With recent changes in the economy, some employers may find themselves forced to reduce costs through employee layoffs. However, it’s important to know how to handle a reduction in force correctly. A failure to follow proper protocol when terminating employees or conducting layoffs could soil your business’s reputation and expose you to the risk of lawsuits or workplace safety issues caused by disgruntled employees.
A cautionary tale
In late November, a Mississippi-based furniture company laid off nearly its entire workforce. Approximately 2,700 workers lost their jobs just days before Thanksgiving. If the timing of the layoff wasn’t bad enough, the company chose to tell employees to not report to work the next day via hasty, late-night emails and texts. A second email informed workers that their benefits would be terminated immediately without a COBRA provision, which allows employees to keep employer-sponsored health insurance under some circumstances.
Employees were said to be sound asleep when the emails hit their inboxes, and some didn’t see the messages the next morning before they left for work. Drivers in the middle of making deliveries were ordered to return their trucks immediately. Given that company was a major employer in the area, local government officials called the situation “stunning,” “terrible” and “heartbreaking.”
The Worker Adjustment and Retraining Notification Act (WARN) protects workers’ interests by requiring employers with 100 or more employees to provide 60 days’ notice before mass layoffs and plant closings. The WARN Act does allow for some exemptions to the 60-day notice requirement if layoffs result from business circumstances that are not “reasonably foreseeable” at the time the employer would normally be required to provide notice.
With the Mississippi-based furniture company, the company did issue a memo attributing the layoffs to “unforeseen business circumstances,” but it did not explain any details about what led to the layoffs, and it isn’t clear to those involved why the company cut its entire workforce at once.
It remains to be seen whether the company truly had to pivot in the face of an extraordinary business challenge, or it simply failed to follow the correct procedures for announcing a layoff. An active employee lawsuit is seeking the maximum amount allowed for a violation of the WARN Act, which is 60 days of back pay and the benefits that each worker was entitled to under their benefit plans.
Employment attorneys advise that planning layoffs in advance is one of the best ways to minimize legal risks. Businesses should follow best practices for issuing proper and timely notices, handling both onsite and remote employees, preparing severance agreements and carrying out the layoffs in an orderly manner.
If you have questions about the WARN Act and the proper protocol for terminating employees, MarathonHR is happy to help you.