Andrew Volin

Sherman Howard
Denver, Colorado
www.ShermanHoward.com
AVolin@ShermanHoward.com
(303) 299-8268

Andy Volin began practicing Labor & Employment Law with Sherman & Howard L.L.C. in its Denver office in 1989. He advises and defends private sector employers and their management in disputes involving employment discrimination, wrongful discharge, and wage and hour law. Lawyers in other firms, both out-of-state and local firms, frequently have Mr. Volin serve as co-counsel to provide employment law representation to their corporate clients, or to represent corporate employees who have been sued as individuals.  Andy is active professionally outside the office as well, serving from 2006-2008 as the Management side co-chair of the Labor and Employment section of the Colorado Bar Association, and teaching Employment Discrimination Law at the University of Denver in 2007-2008. He has been a contributing author to the CBA’s The Practitioner’s Guide to Colorado Employment Law since 2001. Andy is also the President of the Board of Community Housing Services, Inc., a local non-profit agency providing housing related services in the Denver area and throughout the state.

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Because of the nationwide economic slump, layoffs are a hot topic these days. Whether you work for a large or small company, layoffs are an inevitable part of the business cycle.

What sort of employment law issues should HR professionals consider when the possibility of laying off workers becomes increasingly likely? Here’s a step-by-step guide for smoothing out a difficult and painful process.

Consider the alternatives

Would normal attrition solve your overstaffing problem? If not, would a buyout package encourage enough people to leave voluntarily, making layoffs unnecessary?

If layoffs are inevitable, should you cut staff in more than one round, on the theory that a second layoff later might not be necessary?

Note: If you conduct a series of layoffs, assume that they will be closely scrutinized both individually and collectively.

Check current policies

If you have an existing policy stating how you handle layoffs, follow it. If it needs to be revised, do so before implementing the layoffs. Failing to comply with an existing policy may lead to litigation.

Be WARNed

The federal Worker Adjustment and Retraining Notification (WARN) Act requires large employers to provide at least 60 days’ notice before some layoffs. The WARN Act generally covers employers with at least 100 employees.

It applies to:

1. A plant closing that results in job loss for at least 50 employees
2. A mass layoff of at least 50 employees who comprise at least 33% of the workforce
3. A mass layoff of at least 500 employees

There is no Colorado state law equivalent to WARN.

No discrimination

Both federal and state discrimination laws apply to layoff decisions. A business cannot choose employees for layoff using discriminatory criteria. For example, you can’t decree “all the women must go.”

In general, using subjective criteria (perceived value to the company, for example) is also riskier than using objective criteria such as length of service. That’s because of the suspicion that subjective criteria can be used to disguise a discriminatory motivation.

Also, businesses cannot use otherwise neutral criteria to select people for layoff, if using those criteria leads to a disproportionate impact on employees in a protected class.

Preparing charts that show how a given set of criteria will affect various protected classes (e.g., age, gender, national origin) may help you develop a plan that minimizes the risk of discrimination claims from being asserted.

Many companies choose to consult an employment attorney when planning layoffs. Doing so could make those charts subject to the attorney-client privilege, keeping them legally confidential. If no attorney is involved, documents showing a company either knew its plan would create a disparate impact, or did not consider whether that would be the result, could be revealed in litigation.

Severance pay

Management needs to decide whether it will offer severance pay. Typically, this is not required, but some companies voluntarily offer severance pay. Most companies that lay off workers (with the exception of some small businesses) choose to provide some sort of severance pay, although the amount involved varies widely.

If you offer more than a token amount of severance pay, consider whether to require employees to sign a waiver-and-release agreement in exchange. Such an agreement can encompass all types of claims, other than claims for vested benefits, or benefits such as unemployment compensation or workers’ compensation. Have your attorney review any waiver-and-release agreement before you ask workers to sign.

Waiver-and-release agreements for laid-off workers age 40 and older must contain special provisions in order to be enforceable. For those workers, the agreements must contain information about the layoff, including the criteria used, and the job titles and ages of all those eligible and all those not eligible. Older workers are permitted up to 45 days to consider such an agreement, and they can revoke an agreement up to seven days after they have signed it, if they change their minds.

Other requirements

Layoffs are subject to the same requirements as other terminations. Therefore, for example, employers must pay all earned wages, including vacation pay, at the time of termination. COBRA continuation insurance coverage rules may apply so that employees can extend their health insurance. Your company policies may also impose other requirements.

On the horizon

Colorado employers may be interested in an upcoming ballot initiative that will be decided in the November election. The initiative requires “just cause” for termination, and a layoff will constitute “just cause” only if it involves at least 10% of the workforce in Colorado.

A termination without “just cause” may lead to an order by an arbitrator of reinstatement or back pay, or both, as well as attorneys’ fees. Employers considering layoffs should decide whether this initiative impacts the timing of a layoff.