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.

You do a blog long enough and everything comes full circle.  Back in January 2008, I took out my crystal ball and suggested that reductions in force (RIFs) and lawsuits would soon follow.

We all know what happened next. The economy crashed and discrimination claims at the EEOC peaked at their highest levels in more than 20 years.  

So here we are 11 years later.  A whole generation of HR professionals have never experienced a significant downturn.  Are we headed there again in 2019?

I’ll leave that to the economists and politicians.  Two weeks ago, the stock market was topsy-turvy. Now, we seem pre-occupied with the partial government shutdown.  And at least in Connecticut, new Governor Ned Lamont has a plan for growth, growth, growth.

But it’s worth considering whether your company is even prepared for a downturn, even if it still is many months away.

Again, we can first look to history. As I said back in 2008:

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.

And even back in 2008, I noted that things might be different for employers and indeed they were.  The rise of the internet-fueled lawsuits have been a reality. Here was my prediction back then:

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.

Just as Uber or the employers in Connecticut facing class action lawsuits that one firm puts on their website have found out.

What’s an employer to do? I’ll tackle that in my next post.

In the last few months, I’ve had some inquiries from employers asking about resources for layoffs.

Yawn.

Everyone remembers the layoffs of the recession, right?

Actually no, as it turns out.

In the ten years since the last great round of layoffs, there is a big group of new managers, directors, human resource personnel, lawyers etc that have joined the workforce.  And, as it turns out, they really DON’T remember the layoffs.  Unemployment is low. “Why would I need to worry about a Reduction in Force?

The stock market’s drop yesterday should remind all of us that good times aren’t always going to last.

What’s ironic about this is that back in 2008 — when the unemployment rate was skyrocketing — programs about reductions in force were just taking off and I noted the same concerns about whether employers were sufficiently aware of the issues.

History may repeat itself. Back then, I highlighted a few items that employers had to think about:

  • The WARN Act – If you’re doing a mass layoff, you need to notice affected workers in advance and provide notices to local and state officials.
  • Separation Agreements – If you want employees to sign a separation agreement (and you probably should), you need to give employees who are terminated in a layoff 45 days to consider an agreement and provide additional background information about the layoff itself.
  • Disparate Impact Analysis – With computers, checking your layoff data to ensure that it doesn’t have a disproportionate impact on protected groups (or, if it does, a legitimate business reason why it might) remains important.

Much of this remains valuable advice today.  And for employers who don’t remember this, now would be a good time to start your refresher courses.

Layoffs may not be right around the corner. But employers that are looking ahead in their business plans for 2019, would be wise to ensure that their staff are aware of the obligations that attach if the economy turns cold.

A quick update on the Mortgage Lenders Network matter I’ve covered a few times before (here and here.) 

Earlier this month, a Delaware bankruptcy court approved of a $2.7 million settlement of a class-action lawsuit filed on behalf of more than 1600 employees, many of whom worked in Connecticut.

The settlement, first reported by the Hartford Courant, essentially covers wages and salaries that should have been paid during the 60-day WARN notice period.  The average payout per employee is $1,636. 

The Courant adds a few more details:

Monday’s settlement is separate from the civil lawsuit seeking unpaid wages and commissions being pursued by the attorney general and the state Department of Labor. That lawsuit seeks $2.6 million for about 100 employees.

Charles A. Ercole, a lawyer for the Philadelphia law firm that negotiated Monday’s settlement, said Monday that MLN was left with few assets when it filed for bankruptcy. But the company has subsequently been able to recover some money from lenders who provided lines of credit to fund MLN’s mortgage business, Ercole said.

"It is a very good settlement under the circumstances," Ercole said.

Final court approval is expected after a hearing Aug. 5. Checks could be sent out in early fall, Ercole said.

Addressing the legal risks associated with a reduction in force (or "RIF") has long been a topic on this blog. In fact, looking in my crystal ball way back in January 2008, I suggested that it would the hot topic before years’ end

Flash forward to the present, and the headlines continue to be dominated by news of layoffs, plant closings, furloughs and bankruptcies. 

One of my friends and professional colleagues in the area, Lori Rittman Clark, has posted her thoughts on RIFs in the For the Defense blog

While there’s nothing particularly ground-breaking (quite simply because there aren’t a lot of new developments in the area), it is a concise and well-rounded summary for employers and HR professional looking to reduce legal risks associated with reductions in force.

What are the issues she suggests reviewing?

  • Potential Applicability of the WARN Act;
  • Disparate Impact Analysis.;
  • Disparate Treatment Analysis; and,
  • Releases.

All are sound subjects for review. The best suggestion should be the most obvious one: Seek legal guidance at the START of a process, rather than the end, to avoid the legal pitfalls that surround RIFs.

In the end, however, there is no magic bullet to eliminating legal risks associated with reductions in force. Each of the items Clark raises may help reduce the legal risks, but even implementing all of the above may not eliminate the risk entirely.

The headlines over the weekend for Connecticut have not been kind.  Two were particularly striking. First, the Courant ran a story entitled "Sizable Job Losses Expected in State".  The second wCourtesy morgue file "depression"as a story about the expected closing of The Goodwin Hotel, one of Hartford’s premier hotels. 

Both indicate a local economy that is teetering between lousy and downright awful.  As a result, there is likely to be more unemployment .  And with that, more people will be considering filing suit; such is the nature of economic downturns.

For those companies looking for a free primer on the subject of wrongful discharge claims in the state, the Connecticut Law Libraries have just posted a pretty good website with links to a variety of key statutes and summaries.  (You can also save the date of December 16th; I’ll be presenting a program for the CBIA on reductions in force as well.  Details are forthcoming soon.)

Although times may be looking bleak, companies should still not ignore the law at this point.  A prior post earlier this year focused on five issues that employers should become knowledgeable on in this economic downturn. (You can also click here, for all of my reduction in force posts.)  For employers, ask yourself how prepared you are to confront these issues.  Preparation is the key and often, when layoffs are needed, they always seem to need to occur in just a few days time.

For companies looking for other ways to save costs, the Ohio Employer’s Law Blog has an interesting post up this morning about the risks that increase with such an action.

Times are tough, but employers that abide by the law can ensure that they don’t compound the issues and financial difficulties that they may already be facing.

News about the WARN Act keeps surfacing in everything from law firm closings to bakery layoffs

While I’ve touched on the subject before, the Connecticut Law Tribune this week published a longer piece that I’ve written on the basics of the act for employers, particularly those in Connecticut.  You can download the article here.  

In my view, this Act is one of the easiest for companies to comply with, and yet, time and again, we see examples of employers who do not follow its mandates.

Perhaps the most important takeaway from the piece is the fact that WARN is not a mandatory severance law but rather a mandatory notice law.  Once the notice is providing within the required timeframe to both employees and various public officials, then the company is — for the most part — off the hook here. 

 

With the cable news shows tracking the stock market like the latest sports scores ("it’s down…no it’s really down!), there is little doubt that the public and companies are all feeling some anxiety. 

So, I decided to take a look at some of the blog statistics to see if I could discern any patterns.  While some search terms over the last 72 hours seem obvious (such as "Connecticut Employment Law"), there were other search terms that stood out.

Among them are several dozen for what I would term "layoff-related" terms like OWBPA and WARN.  More troubling though were searches for "ct layoff law" or "60 day RIF law connecticut". 

Some of the search terms were even done by individuals with IP addresses at some notable Connecticut companies. Is this a prediction of things to come? Or is it just nervous employees researching what the rules are in case things turn south?

Either way, to me it shows a workplace on edge. 

In employment law, we often talk about how human resources can play an important role in taking the pulse of the workplace and providing communications to address questions that people might have.

Why? Because anger and lawsuits sometimes develop from employees who feel mistreated or who were not expecting the adverse action.  Telling employees the whole truth — even when the future is up in the air — is an important part of any communication plan. 

A long time ago I heard an employee — when complaining about her employer — say that her employer treated her "like a kid".  Had the employer managed the employee a little more closely, the lawsuit may have been averted.

Being forthright with employees about the prospects about the future business and staffing levels — hopefully, that’s not a novel concept for your business.

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.