Economic Slowdown: Layoff Speedup – 10 Commandments for Employers Considering Layoffs 



By Gaia T. Linehan, Mandy D. Hexom and Victoria Fuller

From retail to tech, employers have laid off tens of thousands of employees since the beginning of the year. Mass layoffs (i.e., ones affecting 50 or more employees) involve particular legal implications that employers must consider. The following are some guidelines for such layoffs: 

1. Use Objective Selection Criteria: For layoffs, employers should generally select a group of employees based on objective criteria, e.g.:  

a. Seniority
b. Skills
c. Pay Grade
d. Job Title

Other potential factors include quality and quantity of work, attendance history, and education and experience levels. However, failure to use objective, defensible criteria for determining which employees are affected by the layoff can lead to discrimination and/or retaliation claims by affected employees. 

2. Consider Individual or Representative Risks: Employers should consider potential exposure from claims brought by affected employees, such as alleged wage and hour violations, open internal complaints of discrimination or harassment, or requests for accommodation or leave by affected employees. Employers who identify such potential exposure should seek legal counsel as far in advance as possible from the planned layoff. 

3. Give Legally Required Notice: Employers should determine whether they are subject to the notice requirements under the WARN Act (and any potentially applicable state mini-WARN). If so, employers may be obligated to give advance notice not just to the affected employees, but also to the state Employment Development Division. 

4. Termination Meetings Should be Attended by at Least Two People: Meetings with affected employees should be attended by at least two company representatives, ideally a manager or executive and a human resources employee. Meetings should be conducted individually, when possible, and management should review continued benefits and COBRA options, the process of filing for unemployment benefits, and any other paperwork during the meeting. Any potential legal claims raised by the affected employee during the meeting should be immediately discussed with counsel. 

5. Be Aware of Additional State Requirements: Employers should consult with counsel to ensure they comply with other potentially applicable requirements. For example, in California, employers must provide to separated employees a completed Notice to Employee as to Change in Relationship that complies with section 1089 of the California Unemployment Insurance Code:

6. Avoid Wage and Hour Claims: Employers, particularly employers with employees in multiple states, should ensure they avoid potential wage and hour claims arising out of the separation. For example, many states require vacation time to be paid out upon termination, and/or require the final paycheck to be delivered to the affected employee on the date of termination. Employers should further confirm that earned bonuses or commissions are also timely paid. In some states, failure to comply with these requirements can subject employers to penalties and attorneys’ fees. 

7. Hours Worked Declaration: Employers who are concerned that employees may later claim that they did not receive all breaks or payment for hours worked might consider having the employee sign a statement in which the employee acknowledges that they have been paid for all hours worked and have been provided all breaks. If the employee does not agree to acknowledge that statement, consult legal counsel. 

8. Severance Packages: Employers who are in a position to do so should also consider whether to offer severance packages to affected employees. Employers who choose to do so should ensure that the severance agreement conforms to the NLRB’s recent McLaren Macomb decision. In addition, employers should ensure that severance agreements offered to employees who are 40 years of age or older comply with the ADEA and OWBPA and include required disclosures. 

9. Return of Company Property: Collect keys, security badges, and any other work-related equipment provided to the employee (e.g., laptop). Employers can provide a checklist for the recovery of property with a signature from the employee attesting that they have no other employer-provided items that need to be returned. Also, employers should ensure that affected employees’ access to company servers and email is immediately terminated. 

10. Special Considerations for Remote Workers: Finally, employers should take care that they understand and comply with applicable law governing affected remote workers. The applicable law can be affected by, for example, an employer who pays payroll taxes on the employee. Employers who are unclear about which state law governs an affected remote worker should consult with counsel. 

Employers who are already adversely affected by an economic downturn should take care to avoid potential exposure from failing to follow state and federal laws governing reductions-in-force. Legal counsel can assist employers through the process to help identify and minimize risk. For more information, contact Mandy D. Hexom, Gaia T. Linehan, Victoria Fuller or your state FMG Labor and Employment Attorney.