In my prior post, I wondered aloud whether there were some rough waters ahead for employers.  Apple recently announced that it would not meet it’s earnings estimates in the first quarter of 2019, in part because of soft demand from China. Other companies are expected to announce some similar issues.

Honestly, I’ve had enough conversations in the last few years with HR professionals who just haven’t lived through a major downturn.

Think about this way: For anyone who joined the workforce since 2010 or so, the era of massive layoffs in the financial and automobile sectors had just passed.

But fortunately, there are still a few of us around who remember.

So here are four things to think about:

  • Performance Reviews.   Why? Because when a downturn hits, your company will need to start a selection process as to who stays and who goes.  Inevitably, you will start looking at performance reviews to see about ranking employees.  You know what you might find? They all start looking alike. Everyone is slightly above average.   While I’m not suggesting everyone convert to a forced ranking system, your performance reviews should be honest indicators of how an employee is doing. Take a look at the ones you are doing this quarter.
  • WARN.  The Workers Adjustment and Retraining Notification Act  is one of those federal laws that you might not have even heard about. But if your company has 100 or more employees, you should. It requires that 60 days notice be given in instances of a mass layoff or plant closing. Before you go down the road of layoffs, you may have obligations to notify your workers and the government of the potential for layoffs. Be sure to comply.  Here’s a brief recap.  
  • Consider a Statistical Analysis.  I know — you didn’t like math in high school. But trust me: There is an entire profession of statistical experts available to help you figure out if the proposed layoff may have a disparate impact on a protected class of workers.  How is this done? You look at the class of workers that may be impacted by the proposed reduction in force and have an analysis done to see whether your neutral criteria may not be so neutral after all. Sometimes there are explanations for the disparate impact; but sometimes, the analysis can force employers to take a second look. Regardless, this can be an important step.  Just make sure to use an attorney to help give guidance here.
  • Understand the OWBPA.  It stands for the Older Workers Benefit Protection Act and it’s part of the federal law on age discrimination.  And if you want your employees to sign separation agreements (as I think you should) when you do your layoffs, your agreements better comply with this act.  I did a recap in 2008 that still holds up today.  

Before you have a crisis on your hands, talk internally about what the reasonable expectations for 2019 are going to be. If a possible cutback to personnel is even being discussed, now is the time to get ahead of things.

UPDATED:

The cuts to the CHRO keep coming.

Governor Malloy this morning released his plan to reduce the size of government — should a deal with the state labor unions not be struck.

The plan calls for the elimination of the CHRO’s Waterbury Office (page 35) and the elimination of other staff positions.  All told, 23 positions would be cut at the CHRO.

The Judicial Branch’s plans are also coming later today; advance word is that several courthouses will be closed.

The Judicial Branch will undergo deep cuts too, including the closing of several courthouses and the elimination of various assistant clerk and paralegal positions.  You can view the entire report here. Funding for the Connecticut Bar Foundation – cut. Six law libraries – gone. Oh, and watercoolers will be eliminated too (page 15)

Unless a new deal is reached, employers and their attorneys (as well as others in the system) will start seeing the impact of these reductions late this summer and early this fall.

The other shoe has dropped. For now.

Governor Malloy late today released his official “Plan B” detailing the layoffs expected as a result of the union concession vote. And it’s ugly.

It calls for a 15 percent staff reduction at the Department of Labor, 30 percent reduction at the Commission on Human Rights and Opportunities, and 10 percent reduction at the judicial branch (resulting in 450 layoffs there alone).

It’s not the elimination of the CHRO which was on the table, but cuts this deep will no doubt have a serious impact on the work that can be done at that agency.

If this goes through, expect big delays to start happening. The next few days and weeks are going to be worth watching. Will there be a new deal cut? Perhaps. But until then, the uncertainty continues.

As Connecticut law blogger Ryan McKeen aptly notes:

It’s bad for business when disputes can’t be resolved in a timely and efficient manner. Bad. Bad. Bad.

With rejection of a union concession package now appearing likely in news stories this morning, it seems probable that layoffs are around the corner. Notably, a lawsuit arising from a prior state layoff is still kicking around over eight years later.  I discussed this back in October 2010 and noted that the parties had just filed motions for summary judgment.

In checking the court docket again this morning, the parties are still waiting for a court decision on those motions.

Here’s the full story from last fall:

At last night’s gubernatorial debate, the issue of potential layoffs of state union workers was a hot topic of conversation.  (See CT News Junkie for a more detailed report.) Each candidate indicated that layoffs weren’t ruled out if elected.

That’s all very well and good, but none of them have mentioned how a prior layoff (from a governor who allegedly tried to seek long-term concessions from the unions) has led to a seven-and-a-half year battle between the state (actually, the governor & the chief of the office of policy and management) and State Employee Bargaining Agent Coalition (SEBAC). And the outcome of that case is likely to determine the path that the next governor will be able to take under similar financial circumstances.

What’s that case about?  It has a long and tortured history, but each side has now filed motions for summary judgment (in whole or in part) that try to summarize it.  According to the unions (the summary judgment memo can be downloaded here):

The case involves the constitutionality of an attempt by Connecticut’s former Governor to compel the plaintiff unions to grant long-term concessions to their legislatively-approved collective bargaining agreements by threaten to terminate the employment of union members if the concessions were not granted and by implementing the terminations, through layoffs of 2800 union employees, when the unions refused to agree to all of the demanded contract modifications.

Defendants assert that it is constitutionally permissible for them to terminate union employment in an effort to compel demanded concessions.  Defendants further contend that in making state work force determinations, it is constitutionally permissible for them to single out union employees for layoff.  Plaintiffs submit that such conduct violates their First Amendment right to freedom of association; impermissibly conditions their right to continued public employment on giving up protected First Amendment and Contracts Clause rights; and subjects them to adverse state action based on an arbitrary and impermissible classification, in violation of the Equal Protection Clause.

According to the state (summary judgment memo available here):

“The First Amendment is not a substitute for the national labor relations laws…(citation omitted) Notwithstanding the Supreme Court’s admonition, the Plaintiffs … seek to transform a labor dispute with the State of Connecticut (the “State”) into a First Amendment “retaliation” case.  The labor dispute arose amidst a major budget crisis in 2002-2003, when the State sought concessions from the Plaintiffs. When the Plaintiffs refused to agree to the State’s demands, the state laid off approximately 2800 state employees.  …

[M]assive budget deficits have forced the State’s governors to make extraordinarily difficult decisions about the size and cost of the State work force as part of their constitutional obligation…[T]he Court should reject the Plaintiff’s attempt to ‘constitutionalize’ their labor dispute with the State.

(Full disclosure: For 2003-2005, I was part of a team of attorneys on this matter representing the state while I was at a prior law firm.)

Just two weeks ago, each party filed briefs opposing the others’ summary judgment motions. The union’s memo is available here, while the state’s is available here.

Notably, a decision is not expected in that case until well after the November elections. But one thing is for sure: The outcome of the case may dictate how much (or little) flexibility the next governor will have on layoffs. Indeed, ironically, the new governor will have to deal with any fallout from the years-old lawsuit.

In any event, the case should serve as a cautionary tale. Even the layoffs that do occur can lead to years of litigation and no assurances of the end result. It’s something that the candidates should keep in mind as they devise their strategies for balancing the budget.

If you were at the Holiday Inn in Waterbury yesterday, you had the opportunity to see a microcosm of what’s going on in today’s workplaces and economy.

Lining the halls outside the conference rooms to the hotel were hundreds (850, to be exact) of people apply for 40-50 jobs at an indoor water park.  (The Hartford Courant treats the story as if it were the only employer in the state doing hiring.) Fox61 News had a report last night detailing the scene as well, which you can see here:

But if you look carefully at the video (particularly about the 1:20-1:40 mark of the report, you can see a banner in the background from a seminar and conference that was also occurring at the hotel yesterday. It reads: CBIA Supervisors’ Conference.

What was the conference? Well, the all-day conference was designed to give supervisors’ practical skills to help them become more effective managers.  (And, in full disclosure, the conference was sponsored by my firm, Pullman & Comley, LLC). But an underlying theme of the day was how to manage in difficult economic times.

The lunch-time speaker spoke eloquently about how managers and supervisors — even at healthy companies — must understand the stresses that are being placed on all workers, even the ones with relatively secure jobs.   Employees are worried about layoffs or their families’ financial well-being, in levels not seen in a generation.  (Just think about all of the job fair applicants who have families and friends that are concerned about them.) As a result, fear, anxiety, lack of loyalty and uncertainty are all feelings that are circulating in the workplace.

What are some practical solutions suggested by the speaker? Most of the suggestions are good business practices anyways, but they are certainly worth repeating now: Build trust; communicate often; pay attention to high potential employees; recognize success; and including employees in decision-making (i.e. cost saving ideas). And inexpensive rewards — even a letter of thanks by the company’s President — may make a difference in today’s workplaces.

I had the opportunity to speak in the afternoon on the ADA, the new ADA amendments and how to deal with employees with disabilities.  I’ll share my thoughts on the ADA in a future post (though you can get a head start on the subject from my previous blog entries). 

With the jobless rate now climbing to 7.6 percent nationally, it’s a tough time for both the people looking for a job, and those fortunate enough to have one.

For anyone who watched 60 Minutes last night, you know that there is a great deal of pessimism out there about how quickly this recession will end.

Employers are struggling to control costs and keep layoffs to a minimum. A new, thoughful article by the Wharton school suggests that employers be innovative in their approaches to dealing with this economic crisis.

[Wharton Professor Peter] Cappelli suggests that it’s worth thinking about what kind of problem a company is trying to solve. If there is a concern about what happens when business activity picks back up, for example, companies that hold on to their workers would be in much better shape than companies that have undergone large-scale layoffs.

The costs of layoffs go beyond the morale problems they cause — both for those laid off and those who keep their jobs. Unemployment insurance premiums spike. Depending on the company, there are severance packages to consider and outplacement services (costly in these days of bigger demand for them). Litigation is a not insignificant risk. Cappelli suggests that if a company can cut back without instituting layoffs, it should do so. "Then you don’t have those start-up costs" once things are back on track.

On the other hand, there’s nothing like a good economic downturn to get rid of dead wood. A sagging economy can be an opportune time for management to deal with performance problems by using the bluntest instrument possible, Cappelli says. Firing people is often difficult to execute, but an over-arching justification tends to lessen complications.

The subject of alternatives to layoffs is almost always seen from the point of view of the employer, he adds. It would be a rare employee who suggests his or her hours be cut. But executives can share the decision by asking for voluntary pay cuts in exchange for some sort of deferred compensation, such as shares of stock or extra vacation.

In giving my presentation tomorrow on the subject of RIFs, the article’s points are timely.  Layoffs are never easy and coming up with solutions to lessen the impact may make the company stronger in the long-term. 

Ultimately, if company does decide to conduct a round of layoffs, making sure that it has considered alternatives will only strengthen the company’s rationale for the layoff (thereby preserving a valuable legal defense).

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.

  1. 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.
     
  2. 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. 
     
  3. 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.
     
  4. 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.

 

Earlier this week, I discussed the benefits of providing notice to employees who may be affected by mass layoffs and plant closings, by complying with the Worker Adjustment and Retraining Notification (WARN) Act.

But what exactly does the WARN Act require and who is covered? Here are some basic answers to some basic questions. As always, those who need more information should seek legal counsel and review the applicable laws.   In addition, some states have additional requirements that must be complied with; this post just discusses the WARN Act.courtesy morgue file "industry"

Who’s Covered?

Not all employers are covered. Employers who have 100 or more full-time employees are covered. But employers who have 100 or more full-time AND part-time employees who, in total, work more than 4000 hours per week are also covered.  Most governments are not covered, but some quasi-public and public entities may be covered.

When Does WARN Apply?

As I discussed in my prior post, there are two types of events that are covered  by WARN — plant closings and mass layoffs. "Employment Losses" within each of them triggers some notice requirements.  All of these terms have a definition though. 

"Plant closings" are a permanent or temporary shutdown of a "single site of employment" (though it can also be one or more facilities or operating units within a single site of employment), so long as the shutdown results in an employment loss at that site for 50 or more full-time employees during any 30-day period.

"Mass layoffs" are a reduction in force (that is also not the result of a plant closing) that results in an employment loss at a single site of employment during any 30- day period for at least 50 employees.  These 50 or more employees must also make-up at least 33 percent total employees (excluding any part-time employees). This will also be satisfied if there are at least 500 employees (excluding any part-time employees) affected by the mass layoff as well.

What Is An "Employment Loss"?

Despite its term, the term "employment loss" is fairly broad.  It means either:

  1. a termination of employment for reasons other than a discharge for cause, voluntary departure, or retirement,
  2. a layoff longer than six months (which indicates that the employee may return after the "layoff", or 
  3. a reduction in hours of more than 50 percent during each month of any six-month period.

What Notice Is Required? 

A WARN notice must be given to each employee at least 60 days before a plant closing or mass layoff.  However, if there is a union, the notice must be given to the union representative of the affected employees. 

In Connecticut, notice must also be provided to the Connecticut dislocated worker unit (see below) and the chief elected official of the local government where the closing or layoff is occurring. 

The Website for the Connecticut Department of Labor has some more specifics on the notice required:

Written notification should be printed on company letterhead, signed by the authorized employer representative, and addressed to:

Rapid Response Unit
Connecticut Department of Labor
200 Folly Brook Boulevard
Wethersfield, CT 06109-1114

This notification should include: the name and address of the employment site where the plant closing or mass lay off will occur; the date(s) of proposed closing or mass layoff; the number of affected workers, and address of their collective bargaining representative and chief elected officer if applicable; and, the name, address, and telephone number of the employer representative to contact regarding the closing or mass layoff.

Interestingly enough, the DOL site also encourages employers to seek legal counsel regarding the notices. 

As with lots of federal laws, there are some exceptions and some tricky questions that arise such as what happens when you have multiple layoffs within a short time that don’t trigger WARN individually but would collectively, and what happens in situations that are not foreseeable (plant burns down and must therefore close immediately). 

The U.S. Department of Labor has some additional guidance on this issue for those types of situations in this employer’s guide.

These days, everyone seems to be jumping on the wage and hour bandwagon, predicting an endless stream of lawsuits for 2008, just as there was for 2007.  But just as mutual funds preach that "past performance is no guarantee of future success", I would argue that focusing too much on one trend, misses an opportunity to see another.public domain - creative commons

Indeed, having looked into my crystal ball for 2008,  I believe lawsuits involving reductions in force will be the latest trend to emerge in the next year. (And lest you think me too radical, I do think wage and hour lawsuits will certainly continue as well, albeit in lesser amounts as companies adapt to the litigation trend by addressing wage and hour issues preemptively.)

What is a reduction in force? Really, just a lawyerly way of saying "layoff". Back in the early to mid 1990s, lots of companies went through them.  And the number of lawsuits arising from those reductions went through a major peak in 1995 or so.

But these types of lawsuits rise and fall with the economy.  When the economy is good, lawsuits go down. When it’s not so good, they go up. One reason is that when people can find another job quickly (i.e. the unemployment rate is low), then tend not to sue as much.

So what leads me to think that reductions in force lawsuits are on the horizon?

Well, for one, the unemployment rate numbers crept up over 5 percent on Friday.   The second, is that financial sector companies have announced major layoffs in late 2007, as a result of the mortgage crisis.  And when these people get laid off, more dollars are at stake.  And lawsuits typically follow the money. 

Moreover, with the overall economy in a stall pattern at best, companies will continue to resort to the cost-cutting measure they have used before — layoffs. 

To be sure, the landscape involving RIF lawsuits has changed in the last 15 years; more companies offer severance packages (with accompanying separation agreements) and more companies do statistical analyses to determine if their RIFs have any statistical disparities among protected groups.  And layoffs for 2007, fell to their lowest since 2001. 

But harder times nearly always means more employment claims.

One more factor suggests to me that more lawsuits are on the horizon — it’s much easier for a few employees to band together than in the past. Previously, people would have to use their existing networks to find laid off employees to hear their stories (indeed, outplacement firms were a good source for employees looking to talk with other laid off workers). But now, with the rise of social networking sites, it seems only a matter of time before a group of employees will form a Facebook or MySpace page to compare experiences.  Employees from around the country can share information instantly, making it much easier to figure out if there are trends associated with the layoff that may give rise to a lawsuit. (Unions already have started marshaling the Internet, like this site for a group of Washington Post workers.)

This should give employers some pause; multiple plaintiff cases are always a challenge and expensive, and class actions (where attorneys fees could be recovered) could also be an attractive option.

Will this happen? Let’s check back in a year. But absent the economy rocketing ahead in 2008, I don’t think it’s a stretch to see reduction in force lawsuits making a comeback.

Stay tuned.