Author: Brett Holubeck

The Basics of Layoffs and the WARN Act

Published by Brett Holubeck on August 13, 2019

A window with the words "closed down" written on it to show what happens when layoffs occur and to serve as a reminder to follow the WARN Act. — Photo by Marco Bianchetti on Unsplash

Layoffs are terrible! A lot of employees are caught unaware that a company is not doing well while others cannot understand why they rather than someone else were let go.

Why are we talking about layoffs and reductions in force when unemployment is 3.7%?

Let me give you a couple of reasons.

Store closures may top 12,000 in 2019 as 7,062 store closures have already been announced this year compared to an all-time high of 8,139 in 2017. The retail apocalypse may be accelerating.
The ongoing trade war which many believe will result in a recession within a year or so.
Profitability of oil and gas (at least in Texas). There is some speculation that the shale oil boom may be over.

What to Consider When Layoffs Approach

There are a couple of things that all employers must remember when conducting layoffs. Employers must consider the legal elements of a layoff, and to conduct the layoffs in a way that allows the business to stay open and does not make the other employees angry. Of course, the best option, if possible, is to follow in the footsteps of Nintendo when the Wii U failed. In that case, the CEO took a 50% pay cut, and members of the board took a 20-30% pay cut.

He said:

If we reduce the number of employees for better short-term financial results, employee morale will decrease. I sincerely doubt employees who fear that they may be laid off will be able to develop software titles that could impress people around the world. Keeping employees can often be better than letting employees go if a company believes that the employees will be needed later.

Legal Aspects of Layoffs

Employers that layoff employees may have obligations to alert their employees.

As the Department of Labor explains:

The Worker Adjustment and Retraining Notification (WARN) generally covers employers with 100 or more employees, not counting those who have worked less than six months in the last 12 months and those who work less than 20 hours per week, or those employers with 100 or more employees, including part-time workers, who in the aggregate work at least 4,000 hours per week, exclusive of overtime.
WARN protects workers, their families, and communities by requiring employers to provide notification 60 calendar days in advance of plant closings and mass layoffs. Advance notice gives workers and their families some transition time to adjust to the prospective loss of employment, to seek and obtain other jobs and, if necessary, to enter skill training or retraining that will allow these workers to compete successfully in the job market. WARN also provides for notice to state dislocated worker units so that they can promptly offer dislocated worker assistance.
A covered plant closing occurs when the permanent or temporary closure of a single site of employment or of one or more facilities or operating units within a single site of employment results in an employment loss as defined by WARN regulations. A covered mass layoff occurs when 50 to 499 employees are affected during any 30-day period at a single employment site (or for certain multiple related layoffs, during a 90-day period), if these employees represent at least 33 percent of the employer’s workforce where the layoff will occur, and the layoff results in an employment loss for more than six months. If the layoff affects 500 or more workers, the 33 percent rule does not apply.

Many states have their own mini-WARN Acts, so you need to review your state law as well to comply with the law. Texas does not have its own WARN Act.

There are 3 important exceptions to providing 60 days notice as required by the WARN Act:

Faltering Company Exception (applies to closing but not mass layoffs) which requires that the employer 1) sought capital or business at the time that the 60 days’ notice would have been required, 2) there was a realistic opportunity to obtain finance or business, 3) it would have been sufficient to avoid the shutdown (the employer must objectively show this), and 4) the employer must have reasonably and in good faith believed that the required notice would have precluded the employer from obtaining the business or capital.
Unforeseeable Business Circumstances Exception, which applies when business circumstances were not reasonably foreseeable at the time that 60 days’ notice would have been required. The circumstance must be a dramatic change outside of the employer’s control like losing a major contract or a dramatic economic downturn.
The Natural Disaster Exception only applies if a plant closed or mass layoffs ensued because of a natural disaster.

As noted above, another exception (or at least a situation where the law does not apply) is when a mass layoff will last less than six months. For example, suppose you send 400 out of your 500 workers home for 2 weeks while you conduct necessary maintenance at your plant. The WARN Act would not be triggered in that case because the layoff is temporary.

When conducting a layoff, it is also important to ensure that it is done in a way that does not discriminate against individuals because of their age, race or other protected characteristic. Essentially, layoffs should be conducted in a way that it does not have a disparate impact on any protected class.

Who Receives Notice of a Layoff or Plant Closing?

As detailed by the Department of Labor:

The employer must give written notice to the chief elected officer of the exclusive representative(s) or bargaining agency(s) of affected employees and to unrepresented individual workers who may reasonably be expected to experience an employment loss. This includes employees who may lose their employment due to “bumping,” or displacement by other workers, to the extent that the employer can identify those employees when notice is given. If an employer cannot identify employees who may lose their jobs through bumping procedures, the employer must provide notice to the incumbents in the jobs which are being eliminated. Employees who have worked less than 6 months in the last 12 months and employees who work an average of less than 20 hours a week are due notice, even though they are not counted when determining the trigger levels. The employer must also provide notice to the State dislocated worker unit and to the chief elected official of the unit of local government in which the employment site is located.

What the Notices Must Contain

There are different items that must be in the notice for any union that represents employees, the employees, and the State Dislocated Worker Unit and chief officials of the local government entities. You can view that information here or in the regulations.

If employees are represented by a union, then the notice must contain the following information:

The name and address of the company that will have a plant closing or mass layoff and a person and telephone number from the company that can be contacted for more information.
whether the closing is permanent or temporary and whether the whole facility will be closed.
The expected date when the first employees will be laid off and the schedule for laying off the rest of the employees.
The job titles of any positions that will have people laid off and the names of those workers that hold each affected job title.

As stated by the DOL, notices to individual employees (if they are not represented by a union) must contain the following information:

whether the closing is permanent or temporary and whether the whole facility will be closed.
the “expected date when the plant closing or mass layoff will begin and the date that the individual employee will be” laid off.
whether any bumping rights exist (employees with more seniority will be able to take the positions of people with less seniority in the layoff, which means that the most senior people that qualify for any position in the company, even if it is not their current position, will be kept or at least will be the last people to be laid off).
“The name and telephone number of a company official to contact for further information.”

Companies must also provide notice to the State Dislocated Worker Units and the chief elected official of the local governments. This notice must be provided separately and should contain:

The name and address of the company that will have a plant closing or mass layoff and the name of a company official and telephone number that can be contacted for more information about the layoff or plant closing.
whether the closing is permanent or temporary and whether the whole facility will be closed.
The expected date when the first employees will be laid off and the schedule for laying off the rest of the employees.
Job titles of the positions that will be laid off and the number of employees in each position.
Whether any bumping rights exist
The name of any union(s) that represent the employees and the “name and address of the chief elected officer of each union”

Notices must be carefully drafted especially if the layoff is intended to be temporary. Any mistakes in drafting the notice can result in penalties. Employers can be liable for backpay and benefits for each employee for every day of the violation. Penalties are capped at 60 days of backpay and benefits for each employee, civil penalties of up to $500 per day, and reasonable attorney’s fees.

Maintaining Morale in a Layoff

Don’t be like Michael Scott in the Office announcing that the branch is closing (especially when it turned out that the branch was not closing after all).

Employers need to prevent a panic when laying off employees. You need to meet with the employees that are remaining quickly (within 30 minutes or so) to let them know what is going on. You need to give employees a reason that the layoff occurred. Was it to eliminate a portion of the business that was not profitable? That is a different conversation than laying off journalists in the news industry. Journalists are one of the main components of the news business. Many of them may be wondering whether their job is next.

Companies must acknowledge the emotions of the employees that are staying. Some of them will have lost close friends and colleagues that they have worked with for years.

Employees need to understand that there is a plan to move forward. Companies need to communicate about the business’s future. How is the work going to be redistributed now that there are not as many people working for the company? Is there a way for employees to privately ask questions? What is the long-term plan?

Managers need special training to ensure that they can address the concerns of employees that are staying. They need to make everyone as productive as possible and support the employees that remain with the company. Managers essentially need to rebuild the culture of the company. A bad manager can make a layoff worse by driving people away, being unresponsive to questions, or not showing any understanding to what employees are experiencing.

Productivity will fall after the layoff occurs. However, after employees see that the company is moving forward, and their jobs are secure, these employees will settle back into their jobs and will again become more productive. Eventually, work will return to normal, but until it does, all supervisors and members of senior management need to help with this transition to ensure a productive, profitable and secure future for the business.

Conclusion

Layoffs are awful, but not following the correct protocol in the event of a layoff is detrimental to the company and its employees. Keeping in mind the specific legal elements of a layoff, along with the cultural implications within the company, will allow employers and their employees to make the best of a bad situation.

The information provided in this blog is for educational purposes only and is not legal advice. If you need legal advice, then you should speak with a lawyer about your specific issues. Every legal issue is unique. A lawyer can help you with your situation. Reading the blog, contacting me through the site, emailing me or commenting on a post does not create an attorney-client relationship between any reader and me.

The information provided is my own and does not reflect the opinion of my firm or anyone else.

2018-2019 Supreme Court Labor and Employment Cases

Published by Brett Holubeck on July 29, 2019

Image of a gavel to represent the Supreme Court. — Photo by Wesley Tingey on Unsplash

The Supreme Court resolved 5 interesting labor and employment issues this year. The Justices also demonstrated that the Supreme Court is really good at reaching a consensus on employment issues (at least for this term) as 4 of these 5 cases were unanimous decisions.

Mount Lemmon Fire District v. Guido

The court found that state and local government are covered employers under the Age Discrimination in Employment Act irrespective of the number of employees that work for them (even those with less than 20 employees).

Even if you have less than the required number of employees you should still not discriminate against someone because of their age. No one deserves to work in a place where they do not feel welcome.

New Prime, Inc. v. Oliveira

Scotusblog does a great job summarizing the holding. The Supreme Court held “A court should determine whether the Federal Arbitration Act’s Section 1 exclusion for disputes involving the ‘contracts of employment’ of certain transportation workers applies before ordering arbitration; here, truck driver Dominic Oliveira’s independent contractor operating agreement with New Prime Inc. falls within that exception.” Essentially in this case the court concluded that independent contractors are covered under the exception for certain transportation workers and can pursue claims in court rather than in arbitration.

Lamps Plus, Inc. v. Varela

The only close case of the bunch was this case concerning arbitration. The vote was 5-4.

The court held that “Courts may not infer from an ambiguous agreement that parties have consented to arbitrate on a classwide basis.” Parties must essentially agree to arbitrate claims on a class basis or they cannot be compelled to arbitrate the claims as a class. Defendants cannot be forced by one individual claimant to arbitrate over much wider class claims unless the arbitration agreement contemplates this. This also means that companies can be forced to arbitrate hundreds, or even thousands of similar cases, which can be much more expensive if their agreements are silent on class arbitration.

Parker Drilling Management Services, Ltd. v. Newton

The court ruled that the Outer Shelf is not subject to overlapping state and federal jurisdiction. State law only applies when federal law is silent on an issue. If federal law applies to an issue then state law is inapplicable. In this case, this means that California wage and hour law does not apply to oil workers in the Outer Shelf.

Fort Bend County, Texas v. Davis

The court ruled that Title VII’s charge filing or administrative exhaustion requirement is not a jurisdictional requirement but a claim processing rule that cannot be raised if a party fails to raise it in a timely manner. Basically, a case can continue against a company for a claim under Title VII if the company neglects to raise an objection that the party failed to first file a claim with the EEOC. Plaintiff attorney’s should not leave out claims or forgo filing with the EEOC for a claim under Title VII as noted by Jon Hyman from the Ohio Employer Law Blog:

Technically speaking, SCOTUS did expand the rights of employees by allowing them to skip the EEOC before going to court. But, this holding does not mean that a plaintiff can skip the EEOC without consequence. It just means that it would provide to an employer a defense to assert, and not a jurisdictional bar to the filing of the lawsuit in the first place. And, as the opinion aptly points out, “A Title VII complainant would be foolhardy consciously to take the risk that the employer would forgo a potentially dispositive defense.”

Indeed, a plaintiff’s lawyer that recommends this course of action should immediately put his or her malpractice carrier on notice. Why would a plaintiff’s lawyer file a suit that cannot possibly be won and would be subject to an easily granted motion to dismiss? It’s malpractice for a plaintiff’s lawyer to take that risk, and malpractice for a defense lawyer not to raise the defense and seek dismissal via an immediate motion.

Conclusion

The Supreme Court unanimously agreed on all but one of the cases involving labor and employment issues this term. The only case that they disagreed on concerns an issue that has been a matter of serious political debate: the issue of arbitration. California is notorious for limiting arbitration (see this case about PAGA claims not being able to be arbitrated this case about PAGA claims not being able to be arbitrated and this is reflected in the partisan split on the issue this term.

Looking Ahead to the Labor and Employment Cases in the Supreme Court’s 2019-2020 Term

Next term is shaping up to be an interesting term. Here is list of cases that the court will consider next term. Some of the issues at play are: whether Title VII prohibits discrimination based on sexual orientation (Altitude Express v. Zarda), whether a plaintiff must prove that their age was a but for cause for discrimination under the ADEA (Babb v. Wilkie), whether a claim of race discrimination under 42 USC § 1981 requires a plaintiff to show that their race was a motivating factor or if but-for causation must be established (Comcast Corp. v. National Association of African American-Owned Media), whether the court can review the decision to end the DACA and whether that is lawful (Department of Homeland Security v. Regents of the University of California), and whether Title VII prohibits discrimination based on gender identity and sex stereotyping (R.G. & G.R. Harris Funeral Homes Inc. v. Equal Employment Opportunity Commission). It is going to be an exciting year at the Supreme Court next term for labor and employment attorneys and human resource professionals.

The information provided is my own and does not reflect the opinion of my firm or anyone else.

2020 Democratic Candidates on Labor, Employment, and the Workplace

Published by Brett Holubeck on June 26, 2019

Picture of a ballot box to demonstrate the voting for the 2020 Democratic Candidates and highlight how the election may change the workplace — Photo by Element5 Digital on Unsplash

There are a lot of Democratic Candidates for president. As of today, there are 25 active Democratic candidates vying for the party’s nomination. Many of these candidates have not released specific proposals about their beliefs on employment and labor law issues. However, before tonight’s debate I wanted to outline some of the most interesting proposals of the candidates on labor and employment law and the workplace.

$15 Minimum Wage

Joe Biden announced his support in his first campaign speech. Bernie Sanders has drafted legislation to increase the minimum wage to $15 an hour. As reported by Vox, only 4 candidates (Andrew Yang, Bill de Blasio, Jay Inslee, and Wayne Messam) have not taken a position on the minimum wage. Sen. Michael Bennet favors a 12 dollar minimum wage. Klobuchar, Hickenlooper, Warren, O’Rourke, Castro, Harris, Kirsten Gillibrand, Pete Buttigieg, Marianne Williamson, Tulsi Gabbard, Eric Swalwell, Cory Booker, Seth Moulton, Tim Ryan, Mike Gravel, John Delaney, and Steve Bullock all support a $15 minimum wage.

Increasing the minimum wage is likely to have a number of effects on labor and employment. Namely, the minimum wage increase will cause wages to rise for the lowest paid workers. This in turn may cause increased salary compression where higher paid workers do not receive the same increase in their wages that minimum wage workers receive. Many other workers that are not currently minimum wage workers, will need to have wage increases to reward their skills and ensure that they believe that they are adequately compensated. Individuals that have wages close to the minimum wage will expect an increase if they are not making that much more than the minimum wage after a minimum wage hike.

Of course, the minimum wage increase will also have a bigger impact on employers and industries that tend to be located outside of major metropolitan areas or in states where the cost of living is cheaper. For example, in 2015 there were 8 states had a median wage that was less than $15 an hour. Increasing the minimum wage in these states would have a dramatic impact on employee salaries as more than half of workers would need wage increases just to reach the minimum wage. Again, workers with wages that are currently under $15 an hour but above the minimum wage would need wage raises beyond $15 an hour to ensure that their talents are rewarded (i.e. they are getting fairly paid and making more than $15 or the minimum wage). For example, an EMT in Alabama currently averages $14.06 an hour. They would expect a new wage that would be significantly higher than any minimum wage worker making $15 per hour.

Card Check and Union Organizing

Joe Biden, Kamala Harris, Bernie Sanders, Elizabeth Warren, and many others support a law that will enable labor unions to organize by card check. This means that the individuals only need to get a majority of the employees in a workplace to sign union authorization cards. Union authorization cards authorize a specific union to represent the employee, which goes into effect if the union wins an election or the employer voluntarily recognizes the union if a majority of employees sign union authorization. If enacted, card check would mean that there would not be any election to decide whether to form a union in a workplace. Rather, if a majority of employees signed union authorization cards, then the employer would be forced to recognize the union without an election.

This would be a radical change in labor law and would remove, what in my opinion, is a critical piece of labor relations. Namely, that employees are able to vote on whether they would like to have a union in a way that enables their ballots to be secret and free from undue influence.

Eliminating the Gender Pay Gap through EEO-1 Data

Kamala Harris has proposed a requirement that she believes would end the gender pay gap. She is pushing to punish companies with a 1 percent fine for every 1 percent wage gap that exists in their ranks.

Companies will be required to certify that they are paying women the same as men for equal work. To the extent that pay disparities exist a company will need to show that the gap is based on merit, performance, or seniority. Companies will be required to obtain an equal pay certification to avoid paying these fines.

This would be a radical change and would require companies to devote significant resources to demonstrating that their pay practices are not discriminatory.

Sexual Orientation Discrimination

Democratic candidates generally support prohibiting sexual discrimination. This, however, is one issue that will likely be resolved when the Supreme Court decides two cases next year. Bostock v. Clayton County, Georgia and Altitude Express Inc. v. Zarda.

The Supreme Court will decide “Whether the prohibition in Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e-2(a)(1), against employment discrimination “because of . . . sex” encompasses discrimination based on an individual’s sexual orientation.” The decision in these cases will likely determine the final proposals of any Democratic candidate on the issue.

Enacting Paid Family Leave

Kirsten Gillibrand reintroduced her legislation to create a federal paid family and medical leave program. Her plan is co-sponsored by Bernie Sanders, Cory Booker, Amy Klobuchar, Kamala Harris, and Elizabeth Warren.

The bill would essential replace unpaid FMLA leave with 12 weeks of paid family leave.

I’ve said it before (see my earlier post). Paid family leave is coming to the US. President Trump and the Democrats both agree on paid family leave but differ in how they wish to implement it.

Eliminating No Poach Agreements

Cory Booker and Elizabeth Warren have proposed legislation that would outlaw no poach agreements within franchise agreements. No poach agreements prohibit employers from hiring the employees of another employer that is part of the agreement. In fact, 11 state Attorney Generals launched an investigation into these no-poaching clauses and seven chains that represented more than 25,000 stores nationwide have dropped these clauses. With these investigations underway, it is unlikely that the bill or any proposal from a presidential candidate will dramatically impact the law because the court cases will likely decide whether these agreements are enforceable under Antitrust law.

Banning Noncompetition Agreements

Senators Warren and Klobuchar support limiting non-competition agreements. Noncompetition agreements permit employers and employees to enter into agreements to prohibit employees from competing against an employer after they leave that employer’s employment. Both of these Senators have called on the Federal Trade Commission to use their rulemaking authority to limit noncompetition agreements.

Elizabeth Warren has sponsored legislation to ban non-competes. Yes, all non-competes. It would not affect the ability of companies to protect their trade secrets.

The legislation fails to consider some of the important factors that matter for noncompetition agreements and why they are important. Granted, not all employees need nor should they be required to sign noncompetition agreements. For example, employees at Jimmy John’s do not need noncompetition agreements. Forcing the employees that make sandwiches to sign noncompetition agreements does not help the company. It destroys employee morale and makes it harder for the company to find employees once this policy becomes known because (surprise) employees want to be treated well.

Salespeople, executives, owners of companies that sell their company but agree to stay with the company during a transition period, and many other high-level employees are individuals that should sign noncompetition agreements. It makes sense that a former owner should not be allowed to open a competing business after he or she sells their business.

We can expect that if either are elected as President that they would seek to limit or do away with noncompetition agreements.

Ending the Tipped Wage

The Raise the Wage Act would phase out the tipped wage. Bernie Sanders, Cory Booker, Klobuchar, Gillibrand, Harris, and Warren have sponsored the legislation and thus support ending the tipped wage. As I said previously in this post (quoted below), the tipped wage has been a controversial subject for many states and cities.

The recent debate in DC to eliminate the tipped wage demonstrates that many groups have a wide variety of opinions on the issue of tips. The proposal was a voter initiative that would have eliminated the tipped wage and it passed, but it was ultimately undone by a DC council vote. Many restaurant workers expressed concern that the elimination of the tipped wage would cost them money as less people would tip.

Ending Arbitration as a Condition of Employment

Cory Booker, Kirsten Gillibrand, Kamala Harris, Amy Klobuchar, Bernie Sanders, and Elizabeth Warren are all cosponsors of the Restoring Justice for Workers Act. The bill would essentially end employment agreements where arbitration is a condition of employment (it is in an initial employment agreement) and would prohibit arbitration in many other circumstances unless the employee agreed to be subject to arbitration and the arbitration agreement met certain conditions.

Elizabeth Warren, in a letter to the Department of Labor’s Solicitor of Labor, requested information about the DOL’s approach in bringing enforcement actions against companies with employees that signed arbitration agreements as a condition of employment. It is clear that she would like to end arbitration agreements as a condition of employment.

Arbitration has some advantages and disadvantages. Robin Shea, at the Employment & Labor Insider, does a great job of outlining them. For many employers and employees, it is the best way to handle workplace disputes. Removing arbitration as a possibility for handling workplace disputes would radically change employment and labor law by requiring all disputes to be resolved through an already backlogged court system.

Conclusion

One thing is certain no matter which Democratic candidate wins the nomination there are a lot of proposed changes to labor and employment law and the workplace in general among the various proposals of the candidates. It will be incredibly interesting to see who the Democratic candidate will be, what policies they will propose, and how the election influences labor and employment law.

Disclaimer: This is not a full list of all the candidates’ political positions on the workplace nor labor and employment law, but merely some highlights of issues you will see in play. If you know of or would like to highlight other aspects of any Democratic candidate that I did not mention or left out, then please feel free to comment below.

The information provided is my own and does not reflect the opinion of my firm or anyone else.