Five Laws and Issues Employers Should Think About In This Credit Crunch and Economic Crisis
The headlines this week, particularly to those in Connecticut, sound an ominous tone. Foxwoods announces layoffs of 700. And this morning, a new government report came out showing that employers shed nearly 160,000 jobs.
Where will this all lead? That's the $1 trillion dollar question that is on everyone's mind. But in the meantime, there are several laws and issues that employers can familiarize themselves with now to deal with whatever the economy throws at it.
- WARN Act - Number one is the Worker Adjustment and Retraining Notification Act. I've covered this before, but the key aspect of this law is that employers need to provide laid off employees with prior notice of an upcoming reduction in force. BUT, there are exceptions including for economic distress. So employers who are facing a deep credit crunch may want to look to that statute to understand their rights and obligations.
- Unemployment Rules - Employers in Connecticut who have to layoff employees need to comply with rules about providing layoff notices to employees to allow them to receive unemployment compensation from the state. The Connecticut Department of Labor has a detailed website on the subject including a guide for employers.
- Establishing and Developing a Legitimate Non-Discriminatory Rationale for Layoff - As I've indicated before, employers who layoff employees and who are subject to a lawsuit later on will need to establish a legitimate non-discriminator reason for the layoff. Is the economic downturn enough? Maybe. But employers should show how the economic downturn is affecting the business. Are factory orders down? Are accounts receivables at unacceptable levels? Figure out the link between the downturn and business to provide the support for the decision.
- Establishing Layoff Criteria - As the Pennsylvania Labor & Employment Law Blog recently highlighted, developing layoff criteria will also be important:
...It is advisable to develop selection criteria that support the business reasons for selecting one employee over another. Unless dictated by union contract, employers have discretion in developing the selection criteria which can include factors like, seniority, relative skills, performance, and/or disciplinary record. More than one factor may be used.
Forced Ranking Systems are sometimes utilized to rank employees against one another from the top down based on performance criteria. The subjectivity in forced ranking can be challenged as discriminatory unless uniformly and rationally applied.
5. Severance Agreements - But the best way to reduce liability for employers is to offer severance benefits in exchange for a release of claims from employees. I've discussed this at length before, but if you're not familiar with the Older Worker Benefit Protection Act, now's the time to catch up on this important federal law.
