Last year saw the loss of more than 2.5 million U.S. jobs -- the most in one year since 1945. These hard economic times have resulted in more corporate downsizing than could have been imagined. In short, mass employee layoffs have, unfortunately, become a common reality -- and an HR nightmare.
Conducting them in a compassionate manner that is consistent with federal and local law is vital because an improperly done layoff will almost invariably result in significant liability for employers.
Question: I foresee the necessity to consider additional layoffs this year. Do you have any recommendations concerning how to handle these layoffs with compassion, sensitivity, etc., as well as suggestions on ways to address those who are left in the workload?
Being laid off is one of the -- if not the most -- traumatic work-related events that employees experience. In additional, it often comes as a shock to the affected worker even in the midst of poor economic times.
In view of this, and whether an employer is contemplating its first, second or fifth round of layoffs, I have identified eight handy steps that employers can use to ease the anxiety of those who have been selected for inclusion in the layoffs termination as well as those who will remain in the workplace.
1. Be Upfront as Early as Possible.
When rumors circulate that a reduction-in-force may be in the works but management has made no such indication, the eventual official announcement of a layoff can generate feelings of disloyalty and distrust.
In most situations, the circumstances that require a company to reduce its workforce don't happen overnight. Therefore, notice to employees shouldn't either. To ease the shock of a layoff announcement, employers should notify employees as early as possible that an RIF may be in the works.
Even if an employer is only contemplating layoffs, an early warning not only allows employees to prepare mentally and financially for the possibility of losing their jobs. Early notice also signals to employees that the company has considered the layoff option, but is trying other means before resorting to such significant measures.
Even though concern that early notice of potential layoffs will negatively affect employee productivity, loyalty and morale, the reality is that short notice, or even worse, no notice, is much more likely to have a negative effect on both terminated employees and those still employed.
Employees affected by the RIF will feel as though they were not valued by the company, while those still employed will question the company's commitment to their welfare.
2. Consider Providing a Severance Package.
In an economic climate where jobs are scarce, an employer that provides severance pay not only softens the economic shock for those employees selected for termination, but also strengthens the company's goodwill with all employees.
Workers selected as part of the reduction will be grateful for the added financial benefit, while those still employed will take solace in the fact that their employer has shown a vested interest in overall employee welfare.
Severance packages are not only valuable as a boost for employee morale, but also as a way of protecting a company from future litigation.
Employees who are terminated as part of a large layoff often view themselves as victims and may feel as though they have been wronged by the company. As a result, they become easy targets for the plaintiff bar and will often file suit to vindicate their grievances.
One way employers can try to avoid such situations is by offering severance in exchange for a waiver of rights. When an employer offers compensation above and beyond that which a worker is already entitled to in exchange for a release of any claims the employee may bring, the employer provides a benefit to the employee as well as protects itself from the possibility of litigation.
It is important to note that waivers will not be deemed valid and enforceable if the employee is not provided with a benefit above and beyond that which he or she is already entitled to.
Thus, if an employer has a policy or practice of providing severance pay to terminated workers, in order for a wavier of rights to be valid, the employer must provide either additional compensation or some other added benefit that the employee would not otherwise receive.
3. Notify Affected Employees In Person.
When an employee receives notice that he or she is about to be laid off, the way in which the information is conveyed will often have a significant impact on the employee's response.
Notice concerning layoffs should be made in-person, and by someone who has knowledge of the employee's work and can answer questions concerning the reasons for the termination. An employer should never present such information in an e-mail or voicemail, or by someone who has no familiarity with the employee's work.
Such in impersonal approach will not only offend the affected employee, but will also send a message of disregard to those still employed.
4. Be Honest and Concrete.
Whether the decision to terminate is based on objective criteria (such as job position or years of service) or subjective criteria (such as performance or skills), employers must ensure that when they notify employees of a decision to terminate, the reasons given are specific and accurate.
When an employer tries to allay hurt feelings by being vague or by sugarcoating the reasons, the employer adversely affects its position if litigation was to later ensue as well as sends a mixed message to the employee.
When communicating information about layoffs, employers should always be considerate and tactful, but above all else, honest and concrete. The employer must be able to articulate a legitimate business reason for the decision, as well as specific supporting facts.
5. Provide Written Documentation of All Benefits Being Offered.
If an employer is planning to provide a continuation of benefits for a certain period of time to all discontinued employees, the best way to convey such information is in writing. By providing written confirmation, the employer gives the discontinued employee a sense of security that it will uphold its word and provides a sense of reliability and confidence to those still employed.
6. Provide Outplacement Services.
One thing an employer can do to ease the transition from employment to unemployment, and to show loyalty to the welfare of its workers, is to assist terminated employees with securing new employment.
Employers maintain many contacts, either through customers, clients, adversaries, former employees and/or industry networks. Employers that are willing to put a system in place that utilizes such contacts can significantly increase its goodwill among all employees.
Providing some form of outplacement services not only keeps relations with former employees amicable, but also alleviates fear among current employees concerning their own job stability.
7. Become Familiar with Filing for Unemployment.
In conjunction with the idea of providing outplacement services, employers can also increase goodwill by becoming knowledgeable about unemployment compensation and the application process. Many employees have never faced the reality of having to collect unemployment and an employer that takes the time to assist employees demonstrates a vested interest in the welfare of its workers.
8. Communicate with Remaining Workers.
Once layoffs have been completed, it is important for an employer to communicate with remaining employees concerning the reasons for the layoffs and any transitions that may be occurring.
Employers should convey their regrets about the situation and encourage employees to ask questions or voice their concerns. Employers should not engage in conversations concerning individual employees, especially discussions of why certain employees were selected over others.
However, encouraging an open dialogue will show employees that the company is not trying to shy away from its decision, and will hopefully boost employee confidence going forward.
Make no mistake, lawsuits brought by employees who feel victimized by layoffs are not only costly but extremely time-consuming for employers. Therefore, investing the necessary time for planning for layoffs, and investing the necessary money to retain proper legal counsel to review all documents, practices and procedures prior to instituting layoffs is an absolute must.
Question: Can you review the WARN Act -- both the federal and New York laws?
Federal WARN Act:
The Worker Adjustment and Retraining Notification Act is a federal law which requires employers who employ 100 or more full-time workers to give 60 days' advance notice of a plant closing or mass layoff. 29 U.S.C. §2101, et seq.
A plant closing occurs when an employer closes a facility or discontinues an operating unit with 50 or more workers. Plant closings include both permanent and temporary shutdowns if the shutdown results in an employment loss during any 30-day period at a single site of employment.
A mass layoff, on the other hand, can occur in one of two ways: (1) The employer reduces its workforce by 50 to 499 workers, and this number represents at least 33 percent of the employer's total workforce at a single site of employment; or (2) The employer lays off 500 or more employees at a single worksite.
In order to comply with federal WARN, employers must provide notice to each affected employee, and/or his representative(s), the state dislocated-worker unit, and the chief elected official of the local government within which the closing or layoff occurs. =
In general, the notice provided must be specific and contain the following information:
1. The name and address of the employment site where the plant closing or mass layoff will occur;
2. The name and telephone number of a company official to contact for further information;
3. A statement as to whether the planned action is expected to be permanent or temporary, and whether the entire plant is to be closed;
4. The expected date of the first separation, the anticipated schedule for making separations and the expected date when the individual employee will be separated;
5. An indication as to whether or not bumping rights exist; and
6. The job titles of positions to be affected and the names of the workers currently holding affected jobs.
WARN's stated goal is "to provide workers and their families some transition time to adjust to the prospective loss of employment, to seek and obtain alternative jobs and, if necessary, to enter skill training or retraining that will allow these workers to successfully compete in the job market." WARN also requires notice to the state so that dislocated worker assistance can be promptly provided.
There are three situations under which employers are excused from compliance with WARN's 60-day-notice requirement. Although in these situations the 60-day requirement is waived, the employer is still under an obligation to give notice as soon as is practicable.
The three exceptions are:
(1) The "faltering company" exception (only for plant closings), which applies if an employer was actively seeking capital or business at the time the 60-day notice would have been required, but the employer reasonably and in good faith believed that giving the required notice would have precluded the employer from obtaining the necessary funding or business;
(2) The "unforeseeable business circumstances" exception, which applies to plant closings and mass layoffs caused by business circumstances that were not reasonably foreseeable (i.e., sudden, dramatic, unexpected or caused by a condition outside of employer's control) at the time the 60-day notice would have been required; and
(3) The "natural disaster" exception, which applies to both plant closings and mass layoffs that are a direct result of a natural disaster (i.e., flood, earthquake, severe drought or storm, tsunamis, etc.).
An employer that seeks shelter under one of these exceptions bears the burden of proof that the requirements of the exception have been satisfied.
If an employer does not comply with the 60-day notice requirement and is not protected by one of the three exceptions listed above, aggrieved employees will have a private cause of action where they may seek damages for back pay and benefits for the period of violation, up to 60 days. 29 U.S.C. § 2101 (2009), et seq.
New York WARN Statute:
On Feb. 1, 2009, the New York State Worker Adjustment and Retraining Notification Act took effect. (NY Labor Law, Art. 25-A, § 860 (2009)). While similar in many respects to the federal statute, the N.Y. WARN Act provides significantly more protection for employees than its federal counterpart.
For example, unlike federal WARN, which requires only 60 days' notice and applies only to employers with 100 or more employees, the N.Y. WARN Act requires private employers with 50 or more employees to provide at least 90 days' advance notice of a plant closing, relocation or mass layoff.
By requiring 90 days' notice and application to employers with 50 or more employees, the N.Y. statute reaches far more employers and increases by 50 percent the amount of notice required. Id. at § 860-a(3); § 860-b(1).
Under the N.Y. statute, notice requirements are triggered by mass layoffs, relocations or plant closings. Id. at § 860-b.
Plant closings are defined as a "permanent or temporary shut down of a single site of employment, if the shutdown results in employment loss [of] ... twenty-five or more employees." Under the federal statute, the threshold is 50 or more employees.
Under the N.Y. statute, a mass layoff is defined as a reduction in force that results in an employee loss of either 250 employees (federal Act is 500) or at least 33 percent of the workforce, provided at least 25 employees (federal Act requires 50) are affected.
In addition, under the N.Y. statute, notice requirements are triggered in the event of a "relocation" of all or substantially all of the employer's industrial or commercial activities to a location 50 miles or more away. Id. at § 860-a(4), (6).
The N.Y. WARN Act requires that written notice be provided to the affected employees and their representatives, a change from the federal requirement that requires that notice be given to either the employee or the employee's representative.
Under the N.Y. statute, notice must also be provided to the N.Y. State Department of Labor and the "local workforce investment board." Unlike the federal statute, notice need not be provided to the chief elected official of the local government. Id. at § 860-b(1).
The state statute contains the same three exceptions to the notice requirement as the federal statute: (1) the "faltering company" exception; (2) the "unforeseeable business circumstances" exception; and (3) the "natural disaster" exception -- plus one additional exception, the "physical calamity or an act or terrorism or war" exception. Under the N.Y. statute, neither the "faltering company" exception nor the "unforeseeable business circumstances" exceptions apply to mass layoffs. Id. at §860-b(3).
Unlike the federal statute, which allows only for private suit, the N.Y. act may be enforced by a private cause of action and/or the N.Y. State Department of Labor. Ironically, although the N.Y. statute requires a 90-day-notice period, if an employer violates the notice requirement, employees are only entitled to back pay and the cost of lost benefits for the period of the violation, up to a maximum of 60 days. Id. at § 860-g(2).
Keisha-Ann G. Gray is senior counsel in the Labor & Employment Law Department of Proskauer Rose in New York and co-chair of the Department's Employment Litigation and Arbitration Practice Group.