Critical requirements for employers conducting layoffs or a reduction in force under WARN
October, 2008
Layoffs are supposed to save money for employers, right? Employers can be subjected to hefty penalties and civil liability for failure to follow the requirements of WARN.
It seems that every day, there are more headlines in the news announcing layoffs at companies across the country, big and small. This month alone, Ebay and GM have announced large layoffs and Circuit City Stores, Inc. is currently considering closing 150 locations and slashing thousands of jobs to avoid bankruptcy. Unfortunately, this appears to be just another sign of these troubled economic times. In order to make sure that the cost savings of a layoff is not eliminated by penalties or liability for a botched layoff, employers must carefully plan and execute layoffs, reductions in force, or downsizing measures.
Plan carefully - state clear business reasons and avoid discrimination:
- Analyze and identify the business reasons behind the proposed layoff as well as which jobs will be eliminated in order to accomplish the company's goals.
- Consider if there are alternatives to the layoff, such as a hiring freeze or reduction in hours or certain benefits.
- Think about whether to call the proposed action a "layoff," "reduction in force," or "downsizing." Sometimes the term "layoff" connotes the potential for re-hiring or recalling affected employees which may create confusion for employees.
- Make sure that the factors used to select employees do not violate anti-discrimination laws, such as race, sex, age, etc., especially if a layoff will disproportionately affect certain groups of employees in protected classes.
Now you've decided you need to downsize or conduct a layoff - how do you know if you need to provide notice to your employees?
Under the federal Worker Adjustment and Retraining Notification Act (WARN), employers with at least 100 full time employees, or at least 100 employees who together work at least 4000 hours per week, are required to provide employees, their representatives and certain government officials with 60 days written notice, including specific information about the details of the layoff, prior to commencing any layoffs.
Several states have enacted their own similar laws. For example, California's WARN Act applies to employers with 75 or more full time or part time employees within the preceding 12 months.
What happens if you violate WARN?
Failure to provide the required notices can subject the employer to fines, up to 60 days of back pay per employee, including contributions to an employee's pension plan and welfare benefit plan, and possibly having to pay the employee's attorney's fees if the employee prevails in a lawsuit.
There are several issues to consider when employers are faced with layoffs, downsizing and reductions in force. Please contact your employment counsel if you are faced with making these types of difficult decisions.