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Thursday, May 17, 2012
Feature: February 2009
You’ve Been WARNed
Appropriate care for company layoffs
Story by Bill Romanelli
Employers everywhere are confronting the unpleasant reality of layoffs. Already, the Sacramento Area Human Resource Association and local employment law experts are seeing jumps in requests for information and assistance on this issue.
Few employers have a solid handle on the legal intricacies of layoffs, especially notification and pay requirements, and the process can get prickly when it comes to deciding which employees to let go.
California employers with more than 75 employees are subject to the federal Worker Adjustment and Retraining Notification Act and the state’s WARN law, often referred to as “baby WARN.” In 2001, the U.S. saw 8,350 mass layoffs and plant closures, according to the General Accounting Office, 24 percent of which were subject to the federal act. Of those, only one-third of employers actually complied.
The WARN laws call for employers to provide advance notice to employees as well as state and local officials in the event of a mass layoff that would affect at least 50 employees or more than 33 percent of staff at a single location, a plant closure or relocation. In simple terms, both require employers to provide 60 days advance notice for mass layoffs, plant closures or, in California’s case, a relocation of operations to a site more than 100 miles away.
The federal law sailed through a Democratic Congress in 1988, avoiding a Reagan veto. Several states have followed suit, including Hawaii, Tennessee and Wisconsin. California’s law went into effect in 2003, and New York’s takes effect this year.
“Companies have to be careful about how decisions are made, so there’s no discrimination and the process is defensible.”
— Jennifer Randlett Madden, partner, Downey Brand LLP
“The basic idea behind these notice provisions is that by requiring advance notice, employees will have some time to minimize the impacts of a job loss by finding another job or getting training to help them break into another line of work,” says Alden Parker, an employment law specialist and partner with Basham Parker LLP in Sacramento. “Ultimately, these notices don’t tell the employer they can’t layoff people or shut down a location. It only tells you how much time and what type of notice you must give employees.”
From that basic foundation, however, the laws get more nuanced. The federal WARN law, for example, applies to companies with more than 100 full-time employees, whereas California’s WARN law applies to companies with 75 or more employees, including part-time workers. Throw in elements such as length of employment, severance packages and other issues, and suddenly each law includes a small host of intricacies that few companies should navigate without legal support. The penalties and class actions that can result from failure to comply will only add injury to insult.
Of course, WARN and baby WARN only apply to the notification of layoffs. Where companies can get into real trouble is in determining which employees to let go. Is it first in, first out? Is it based on performance reviews? Is there any chance someone can make a case for discrimination? Age discrimination can apply to anyone over 40, for example, so it’s critical that companies put together a thoughtful plan.
“If you look at your work force reduction plan and it turns out 80 percent of the work force selected for layoffs is over 40, you could be exposed to a discrimination claim,” says Jennifer Randlett Madden, partner with Downey Brand LLP in Sacramento. “Companies have to be careful about how decisions are made, so there’s no discrimination and the process is defensible.”
Companies with fewer than 75 employees are exempt from WARN requirements and, because California is an at-will state, can terminate employees without cause or notice. That’s provided the layoffs are permissible with applicable discrimination laws.
“I suspect whistleblower, retaliation, discrimination and unfair business
claims will be a real happening area of law in the next few years.”
— Susan Kirkgaard, trial attorney, Bullivant Houser Bailey PC
All that said, while there may be correct ways to manage work force reductions from a legal perspective, employers are by no means immune from the threat of lawsuits after the fact.
“Terminated and disgruntled employees will want to maintain some sort of income, and if they feel they’ve been treated unfairly, there’s little to stop them from filing a claim,” says Susan Kirkgaard, a trial attorney with Bullivant Houser Bailey PC in Sacramento. “I suspect whistleblower, retaliation, discrimination and unfair business claims will be a real happening area of law in the next few years.”
The major trade groups don’t track employment claims, but the Equal Employment Opportunity Commission tracks its enforcement suits filed and resolved in federal courts. The data is largely inconclusive on whether employment litigation increases in times of economic downturn.
However, companies considering downsizing should look beyond the legal intricacies because layoffs that appear inconsiderate can lead to public relations nightmares.
“It’s critical to plan these things, so employees can understand that management has really thought things through, and there’s a method to the process of who’s impacted,” says Jeff Dunn, president of the Sacramento Area Human Resource Association. “The more information you can give about what’s happening, the less uncertainty, fear and hostility will be involved from the employee’s standpoint.”
Dunn says the method of communication is just as important as the information provided. The process should start with a group communication, so everyone hears the same information at the same time. From there, the company should meet with individual employees to let them know how the layoffs will affect them.
Offering help to employees in the form of outplacement assistance, interview and networking training, employee assistance programs and severance packages can all be vital to a smooth process. On that note, Dunn says four weeks pay has become the typical severance package.
“Two weeks is perceived as pretty skimpy, especially by employees who have been with the company a long time,” he says. “People need time to get back on their feet and find a new job, even in a good economy, but especially in a tough one. The more severance and outplacement assistance you can give them, the better.”
None of these are required by law, but the aftermath of a “bad” layoff compared to one done with respect for the employees’ situation can be significant. Sooner or later the company’s financial picture could improve and companies that want to rehire former employees or attract new talent are more likely to succeed if layoffs were handled well.
“If there’s a perception that layoffs were conducted without consideration for the employees’ plight, lawsuits and the publicity around them might only be one problem,” Dunn says. “Companies can also wind up with ex-employees complaining publicly on blogs, to the media and to customers, vendors and anyone else who will listen. That can do significant damage to a corporate reputation.”
Laws and rulings to watch in 2009
To the delight of the business community, 2008 was a dull legislative year. Of course, the legislative branch is only one of the forces governing the relationship between management and labor. Businesses also have court rulings to contend with. “Under a different administration we’d probably be talking about 15 or 20 bills instead of just three or four,” says Alden Parker, an employment law specialist and partner with Basham Parker LLP in Sacramento. “And there’s no doubt, most if not all of the job killers that died [in 2008] will be back.” That said, here’s what’s new for 2009:
Senate Bill 28 by Joe Simitian (D-Palo Alto)
SB 28 prohibits the writing, sending or reading of text messages while driving as of the first of the year. “This law has triggered discussion about what tools you give employees, how they use them, expectations about responding to emails and what the employers’ responsibilities are,” says Jessica Hawthorne, employment lawyer for the California Chamber of Commerce. “Ultimately, it comes down to having a clear policy in place.”
Assembly Bill 10 by the Assembly Budget Committee
This bill changed the rules regarding computer professionals and exemptions from overtime requirements. State law sets a minimum wage for these employees at $37.94 per hour with mandatory overtime, meal and rest periods. Under AB 10, these employees can be paid an annual salary of at least $79,050 and may be exempt from overtime requirements. “This is a positive change for employees and employers,” Parker says. “Almost every employer has [information technology] people onboard, so this is a big deal.”
Brinker Restaurant Corp. v. Superior Court of San Diego County
Under current law, employers must ensure that nonexempt employees take meal and rest breaks. There is no flexibility for employees who want to skip lunch to go home earlier or employers who need extra help and would provide meals or breaks later.
The appellate decision in this case clarified the meal and rest period rule to provide flexibility: These breaks must be provided, but employees don’t have to take them.
The appellate was submitted to the California Supreme Court, which recently granted a review of the case. “This one is huge for employers. Meal and rest class actions are rampant in California,” Parker says. “If the Supreme Court upholds the Brinker decision, it could substantially reduce those kinds of lawsuits.”
Until a decision is made on the Brinker case, which is expected this year, current law still applies. Employers should continue to make sure employees get their breaks, that policies are clear and managers are trained to enforce them.
Until then, legal observers and employers are holding their breath. “A lot of people are saying the Brinker decision will come down in favor of employers, but I say don’t bet your house on it,” says Jennifer Shaw, a partner in Sacramento’s Shaw Valenza LLP. “No one has a Magic 8 Ball on this. You cannot predict what the courts will do.”
—Bill Romanelli
