Layoffs create new set of legal worries for employers

TRAVERSE CITY – It's not called the WARN Act for nothing.

If the recession has forced your business to lay off workers, the economics behind that decision, however sound, could be the least of your worries, say local employment attorneys. A variety of state and federal laws govern layoffs, including the Workers Adjustment and Retraining Notification (WARN) Act, and could expose employers to expensive legal liability if not followed. A very real concern, as layoffs in the region continue to mount.

"I would say the numbers are unprecedented," said Traverse City employment attorney Rachel Roe. "For most of my clients who are business owners, their business is their baby, their employees are like family to them, and it breaks their heart to tell them they don't have a job anymore. Many of these owners haven't taken a paycheck in months."

Emotional concerns like these could cloud business judgment at exactly the moment when clear thinking is most needed, said Roe. Emotional reactions to a layoff is also the number one reason employees decide to sue an employer. To help avoid such lawsuits, the time to consult an employment attorney is before layoff decisions are made, added another Traverse City employment attorney, Allen Anderson.

"'Layoff' is a kinder, gentler word for 'fired' but it doesn't change the legal situation," said Anderson. "A layoff is still considered under the law to be an adverse employment action. Because of that, it's always better to run the issues by the attorney up front as opposed to spending thousands of dollars to fix the problem after the fact."

Such "after the fact" problems could arise, Anderson said, if one or more of the following issues are not properly addressed:

– Does the employer have more than 100 employees? If so, the WARN Act applies and the employer is required to give notice of a layoff 60 days in advance.

– Does the employer have more than 50 employees? If so, the Family and Medical Leave Act applies and any employees currently on unpaid leave could claim the layoff was a

retaliation against them.

– Does the employer have more than 20 employees? If so, employees need to be given the option to continue their health care coverage through COBRA.

– Is there a union contract? If so, any provisions for layoffs must be honored.

– Is there an employee handbook? It's provisions for layoffs must also be honored, even if it was drafted during a time of economic prosperity.

"Even if it sits in a drawer someplace and nobody ever pulls it, you can bet the laid off employee is going to read it," said Anderson." A good reason to avoid the boilerplate handbook.

– Do some employees have non-compete clauses? These need to be enforced or market competition could arise just when business conditions are at their worst.

– Do you provide laid off employees with letters of recommendation?

– Consider the demographics of the employees who have been laid off.

A high concentration of a single characteristic, age or gender for example, could trigger a discrimination lawsuit. Regardless of the number of employees, the Civil Rights Act always applies.

"You need to be able to articulate the reasons why certain people were selected for layoff and certain people were not," said Roe, who had been practicing employment law for 15 years and works at the firm Smith, Haughey, Rice & Roegge. "And your reasons need to be based on business criteria."

While the seasonal and construction industries have each long dealt with layoffs here, both Roe and Anderson said the phenomenon has quickly extended into the financial, manufacturing, retail, automotive, communications and marketing sectors, and even beer distribution. In the past six months Roe said she has handled a dozen different layoff consultations; her usual number is one per year. Anderson said he works on a layoff matter once or twice a week.

Who is doing well in these challenging times? "Anyone who paid cash and didn't get into the leverage game," said Roe.

"Labor lawyers," said Anderson. "I'm always busy, but right now I seem to have much more to do. This work is not without its interesting days." BN