The recession that was finally acknowledged in late 2008 has not only been deeper than any since the Great Depression, but also will result in a larger reconstruction of the global economic system than accompanied any of the less serious economic downturns of the last 50 years. Like other recessions, this one has resulted in increased unemployment and will continue to do so. Due to the extent of economic reconstruction, however, employees may expect to find it more difficult to find new employment in the same field in which they had been working. These facts make it all the more important for both employees and management to understand the legal implications of the reductions in force (RIF) that will accompany the reorganization of the economy.
Before proceeding further with planning for any RIF, employers would do well to review any employment contract’s in place. If there is a collective bargaining unit that may be affected, the terms of the collective bargaining agreement must be carefully reviewed. The union must be consulted concerning the RIF decision and its effect on members of the bargaining unit. Individual contracts should also be reviewed for provisions relating to termination, severance or change of control, as well as restrictive covenants relating to confidentiality and intellectual property, non-solicitation, and non-competition.
Until the end of 2009, employers are also obligated to subsidize 65% of health insurance premiums for those employees who elect a continuation of coverage under employer-sponsored health insurance plans. Although the employer does gain tax credit for the subsidy, there have been some complaints about the disruption to cash flow that it may create.
The decision to reduce the size of a company’s workforce is rarely made for unlawful reasons. There is still an abundance of potential for legal missteps in the selection of individuals who will be included in the force reduction. In mid-sized or larger organizations, the identification of specific employees whose jobs will be eliminated is normally left to members of middle management. When it comes to these decisions, there is just as much potential for unlawful criteria to infect the decision-making process as there is with any individual termination decision. It is for this reason that several of the U.S. Courts of Appeals have held that it is simply not an adequate explanation, in the context of an employment discrimination case, for an employer to say that its decision was an RIF without explaining why the individual employee was among those terminated or laid off while others were retained. Employers must take steps to ensure that factors such as race, gender, age, religion, and disability are not applied in the decision-making process. The development of objective criteria for selection will help to ensure that the most productive employees are retained and that improper motives have not been used in the selection.
Employers with more than 100 employees are subject to the Worker Adjustment and Retraining Notification Act (WARN). Under this federal statute, if there is a mass layoff, employees must receive a 60-day notification before the layoff takes effect. (A mass layoff is one in which at least 50 employees and 33% of the workforce will experience a job loss.) In addition, if 50 or more employees are affected by a plant closing, they must receive the same 60-day notice. (A plant closing is any temporary or permanent shutdown of the single-sided employment of one or more operating units or facilities.) There are some exceptions to the requirement to give the 60-day WARN notice, but a failure to have planned for application of the act can result in substantial legal issues.
If you are planning an RIF, or if you are an employee who has been affected by one, and if you have not already ensured that all potential legal issues have been addressed, please contact the attorneys at MacElree Harvey.
The following article is informational only and not intended as legal advice. Speak with a licensed attorney about your own specific situation. © Copyright 2011 MacElree Harvey, Ltd. All rights reserved.
Leave a Reply