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December 30, 2008
Must Do Layoffs? Plan Wisely
As the economy continues to reel, companies are increasingly choosing to pare down their workforces. News reports come every day: “Chrysler Could Lay Off 66,000,” “Citigroup to Cut Another 53,000,” “Yahoo Rumored to Lay Off 3,500,” and the list goes on. If your organization plans to join the list, Attorney Mike D. Moye has some advice for you.

Be warned about WARN. Moye, a partner at the San Francisco firm of Hanson Bridgett, discusses mandated severance to employees being laid off, and he focuses first on the federal Worker Adjustment and Retraining Notification (WARN) Act, which requires many employers—those with at least 100 employees that are laying off at least 33 percent of the workforce or 50 people within a 30-day period and for at least 6 months—to give those to be let go at least 60 days’ notice. That notice, if the employer doesn’t follow it, could turn into 60 days’ severance pay under the law.

If you anticipate—or find that you must conduct—successive layoffs, Moye urges, it’s critical to track that “within 30 days” limit. So, don’t lay off a group less than 33 percent or 50 and think you’re home free—if you then do another round of layoffs within less than 30 days. The sum of the two rounds could put you over the top. Moye adds that some states, including California, have stricter provisions in their own WARN laws. For example, the minimum workforce size for coverage is 75 rather than 100, and there is no minimum percentage of the staff to be laid off.

Remember accrued vacation. Another part of potentially required severance packages for laid-off workers is leftover vacation and/or sick leave. Again, how such allowances must be treated will depend largely on state laws. A key policy issue is whether an employer has promised in writing, such as in a handbook, that accrued leave must be granted. That’s true in North Carolina and California. North Carolina, as well as Illinois and Texas, require not only that promised leave be granted but also that it be paid at termination. In New Jersey, it must be given if promised but not paid at termination. States with no restrictions include Georgia, Mississippi, and Utah.

Choose carefully. Assess your organization’s current talent and where you need to go from here before deciding whom to lay off, Moye advises. “Focus on positions, not people,” he says. And, structure a reduction in force that can be defended in court. Base layoffs on legitimate and objective business needs, not totally or primarily on performance evaluations. Study the functions and competencies you will need going forward. For example, Moye suggests you identify at least five key positions and name the best people to fill them. Consider evolving skills and needs, not just current ones. Then lay off jobholders you didn’t choose.

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