Imagine, hypothetically, that you are the head of a massive technology company. You decide one day that you want to layoff, say, 50 percent of the workforce tomorrow while offering employees a severance agreement. What should you know?
My colleagues, Gabe Jiran and Keegan Drenosky, did a whole webinar on the subject last month that you can still listen to for free.
But here are three considerations that you should think about before engaging in a layoff.
- WARN Act and Mini-WARN Acts – The WARN Act is a federal law that most employers have considered since the last major recession of 2008-2009. The law requires that employers provide notice (typically 60 days) of an impeding layoff or plant closing. That notice must be sent to local officials, employees, and, union officials if applicable. I’ve covered this in depth in a 2008 post and not much has changed since then. Various states have their own “mini-WARN” acts as well that must be followed. Importantly, not all layoffs are covered — there are minimum percentages and numbers that must be met so be sure to consult your employment counsel to ensure compliance.
- Disparate Impacts – Engaging in a layoff sounds easy but it quite challenging once you start the process. What factors are you going to consider to decide who stays and who goes? Who will be involved in the decision-making? One overlooked question — is the layoff potentially going to have a disparate impact on a protected category? For example, suppose you have 50 employees who are over 40 and 50 employees under 40. If 49 out of the 50 people over 40 are laid off and only 1 of the 50 people under 40 is laid off, that could potentially show that the decision has a disparate impact because of age. But statistics don’t tell all the story. Suppose that if you determined that everyone over 40 had a higher salary than the median and the employer made the decision based purely on salary, then perhaps that might explain things better. Quite simply – statistical analysis is often a useful tool for employers to look at to ensure that the layoff is fair and supported by legitimate business reasons.
- OWBPA-Compliant Severance Agreements – Lastly, employers should ensure that their standard separation agreements have two important changes made to them to comply with the Older Workers Benefit Protection Act. That law requires that in any reduction in force, employees over 40 are given at least 45 days to consider the agreement. It also requires that employers provide a list (by job title and age) of those in the same decisional unit selected for the separation and those who were retained. Again, I’ve covered this before, but this can also be a tricky subject for employers.
Obviously this list is only a start but with more layoffs reported and more seemingly on the horizon, it’s time for HR and operations personnel to understand the rules in place. And that just might make your decision to fire half your staff a little more complicated.