If You Are Planning Layoffs – Here Are Five Things You Need to Know

Unfortunately, when the price of oil goes down, the employment numbers also move downward in Houston. Many clients in the oil and gas industry are either planning or considering downsizing measures, which means that it is a good time to review your policies and procedures to make sure you adequately protect your business.

  1. Get to know the OWBPA:   The Older Workers Benefits and Protection Act has a number of special requirements for a severance agreement which contains a release of an age discrimination claim. If you are terminating a single employee over 40 (not part of a broader layoff)  an employer must: advise the employee tlayoffso seek advice of counsel, provide up to 21 days to review the agreement, and allow up to 7 days to revoke the agreement after it is signed. For a layoff package offered to more than one person, the 21 day period is extended to 45 days. With a group layoff, the employer must also provide, in writing, detailed information about the persons being laid off, including their age and job titles. The purpose of this information is so employees over 40 can have all the facts and make a knowing waiver of a potential ADEA claim.
  2. Use Objective Criteria:  If you have 5 employees in a department and one of them has to go, you should expect the laid-off employee to ask, “Why me?” If that employee happens to be in a protected class, and all of the retained employees are not, the employer will have some explaining to do (especially if there is a pattern of such choices).  Using seniority is an easy way out of this conundrum, but most employers prefer to make selections on merit, not longevity. There is no law against using such a criteria, but it helps to formalize what “merit” means.  Does it mean good attendance, management reviews, or tangible work production? To avoid discrimination claims, it is best to formalize the selection process and not just rely on supervisor discretion on who should stay or leave.
  3. Beware Disparate Impact:  Even if you formalize your selection process and make good documented decisions, it is advisable to check your math. If the results have a clear bias against women, older workers, or a particular minority group, you should review your criteria and ensure that it is fair. Keep in mind that the law allows for employees to bring a case for discrimination where a facially neutral employment process has a disparate impact on a protected class.
  4. Don’t Forget Confidentiality:  Although most severance agreements insist upon the confidentiality of the amount paid to the employee, this agreement is also a good opportunity to include a broader confidentiality agreement governing trade secrets obtained during employment (if you don’t already have one). That employee will likely be getting a new job soon, and it might be with your company’s most bitter rival. This is your last opportunity to lock down your trade secrets and make sure the employee does not take things out the door to a competitor.
  5. Close Out Wage and Hour Suits:  Wage and hour claims are the prevailing type of class action plaguing employers. The law makes it difficult to obtain a release of a Fair Labor Standards Act claim in a severance agreement, but an employer can include a statement in a severance agreement noting that the employee has reported all of his or her time and been paid in full for all known overtime, bonuses, etc. This acknowledgment can be used against the ex-employee if he or she decides to later join a class action.
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About HR Headaches
HR Headaches is a blog for Human Resources professionals, business owners, and in-house counsel to get the latest news, analysis and tips in the area of labor and employment law. Every day there are new court decisions, agency interpretations, and regulations which affect the workplace, making it difficult, if not impossible, for many employers to keep current. HR Headaches is dedicated to providing information in a practical, no-nonsense manner to help employers avoid legal disputes and keep policies up to date.
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