Terminating swaths of employees is difficult for a number of reasons. For many, the hardest part is telling loyal, hardworking employees that the company simply cannot afford to keep paying them, knowing that these employees are suddenly facing large doses of stress and uncertainty. Unfortunately, as COVID-19 continues to wreak havoc on the workplace, many employers are facing the prospect of making drastic cuts to their workforce to stay afloat. While employers should always mind the Golden Rule during these difficult times, here are some technical points that employers might consider when managing layoffs:
- Determine if a WARN Notice Is Required
Generally, WARN applies to employers with 100+ full time employees (defined as working 20+ hours per week and having been employed six of the last 12 months) or 100+ full time and/or part time employees who, in the aggregate, work more than 4,000 hours each week.
If the employer meets the employee headcount requirement, the next question is whether the employer is conducting a “plant closing” or “mass layoff,” either of which triggers notice obligations. A “plant closing” generally occurs when the employer shuts down a facility resulting in 50+ full time employees experiencing “employment loss” during a 30-day period at a “single site of employment.” On the other hand, a “mass layoff” occurs when 50+ employees constituting at least 1/3 of the “single site of employment” experience “employment loss,” or, alternatively, if 500+ employees lose their jobs at “a single site of employment.”
This raises the issue of what constitutes “employment loss.” This means (1) an employment termination (other than for cause, retirement, or voluntary termination); (2) a layoff exceeding six months; or (3) a reduction in an employee's hours of work of more than 50% in each month of any six-month period.
If WARN is triggered, employers must comply with the statute’s 60 calendar days’ notice requirement unless, as is relevant during the COVID-19 pandemic, the layoffs were due to unforeseeable business circumstances. Employers that rely on the unforeseeable business circumstances exception must still give “as much notice as is practicable, and at that time shall give a brief statement of the basis for reducing the notification period.” It is not certain that a court will necessarily agree with the argument that the pandemic made giving 60 days' notice impracticable for any individual employer. We would note in particular that, as a general matter, the longer we get into the COVID-19 pandemic, the less persuasive the employer's unforeseeable business circumstances argument might be.
Employers who think they may face the possibility of triggering WARN notices should consult with their Tonkon Torp attorney, as the penalties for failing to comply with WARN have significant financial consequences and penalties, including back pay to affected workers.
- Be Mindful of Sick Leave and PTO Banks
In Oregon, employers are not required to pay out accrued sick time, vacation, or other form of PTO balances at termination unless the employer has a policy to pay. However, if the employer's PTO policy is ambiguous as to employee entitlements to PTO at termination, or if the employer has a practice of paying out PTO at termination, PTO may be due to the employee at termination because of the absence of a clear policy not to pay. Note that, since COVID-19, the Oregon Bureau of Labor & Industries (BOLI) released guidance stating that “[e]mployers do not have to pay out unused … vacation time at termination unless they’ve committed to doing so in their policies.” Employers should be forewarned that this recent guidance is not necessarily consistent with the position some employee-side wage and hour lawyers would take and that BOLI itself may regard any policy that does not expressly disclaim payment of unused PTO upon termination as a "commitment" to pay.
Lastly, employers should also remember that, if an employee is rehired within 180 days of termination, the employee is entitled to restoration of their previous unused sick time bank. If the sick leave was paid out at termination, the employee may still be eligible to have the hours of sick time restored, but not necessarily to payment for those hours.
- Other Employment Statutes Are Not Suspended During COVID-19
While the focus in the present is, for obvious reasons, getting through this pandemic, employers should not lose sight of anti-discrimination statutes. Though employers may terminate employees due to legitimate reasons, it is important to be mindful of the legitimate business case supporting those terminations and not to execute layoffs in a way that raises any inference of discrimination. For example, while employers may not need to pay out emergency medical leave under the new Families First Coronavirus Response Act to employees who are laid off for economic reasons due to COVID-19, employers should remember that it will seem fishy if 75% of workers laid off were taking emergency leave, while all employees who were not taking emergency leave were retained. The same example can be applied to virtually every protected class. The point is: make sure that the decision to terminate holds water and can be backed up in court.
- Have Final Paychecks Ready
In Oregon, employers are generally required – subject to various exceptions – to give employees their final paycheck by the end of the next business day following termination. However, the uncertainty of COVID-19 has caused a lot of employers to tell employees that they are being “furloughed” or “temporarily laid off” and will be brought back when hours become available. Employers should note there is no clear legal distinction between a “furlough” or “temporary layoff” and a termination. In fact, all three may arguably be terminations that could trigger the same final paycheck obligations.
Specifically, BOLI has taken the position that employers must pay workers by the close of the next business day if a layoff is “expected to last more than 35 days.” While some employers legitimately may not know whether an employee will be back within a week, three weeks, or three months, the most conservative and likely safest route is to simply pay each employee their final wages by the end of the next business day following their last day worked, unless the employer definitively knows it needs the employee to come back to work within the next 35 days.
Even during COVID-19, employers must still comply with Oregon’s technical wage and hour rules.
If you have questions about the issues raised here, please contact any of the attorneys in our Labor & Employment Practice Group