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Downsizing and Related Issues


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  • 1. DIFFICULT TIMES, TOUGH DECISIONS: DOWNSIZING AND RELATED EMPLOYMENT LAW ISSUES David Dubberly Certified Specialist in Employment and Labor Law February 5, 2009
  • 2. Alternatives to Involuntary Terminations • Pay freezes or reductions • Shorter work weeks or work days • Reductions in authorized overtime • Voluntary LOAs • Temporary shutdowns • Reduce temporary personnel • Hiring freezes • Voluntary separation programs
  • 3. WARN Act Coverage • 100 full-time (20 hours or more) employees (add all facilities) (count employees on lay-off or leave if they have reasonable expectation of recall) OR • 100 full-time plus part-time employees if the part-time employees work at least 4,000 hours per week AND • private sector (even if non-profit)
  • 4. Employees Counted/Entitled to WARN Act Notice Category Counted in Applying WARN Act? Entitled to Notice? Part-time Employees No Yes Temporary Employees Yes No Seasonal Employees Depends whether they are “part- Depends whether they time” or “temporary” are “part-time” or “temporary” Employees on Layoff or Leave Yes, if the employees have a Yes reasonable expectation of recall U.S. Employees Employed Outside the U.S. Yes No Foreign Employees Employed Outside the U.S. No No
  • 5. When Does WARN Act Apply? • Plant closing • permanent or temporary “shutdown” of “single site of employment” or one or more “facilities or operating units” within single site of employment • results in “employment loss” for 50 or more employees, during either a 30-day or 90-day period
  • 6. When Does WARN Act Apply? • Mass layoff – layoff that does not involve plant closing – results in employment loss at single site of employment, during either 30-day or 90-day period, for: • 50 or more employees if they constitute 33% or more of active employees • 500 employees regardless of whether they constitute 33% of the workforce
  • 7. “Employment Loss” Defined • An employment loss occurs if an employee – is terminated other than for cause – is laid off for six months or more – has his hours reduced by more than 50% during each month of a six-month period
  • 8. What is Required When WARN Act Applies? • 60 days notice to: – full-time and part-time employees – Dislocated Worker Unit of the state government – certain local government officials
  • 9. What is Required When WARN Act Applies? • Notices to non-unionized employees must contain: – statement of whether action is permanent or temporary – expected date when closing or mass layoff will occur – date when each individual employee will be separated – statement of whether or not bumping rights exist – name and telephone number of company official • Notices to state and local government officials must contain: – same information provided to employees – list of job classifications of separated employees and number of employees in each classification
  • 10. WARN Act Exceptions • 60-day notice requirement may be wholly or partially waived if: – closing temporary facility – “faltering company” – “unforeseeable business circumstances“ – natural disasters – sale of business • Employer bears burden of proof
  • 11. Remedies and Penalties • Violations can lead to: – civil penalties, including back pay and lost benefits for up to 60 days – attorney’s fees • If required notice not provided to appropriate government officials: – fine of up to $500 per day for each day of violation for up to 60 days • Offsets may be allowed for voluntary severance pay
  • 12. State Notice Requirement (S.C. Code § 41-1-40) • Employers requiring notice prior to quitting must give employees notice of intent to stop work – Notice must be at least two weeks in advance or equal to time of notice employer requires – Notice is given through posting • Exceptions: unforeseen accident to machinery or act of God or of a “public enemy.” • Penalties: fine of up to $5,000 plus damages to each employee
  • 13. Waivers and Releases • Older Workers Benefit Protection Act – “knowing and voluntary” waivers of ADEA claims – strict requirements: • plain language • refer to ADEA • no waiver of claims after signing • consideration in addition to current entitlement • advised to consult with attorney • single individual 21/7 days to review/revoke; group 45/7 days • special rules for exit incentive programs
  • 14. Federal Wage Issues • Exempt employees must still be paid on “salary basis” – Full week shutdowns – Reduce pay in connection with adopting formal reduced workweek schedule • Non-exempt employees must still be paid minimum wage and time and one-half for overtime
  • 15. Discrimination Issues • Obviously can’t select employees for layoff based on protected characteristics – Best defense is legitimate, non-discriminatory reason for each selection • Watch out for neutral criteria having adverse impact on employees in protected group – Review tentative lists of affected employees with employment counsel
  • 16. Unemployment Compensation • Usually up to 26 weeks • File claim with ESC office • Employers can help coordinate and in some situations file for employees
  • 17. Other Issues • Review layoff policies • Review employment contracts • Maintain personnel files of separated employees • Consider labor implications • Consider security implications
  • 18. Other Issues • Consult with employee benefits counsel on: – Retirement plan considerations – Severance plan/policy considerations – Group medical plan considerations – Group life and LTD plan considerations
  • 19. QUESTIONS? David Dubberly (803) 253-8281