bureau of Labor Statistics, more and more employers are faced with the difficult decision of laying employees off. Even if the end of the relationship is necessary because of the economic downturn, there are several issues employers must consider before ending the relationship.
Selecting who to layoff: After deciding that a layoff is necessary, one of the most difficult decisions for employers is how to select which employees to layoff. Employers must put criteria in writing to guide the managers who will apply them and who will select which employee to lay off. Potential criteria could include seniority, performance reviews, versatility (particularly in a smaller workforce and if the remaining employees will have to perform multiple functions), the elimination or consolidation of specific jobs, the possibility of subcontracting, and relative ability. Generally an employer will want to keep its best performers and most versatile employees in order to accomplish the same level of work with fewer people and be in the best position to compete and achieve economic recovery.
Considering Equal Employment Opportunity (EEO) factors: After the criteria discussed above have been determined, employers should select the functions and positions to be eliminated, without considering the employees holding those positions, to ensure that impermissible criteria (for example, age, sex, and race) are not being considered. Then insert in the names of employees in order to apply the factors selected above (for example, versatility, seniority, and performance). Performance reviews can play a role in these determinations, but employers are wise to carefully consider existing performance reviews and creating new ones to justify selection decisions. An employer’s selection of an employee for layoff based upon his performance may be “pretextual” if the employer does not give prior reviews adequate critical review.
Employees challenging a layoff on EEO grounds gain an advantage if the former employer has not kept adequate records. By preparing and retaining documents, employers have much to gain for later use in legal proceedings. Create documentation throughout the layoff process that is “suitable for framing,” including specific reasons why selections were made.
Considering other potentially “protected” employees—leaves of absence: In addition to the protected classes under EEO law, employees who have taken leaves of absence should be given special consideration in a layoff context. For example, employees who are on military leave may have a right to return to their position or be entitled to transfer rights. Employees who have suffered on-the-job injuries and have been on leave as a result may have certain reinstatement and reemployment rights. Employees on pregnancy, parental, or family medical leave may have the right to return to a position equivalent to their former position (or, in some states, to their former position). If the returning employee’s former position has been eliminated, they may be entitled to an alternate position.
Giving employees notice: The Worker Adjustment and Retraining Notification (WARN) Act generally applies to employers with 100 or more employees and imposes certain requirements on those employers when closing a plant or instituting a “mass” layoff. The numbers that determine “mass” vary depending on the number of employees to be laid off during a 90-day rolling aggregate period, but there are certain exceptions.
Offering severance packages: Employers may be able to offer one or more types of services to laid off employees, depending on an employer’s size and resources. For example, outplacement services either on a group or individual basis may help give employees a positive start. Other examples include bridged pension vesting, the option to purchase a company computer at a low cost, extended health or life insurance coverage, and severance pay. If you offer severance pay, get a general release of claims as a condition of payment. Severance agreements must meet certain basic requirements, including a payment in addition to all wages and benefits legally owed; a list of which claims the employee is releasing; and specific language regarding protections if the employee is aged 40 or over. Consult an employment lawyer.
Considering recent legislation: New federal legislation also affects layoffs. The recently passed federal stimulus package contains provisions regarding COBRA benefits that entitle employees to receive (and require employers to pay) subsidies for health insurance premiums for workers laid off between September 1, 2008 and December 31, 2009. Additionally, President Obama signed a bill reauthorizing the Children’s Health Insurance Program, extending benefits that employees and their dependents may be eligible for and imposing new notice and disclosure requirements on employers, along with penalties for failure to comply.
Considering alternatives: Lastly, employers can get creative before laying off employees, and may want to consider the following options:
o A brief shutdown, which might include requiring employees to use accrued vacation or personal time off;
o Reducing all employees’ hours across-the-board so that no jobs are eliminated;
o Reducing pay or putting a freeze on all overtime hours;
o Offering “early retirement” options;
o or allowing employees to job share.
Certain states offers programs to help keep as many people as possible working, by paying some employment benefits to employees who are not fully employed. Whatever options you choose, carefully consider the legal requirements and consequences before implementation, and consult with an employment attorney.
The best way for employers to alleviate the stress of lay offs is to know each party’s rights and obligations, and to work proactively and cooperatively to ensure that those rights are honored and obligations are met.
(Christina Thacker is an attorney with Barran Liebman LLP and represents management in employment and labor law matters, specializing in employment litigation. In addition to employment law, Thacker also has assisted employers with labor relations issues such as defending employers against unfair labor practices and representing them before the National Labor Relations Board.)
