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► Mass Layoffs: What Rights Do Employees Have?

Mass layoffs have dominated the news cycle in the last several months. While many of these layoffs have impacted the tech sector, nontech employees aren’t immune. In light of this unfortunate trend, it’s critical that employers in all industries be aware of their employees’ rights in the event of a layoff.

Selection for Layoff

Employers generally have broad discretion as to which employees to lay off. Employee selection will likely depend on the circumstances that have led to the need for a layoff. For example, a company with a department that’s no longer needed could choose to lay off the entire department, while a company looking to reduce the size of its workforce could choose to lay off a certain number of employees across multiple departments.

While employers have significant discretion in determining which employees to lay off, that discretion isn’t unfettered. Federal laws prohibit selecting employees based on protected characteristics such as age, disability, race/ethnicity, religion, gender (including sexual orientation and gender identity), and national origin. Employers are also prohibited from selecting employees because of prior complaints about unlawful discrimination or certain wage violations. Many states have additional protected classes. Employees who believe they were laid off based on an unlawful reason may pursue a legal claim against the employer.

Severance Agreements

Although there’s no legal obligation to provide a severance payment, many employers choose to offer severance as part of a layoff.

Severance amount and scope of release: In the absence of a severance plan, or an individual or a collective contract governing severance, the amount of the severance is entirely at the employer’s discretion; it could be a set amount for all employees, it could be calculated as a certain amount per year of employment, or it could be a different amount for different job titles. In exchange for this severance payment, employers generally require employees to sign a release in which the employees give up the right to sue the employer in the future for most employment- or wage-related claims. Note, however, that certain types of claims can’t be released in a severance agreement. Employees who believe they may have a legal claim against their employer (such as for discrimination, harassment, or wage-related issues) may consult with an attorney before signing the severance agreement in order to evaluate the value of their potential claim against the amount of severance payment being offered. Such employees or their legal counsel might attempt to negotiate a higher severance amount.

Confidentiality and nondisparagement clauses: Severance agreements often include a requirement that prevents employees from disclosing the terms of the severance agreement (generally known as a “confidentiality provision”) or a provision forbidding employees from making statements that could be seen as harmful to the employer (generally referred to as a “nondisparagement clause”). The National Labor Relations Board has recently determined, however, that only very narrowly tailored versions of confidentiality and nondisparagement provisions are lawful.

Older Workers

Employees who are 40 years of age or older are entitled to some additional protections in a layoff.

First, they must be given at least 45 days to review and sign the severance agreement, plus an additional 7 days to revoke their signature. (There’s no requirement of any particular length of time for review for workers under 40.)

Also, the employer must provide laid-off workers who are 40 or older with the ages and job titles of all employees in the applicable decisional unit(s) who are impacted by the layoff and those not impacted. The purpose of this mandatory disclosure is to enable employees to evaluate whether they might have a claim of age discrimination.

There are also specific notifications that must be included in severance agreements for the employees in this age group, including with respect to such employees’ right to consult with counsel. If any of these requirements aren’t met, any purported release of age discrimination claims could be invalid.

WARN Act

The Worker Adjustment and Retraining Notification (WARN) Act is a federal law generally requiring that employers with 100 or more full-time employees provide written notice at least 60 days in advance of:

  1. Closing a worksite with at least 50 employees;
     
  2. A mass layoff affecting at least 50 employees and 1/3 of the company’s total workforce; or
     
  3. A mass layoff of at least 500 or more employees at a single site of employment during a 90-day period.
     

If 60 days of advance notice isn’t provided, then the employer must provide 60 days of pay.

With the rising prevalence of remote work, the WARN Act’s applicability to remote workers is evolving. Termination of large numbers of employees, some or all of whom are remote workers, may trigger the Act, so employers should consult with employment counsel to determine if its requirements are applicable.

Payment for Wages Owed

Regardless of whether employers offer severance payments to employees, they’re legally obligated to pay employees any wages they’re owed for work performed as of the employees’ last day. Depending on the situation and the state, outstanding wages could also include commissions, bonuses, vacation pay, etc. Many employers pay all outstanding wages owed on an employee’s last day, and the exact timing of this payment generally depends on state law requirements.

Health Coverage

Under the Consolidated Omnibus Budget Reconciliation Act (COBRA), most employees are entitled to elect to continue participation in employer-sponsored health insurance plans for up to 18 months at their own expense.

The Bottom Line

Layoff coordination can be complicated and challenging, but planning ahead and consulting with your employment counsel can help avoid any missteps.


By Michelle Cassorla. Ms. Cassorla is an employment lawyer at Boston-based law firm Davis Malm, representing clients in employment discrimination, harassment, and wage and hour claims. She also represents employees in negotiating employment agreements and counsels employers in drafting and implementing company handbooks, restrictive covenants, and severance agreements.

[7/2023]
 

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