Economic times are tough and production is down. You come to the
grim realization that layoffs will have to be made. But how do you decide
whom to let go? How important is seniority, and should it overshadow the performances of the workers?
“There are no laws that provide
employers a formula as to how to make
those decisions or whom to select,” says
Kevin T. McLaughlin, the labor and
employment practice group manager for
Greensfelder, Hemker & Gale, P.C. “And
there are no limits to the number of people you can lay off.”
Smart Business spoke to McLaughlin
about the difficult decisions involved in
employee layoffs.
Outside of a union, are there any laws regulating how to conduct an employee layoff?
At a certain threshold, there are laws
that require specific notice, and there
are penalties if the employer fails to provide that notice. The most applicable
law is the federal law known as the
Worker Adjustment and Retraining
Notification Act (WARN), which applies
to companies that have more than 100
employees and states that employers
must provide notice 60 days prior to the
layoff.
The law applies in a number of situations: First, if the company is closing a
facility with at least 50 workers or if the
company is laying off 50 or more
employees at a single site and those 50
workers comprise at least one-third of
the work force at that particular site.
Second, if there is a layoff of 500 people
or more. Third, if there is a reduction of
hours of at least 50 percent for 50 or
more workers at a single site for six consecutive months.
What about collective bargaining agreements (CBAs) with unions?
Outside of a claim of discrimination,
the only way an employee can claim he
or she cannot legally be laid off is if the
employee has a contract that protects
his or her job. Individuals, such as
CEOs, typically have those types of contracts. Union contracts almost universally have some type of layoff clause
that does not necessarily restrict the
employer’s right to lay an employee off
but rather tells the employer the proper
way to do it.
Layoffs are always subject to the question: ‘Will the layoff lead to a claim of
discrimination?’ You really see this most
often in the private sector, and the most
common type of discrimination claim in
layoff situations is based on age. If you
have to lay people off, that decision is
usually economically driven and most
often that means that the people making
the most money are the ones who have
been there the longest, and typically
those are the older employees.
One way to protect against discrimination claims is for employers to have separation or severance agreements with
their employees. Many times, when
there are massive white-collar layoffs,
you will see an offer of severance, such
as early retirement, as part of the package. There are specific, unique legal
requirements for these types of severance agreements.
Are white-collar workers feeling more of the
pinch these days?
Certainly, there are more white-collar
workers being laid off and part of the
reason is employers’ response to the
mounting pressure to cut costs across
the board. Typically, your white-collar
employees are going to be some of your
highest paid employees.
For example, if you’re dealing with a
field where technology is an issue, many
times a newer, more recently trained
employee can work at a cheaper rate
than someone who has been around for a
long time. Also, many employers ‘run
lean,’ which means they are consolidating job functions into one position and
expecting more out of the remaining employees. These people are affected by the
layoffs of other employees, as well, as
they are now being required to perform
the functions of two or more people.
How does an employer decide who stays and
who goes?
There’s a distinct difference between
the union setting and the white-collar setting. There is almost always a CBA in the
union setting that will dictate how the layoff has to happen. The most common layoff criteria in a union contract is seniority. The newest employee is generally the
first to go, and, of those laid off, the most
experienced employee is the first to be
recalled. I try to negotiate skill and ability
as factors in determining layoffs and
recall into CBAs, as I’ve had clients complain that they have been forced to get rid
of newer employees and lose some of
their best workers in the process.
Outside the union contract, the
employer tries to balance the need to cut
costs with what skills they need to keep
in the workplace. Employers must determine at what point they can cut costs
enough to make the layoff effective without impacting efficiency to the point that
they cannot get the work done that
needs to get done.
KEVIN T. MCLAUGHLIN is the labor and employment practice group manager for Greensfelder, Hemker & Gale, P.C. Reach him at
(314) 345-4758 or [email protected].
