Reductions in Force, Age Discrimination & WARN Act

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Workforce reductions can create substantial legal risks for employers. This is so because workforce reductions are often carried out under pressure in a compressed period of time without opportunity for full legal review, and because laid-off employees are often angry at what they perceive to be unfair treatment and look to make the company “pay” for what has happened. Age discrimination claims and WARN Act compliance problems are two of the biggest legal risks associated with workforce reductions.

Older laid-off employees often believe that they have been discriminated against because of their age. Because older employees who have been with their employers for a longer time are likely to be paid more than others, they may suspect that they have been made “cost cutting” targets in a workforce reduction. Additionally, because such employees often have received favorable performance reviews, they can easily conclude that their age has been held against them and that they have been targeted for layoff in a discriminatory way.

An employer trying to avoid a lawsuit arising out of a layoff may offer severance to departing employees in exchange for a release of claims. In order to obtain a legally valid release of a potential age discrimination claim, an employer must comply with special requirements imposed by federal law. These requirements include giving “older” laid-off employees (those 40 years of age or older) 45 days to consider the severance offer, directing them to consult with a lawyer, making clear that they are waiving a potential age discrimination claim, informing them of the universe of affected employees and those not affected by the layoff, and giving them seven days to have “buyer’s remorse” and revoke their agreement after they have signed it. These requirements (and others) are strictly imposed on the employer and must be complied with fully. Otherwise, the release of claims as to an age discrimination claim is ineffective, and an older laid-off employee may keep the severance and sue the employer for age discrimination.

The WARN Act requires certain employers to give employees 60-days advance notice of a plant shutdown or a “mass layoff.” The Act applies only to employers with 100 or more full-time employees. The requirement to provide advance notice is triggered when (a) a facility or an operating unit is closed or (b) there is a layoff at a work site. In either case, the action must affect 50 or more employees (which must be at least 33% workforce at the work site).

While it may be obvious when a facility is closed, a “mass layoff” may be more difficult to determine in advance. This is especially true if there is more than one layoff at a work site. Under the WARN Act, all layoffs at a single location occurring within any 90-day window of time are considered a single employer action and therefore must considered in the aggregate in determining whether a “mass layoff” has occurred.

If a proper WARN Act advance notice is not given, the employer is liable for up to 60 days’ pay and benefits for each affected employee plus attorney’s fees.

Parsons employment attorneys have substantial experience in assisting employers in implementing workforce reductions, assessing potential legal problems, and ensuring that the risks of age discrimination claims and WARN Act violations are minimized.