Top Things to Consider If Your Recession Planning Involves a Reduction in Force or Layoff

By Christopher M. Santomassimo, Powered by OGC Solutions® The Think Factory™

Unless you’ve been on a sabbatical with no Wi-Fi access, you’ve been bombarded with news about an impending recession.

Some economists believe that it has already begun. In response to the gloomy outlook, some companies such as Tesla have already begun buckling up for a bumpy ride by reducing their workforces. Your company may be considering when and how to trim.

Reductions in force, or layoffs, are not as easy to execute properly as one might think. Thanks to a wide range of federal and state employment laws, there are a number of important items to consider before you generate pink slips. Keep in mind that every company has its own unique issues – i.e., this is not legal advice for your company – and involving an Outside General Counsel™ will help manage the risk. With that said, these are the important issues to consider:

1. Be Able to See Your Workforce by Location, Department and Job Function.

Having a clear view of your organization is key to evaluating the risk of the choices you’ll make. We ask our clients to download their employee roster into a spreadsheet that can be sorted by location, department, job title/function, age and tenure. It’s also helpful to know which employees are in legally protected categories such as race and national origin. The spreadsheet will help you calculate the numerical and percentage impacts of the layoff which is relevant to the “WARN analysis discussed below.”

2. Document and Explain Layoff Selections, Especially Those Based on Performance.

No matter how you select employees for inclusion in a layoff, be able to explain how and why you made the selections. Some employers start with lowest performers, but performance-related selections can be tricky where they aren’t well-documented. Take the time to explain the analysis and record it in writing for future reference.

3. Do a Risk Assessment and Pay Special Attention to “Whistleblowers” Past and Present.

Your spreadsheet and roster will help you evaluate whether the layoff selections you’ve made present any legal risk. Pay particular attention to those employees who could be characterized as “whistleblowers” – that is, employees who raised concerns about such things as working conditions, employee safety, or incidents in which they suspected legal or regulatory violations by the company. The COVID-19 pandemic, and how companies responded, cloaked many employees with actual or perceived whistleblower status when they raised objections or concerns about safety conditions, return-to-office plans, and the like. Pay particular attention those these employees and consult legal counsel about whether including them in your layoff creates additional legal risks.

4. Notice Periods and the WARN Act(s).

The Worker Adjustment ad Retraining Notification Act, or the WARN Act, is a federal statute that extends notice rights to workers with employers employing 100 or more employees (with some limited exceptions). If your company is covered by WARN, the statute is triggered by a “mass layoff” – a layoff that impacts 50 or more employees at a single work site – or plant closing. In such an event, you must provide at least 60 days’ notice of the mass layoff or plant closing to the impacted employees or their representatives (e.g., a labor union) and to certain governmental agencies, or else be liable for back pay and penalties. Also, several states have their own “mini-WARN” statutes that cover more employers and are triggered by smaller layoffs. WARN is a topic that requires careful analysis. Obviously, we recommend getting experienced employment counsel involved before announcing the layoff.

5. Unionized Facilities: Know Your Labor Agreement.

Layoffs at unionized facilities are more complex because they are governed by collective bargaining agreements. The CBA will dictate how a layoff is conducted, who goes and in which order, and other related items such as severance pay and other benefits. Pay special attention to your CBA, and keep your union reps apprised to avoid grievances and other negative outcomes.

6. Develop a Communication Plan.

Aside from WARN notices, your layoff communication plan is more about your business than legal issues but equally important. Executing an effective communication effort is critical to soothing the fears of the employees who are not impacted, as well as providing the impacted employees with information they’ll need such as how to file for unemployment benefits. Don’t forget that employees who participate in the company’s benefit plans may be entitled to notices about COBRA rights.

7. Follow State Rules About Last Payroll Timing.

Last but not least, some states such as California and Massachusetts require that the employer deliver impacted employees their paychecks on their last day of employment. This is one of the many planning items that is sometimes forgotten until it’s too late. Missing the mark in this area may subject the company to fines and penalties.
As you can see, a layoff requires planning and thinking ahead. Take the time to do the homework with your counsel and human resources team to minimize the risks.

Thanks for reading this article! We would be happy to discuss your layoff plans in a no-cost, no-obligation needs assessment meeting. Please contact us to discuss your thoughts and how best to proceed.

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