In Focus: Layoffs—Legal Protection for Employers

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Olivia Goodkin and Wendy Lane, Attorneys, Rutter Hobbs & Davidoff Inc. (Nov 08)

The current state of the economy has left many employers in the uncomfortable position of having to reduce their work forces by engaging in group layoffs and other adverse employment actions. This has prompted the inevitable flurry of lawsuits. There’s an inverse relationship between the economy and employment-related claims: As the economy weakens and job security fluctuates, claims increase. This growing national trend has forced several legal issues to the forefront of consideration by employers in the financial, mortgage, retail, building, real estate, home improvement, and other industries.

To help employers avoid lawsuits from former employees, there are a variety of recommendations that should be considered:

Provide outplacement services. Employers can go a long way toward increasing good will with just-released employees by offering to help them find alternative work. Providing some type of outplacement assistance can do more than keep things amicable among former employees and minimize the risk of future litigation — it can also alleviate fears among current employees who may be worried about their own job security.

Be aware of legal requirements. Many employers aren’t familiar with the federal WARN Act, which requires covered employers to give 60 days advance notice before ordering a plant closing or mass layoff that will affect a substantial number of workers. Covered employers generally include those with at least 100 full-time employees. There are severe monetary sanctions for failing to comply with the requirements of WARN.

In addition, the federal Older Workers’ Benefit Protection Act places certain important restrictions on separation agreements or severance packages involving employees who are 40 or more years old, including those involved in group layoffs — defined broadly to include layoffs of two or more employees at one time. To ensure that a layoff does not violate this act, employers should consult with an employment law attorney to make sure they have the proper language for any agreements with laid-off employees in this age group. This includes a required chart listing ages and positions within the affected department of the company, noting those included and not included in the layoff.

Review all decisions carefully. It is important to have your human resources department and legal counsel review decisions about who will be laid off and who will be retained in order to avoid claims of discrimination in the layoff selection process. This includes a review of the impact of the layoff on employees in certain age, gender, racial, ethnic, and other protected categories, as well as making sure that the company has a cogent business justification for its determinations as to who will be included in the layoff and who will not, thus closing the door on potential lawsuits stemming from claims of retaliation. There is also a risk with a layoff that the employees will be prompted to pursue other claims such as class actions for wage and hour violations. Be sure to review these factors in your decisions as well.

Olivia Goodkin and Wendy Lane are attorneys with California-based Rutter Hobbs & Davidoff Inc., a law firm that specializes in labor and employment issues; they are part of the firm’s Employment Law Practice Group. Contact the authors at (310) 286-1700; visit the firm’s website at www.rutterhobbs.com.