Employment Laws in Downsizing

Employment Laws in Downsizing: Mass Layoff of Workers

In a situation where more than 50 workers are being laid off at one time, the Federal Worker Adjustment and Retraining Notification Act (WARN) is the piece of legislation may come into play. If the company regularly employs more than 100 workers on a full-time basis, then its workers will likely be covered under the provisions of WARN.

If the company is planning a plant closure or a mass layoff, then it is required to give employees a minimum of 60 days' notice in writing. If the company does not give the employees at least 60 days' notice, then it must provide each employee with 60 days' pay in lieu of notice.

Exceptions Under WARN

Under some circumstances, a company will be exempt from the requirement to either give notice or pay in lieu of notice to employees:

• Natural Disaster: If the closing of the plan or business takes place in the aftermath of a natural disaster.

• Unforeseen Circumstances: In a situation where an event occurs that the employer could not reasonably have foreseen, then it will not be required to give the 60 days' notice.

• The Company is Faltering: This provision of the WARN refers to a situation where a company is actively seeking new contracts or investors in order to avoid having to lay off workers or shut down entirely. The company must be able to show that providing employees with notice under WARN would jeopardize negotiations for the contract in question or arrangements for additional capital for the business.

In all of these situations, the onus is on the employer to demonstrate that the situation fits the criteria set out in the legislation, and the employer is still required to give as much notice to employees as possible in the circumstances.

Employment Laws in Downsizing: Employees Aged 40+

When an employer lays off an employee who is over the age of 40 and gives the employee a severance payment in return for the signing of a Release, the terms of the Release must comply with the terms set out in the Older Workers' Benefit Protection Act (OWBPA). If the Release does not have the correct language, then it is not valid. Not only can the former employee keep the severance pay, but he or she can also sue the employer.

Here are the specific references the Release must have under this federal law:

• The OWBPA must be mentioned in the body of the Release.
• The employee can take up to 21 days to review the Release and decide whether to sign.
• After the Release has been signed, the employee has an additional seven days during which he or she can revoke his or her signature on the document.

General Information About Severance Pay

Employers in the U.S. are not required to provide severance pay to employees who are downsized. Each company will have its own policies about whether to offer severance pay of any kind to downsized workers.

Some companies will offer one or two weeks' pay for each year of service when downsizing employees. For those people employed in an executive capacity, the amount of money paid out in a severance package will likely be calculated in a different manner.

An employer who wants to provide a severance package to downsized workers may want to consult with an attorney to discuss how to discuss the downsizing with affected employees and how to structure the payout. Adding outplacement services into the mix will help the former employees to get on track to find another paying job quickly.