by Kirstin Muller and Todd M. Plate
From tech boom to bust, recent waves of layoffs
in the high tech industry have sent a large number of employees
to the unemployment lines and their attorneys' offices. The same
layoffs have also sent employers to meet with their legal advisors.
It is here both employees and employers are learning about the Worker
Adjustment and Retraining Notification (WARN) Act. Unfortunately
for many employers, this consultation is too little, too late.
One of the best-known examples is Walker Digital,
a company owned by Priceline.com founder Jay Walker. The company
was hauled into federal court by the Attorney General of Connecticut
to defend its actions in laying off 106 employees, allegedly without
the notice required under the WARN Act. The Act applies to all U.S.
employers with more than 100 full-time employees and requires employers
to give at least 60 days notice before undergoing a major layoff
or plant closure that affects 50 or more employees per site, 33
percent of a specific site's workforce or 500 employees company-wide.
Layoffs, however, are not isolated to U.S. employees.
Workforce reduction is also a matter of international concern. Stephen
J. Hirschfeld, CEO of The
Employment Law Alliance, a globally linked network of employment
law attorneys, agrees that layoffs are a worldwide issue. "Because
we work in a global marketplace, employers need to be aware of all
the labor laws that affect their layoff decisions, whether that
is the WARN Act in the United States or relevant labor law abroad,"
Hirschfeld said.
ELA member Juan Carlos de la Vega of the law firm
Santamarina Y Steta noted that Mexican Federal Labor Law entitles
employees who are laid off due to a downsize in business to receive
a minimum of three months' salary and a seniority bonus equal to
twelve days' salary for each year of service. This minimum will
generally increase in order to avoid a lengthy process in front
of Mexico's Conciliation and Arbitration Board. Indeed, France does
not allow a reduction in the size of a workforce unless an employer's
economic survival or competitiveness is at stake. According to the
ELA's Vanessa Lehmann of Eversheds' Paris office, this "Redundancy
Procedure" prevents dismissals simply for improving profits
and benefiting shareholders. Lehmann explained that in France an
employer must have a "real and serious reason" for layoffs.
Although the WARN Act and similar labor laws restrict
an employer's ability to reduce its workforce without reason or
notice, employers are finding that they fall within exceptions to
these laws. For example, in the U.S., high-tech employers are claiming
exceptions to the WARN Act based on "unforeseeable business
circumstances." In such a case an employer may have lost a
major contract or suffered an unexpected change in its business
conditions. If these circumstances can be shown, an employer only
need give as much notice as reasonably possible. Dot-com employers
are also using the "faltering company" exception. If an
employer is "actively seeking" business capital for its
firm and believed that the 60-day WARN Act notice would have precluded
them from receiving additional capital, the employer is exempt.
Similarly, labor laws abroad allow exceptions
to strict layoff policies. In Argentina, an employer may make a
request before the Labor Ministry for dismissal of a large number
of employees. Julio Fernandez Moujon, of ELA member Marval, O'Farrell
& Mairal encourages employers to do this because it can result
in reduced severance compensation. Once the termination agreements
are approved, then any further claims may be rejected. Otherwise,
Argentina's labor laws require prior notice, severance pay based
on seniority, proportional vacation pay, and proportional bonus
pay.
Employers can save themselves the time and expense
involved in looking for loopholes by carefully managing employees'
expectations during the hiring phase. The ELA recommends that employers
ensure that initial contacts with new employees confirm to the employees
that their employment is "at-will," meaning that their
employment can be terminated at any time and for any non-discriminatory
reason. The ELA recommends including this language in employment
applications and offer letters. While at-will statements do not
exempt an employer from coverage under the WARN Act and other notice
laws, they help to keep employees' expectations within the realm
of reality. Finally, ELA counsels employers to limit statements
to new employees about the future financial viability of the company,
if it is in doubt.
When the time does arrive for layoffs to occur,
proper planning and communication with employees can reduce legal
risks and negative impact on morale. Initially, it may be a good
idea to consider downsizing though attrition or voluntary retirements.
If this is not an appropriate response, then ensure that procedures
are in place. Determine a timetable to follow, review any collective
bargaining agreements, and establish criteria for the layoffs --
seniority, merit, and skills. Also, it is important to develop termination
agreements and general releases. Large layoffs are not pleasant
for employees or employers, but when it is necessary, it is also
necessary to do it right.
As technology advances and the world marketplace
blurs the lines of federal labor laws, it is increasingly important
for employers to be aware of the ramifications of their actions.
When a layoff announcement affects an employee in St. Louis, Missouri
and also one in Paris, France, it is the employer's responsibility
to understand the relevant labor law issues surrounding that announcement.
Even if a WARN Act exception applies in the U.S., the employer's
examination is not complete. It is in the employer's best interest
to seek proper counsel because when proper understanding exists,
appropriate employment decisions follow.
Editor's Note: For more information on the subject, e-mail
Kirstin Muller at kmuller@cdhkk.com;
Juan Carlos de la Vega at jdelavega@s-s.com.mx,
Vanessa Lehman at Vanessa.lehman@eversheds.com,
and Julio Fernandez Moujoin at jfm@marval.com.ar.
To learn more about the Employment Law Alliance, e-mail CEO Stephen
J. Hirschfeld at shirschfeld@cdhkk.com.
Authors Kirstin E. Muller, Esq. and Todd M.
Plate are with the California-based law firm of Curiale Dellaverson
Hirschfeld Kelley & Kraemer, LLP, the exclusive California member
of the Employment Law Alliance, the world's largest association
of employment and labor lawyers.
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