This article appeared in the May 2020 issue of MiMfg Magazine. Read the full issue and find past issues online.

Layoffs and terminations often conjure feelings of worry and trepidation from employers and defense counsel alike: Did we make the right decision? Did we adequately protect ourselves from litigation? Did we give an employee a reason to file a lawsuit? Could we have done anything differently? There are myriad issues to consider when economic conditions and unforeseen events such as the coronavirus pandemic force difficult business decisions, and employers must consider not only the necessity to right-size the work-force, but also the necessity to minimize the likelihood of legal fallout following such a tough decision.

The Decision

Advanced planning prior to executing a layoff or a reduction in force (RIF) can help avoid and defend against potential litigation. First, the employer should evaluate what functions, if any are being eliminated. Second, the employer should determine factors for identifying the affected employees (e.g., employees performing that function? seniority? performance evaluations? specific skill sets?). Employers should not identify specific individuals for layoff until going through and documenting this analysis. Employers should articulate and document the business reasons for the action.

Prior to selecting a worker for a layoff, it is helpful to establish and document that job-related factors for the layoff do not have a disparate impact on a protected group. To protect disparate impact analysis from discovery under the attorney-client privilege and/or attorney work product doctrine, it is advisable to seek legal advice, allowing time to address issues in the selection process that may subject an employer to an unreasonable risk of litigation.

Providing Notice

The Worker Adjustment and Retraining Notification Act (WARN) applies to employers with 100 or more employees, excluding part-time workers, or 100 or more workers who in the aggregate work at least 4,000 hours per week, excluding overtime. It requires covered employers to provide 60 days of advance notice of “plant closings” and “mass layoffs” that result in an “employment loss” at a single site of employment during any 30-day period.

An “employment loss” includes a termination, a layoff exceeding six months, or a greater than 50 percent reduction in hours for any individual employee during each month of a six-month period. During the current pandemic, where layoff may not exceed six months, WARN Act notice might not be required. A “plant closing” includes the permanent or temporary shutdown of single site of employment or one or more facilities within a single site of employment that results in an employment loss for at least 50 employees during a 30-day window period. A “mass layoff” involves a reduction in force other than a plant closing that results in an employment loss, during a 30-day window period of at least 33 percent of active employees (excluding part-time employees) and at least 50 employees (excluding part-time employees). If, however, there is a reduction of 500 or more employees, the 33 percent requirement does not apply. Mass layoffs differ from plant closings because there need not be a shutdown of a unit at an employment site.

The notice must be given to the affected employees or their bargaining representative, the state dislocated worker unit, and the chief elected official of the local unit of government. The requirements for notice to each of these groups varies.

There are exceptions to the 60-day notice requirement, including:

• The faltering company exception, which applies to plant closings, but not mass layoffs. The company must be actively seeking capital or business and have a realistic opportunity to obtain it.
• The unforeseeable business circumstances exception, which requires an employer to show that the circumstances are based on sudden and unexpected actions outside of its control, such as a strike at a major supplier or the termination of a major contract.
• The natural disaster exception, which applies to plant closings and mass layoffs and encompasses floods, earthquakes, droughts, storms, tidal waves or tsunamis. Although courts have not addressed the issue yet, it is possible that this exception may apply during the current COVID-19 pandemic.

Post “Right-Sizing” Considerations

Severance
One way to soften the blow for employees who have been let go due to “right-sizing” is to offer a severance benefit. Such benefits are not required by law, but may prove valuable to employees and employers alike. Employers should consult with legal counsel to ensure compliance with Employee Retirement Income Security Act (ERISA).

Releases
A properly crafted release of claims may reduce an employer’s exposure to liability for employment law claims brought by a laid-off worker. Because severance benefits are not mandatory, an employer may condition the receipt of such benefits on the employee’s agreement to release the employer from any employment-related claims up to the time of termination.

Miller Canfield is an MMA Premium Associate member and has been an MMA member company since February 1989. Visit online: millercanfield.com.

About the Author

Megan Norris is a principal attorney with Miller Canfield. She may be reached at 313-963-6420 or norris@millercanfield.com.

About the Author

Brian Schwartz is a principal attorney with Miller Canfield. He may be reached at 313-963-6420 or schwartzb@millercanfield.com.