What Employers Need to Know About Layoffs During COVID-19

The coronavirus pandemic has devastated the United States. It has caused serious challenges for employers in Silicon Valley and throughout the United States. Many businesses are considering layoffs in order to stay afloat. For employers, it is important to be fully aware of their legal responsibilities and seek legal advice before terminating employees to avoid possible legal disputes due to layoffs.

Employer’s Legal Responsibilities Regarding Termination of Employees

In the process of terminating employees, employers must be careful not to violate federal anti-discrimination laws, such as Title VII of the Civil Rights Act of 1964, Age Discrimination Employment Act (ADEA), Americans with Disabilities Act (ADA), and other laws enforced by the Equal Employment Opportunity Commission (EEOC). In other words, employers should keep in mind that they cannot terminate employees solely based on protected characteristics, such as age, sex, race, disability, religion, color. There are also additional protected characteristics under the California Fair Employment and Housing Act (FEHA), such as sexual orientation, marital status, and religious faith.

Currently, many employees are being laid off due to financial difficulties and health risks that the pandemic has created. However, employees may not always clearly understand the reasons for their termination. For employers, it is important to record the reasons for their layoffs in written or electronic form to ensure that these reasons for termination are neutral. Some categories of neutral reasons for termination could involve length of work, type or work, and qualifications of employees, rather than the above-mentioned discriminatory reasons.

Special Provisions for Severance Packages

If the employer and employee have agreed on the terms of severance pay in advance of the termination, then the agreement will stand. In cases without an advance agreement, if the employer is worried about potential lawsuit claims by employees, they can also negotiate severance package conditions with employees to “settle” claims before they arise.

Businesses with more than 20 employees must comply with the federal Older Workers Benefit Protection Act (OWBPA) regulations. OWBPA requires employers to follow certain guidelines for giving severance packages to employees over the age of 40. Most importantly, employers must give older employees at least 21 days to consider the severance agreement. Also, older employees are permitted to back out of the agreement up to 7 days after the agreement is signed.

If employers lay off or offer voluntary severance packages with incentives to a group of employees, where at least one affected employee is over 40 years old, employers must meet some additional requirements under OWBPA. Affected employees, regardless of age, must all be given at least 45 days to consider signing the voluntary severance package. Moreover, each employee must be provided with information about the job titles and ages of the dismissed group. If OWBPA requirements are not met, then the severance packages are invalid and cannot be enforced.

Employee Compensation and Benefits During Layoffs

Employers should review labor laws and policies, collective employment agreements, and individual employment contracts to ensure that their contractual duties are fulfilled during layoffs. Sometimes, the layoff process is already set at the start of employment and the company will already have a compensation system for those who resign with unused annual leave. These employers must follow the guidelines they have set.

In addition, according to California law, when an employer fires an employee, the employer must pay all wages due for the dismissed employee up until that day of resignation, including compensation for unused leave. If the final salary cannot be paid in time, the employee may seek compensation.

Federal Law Compliance Under the WARN Act

The federal Worker Adjustment and Retraining Notification (WARN) Act may apply to employers who have closed factories or laid off employees because of the novel coronavirus. According to the WARN Act, employers with 100 or more full-time employees are required to give a written notice 60 days before the factory closures and mass layoffs are made.

Of course, there are exceptions to the 60-day advance notice requirement. If the company is actively seeking capital or business, and it is reasonable for the time being that advance notice will prevent its ability to gain capital or business, the employer can cancel or postpone the suspension of business within a reasonable amount of time, in which case there is no need to provide advance notice. Another exception that does not require 60 days advance notice is for mass layoffs or factory closures due to unreasonable business conditions.

California State Regulations

California Governor Newsom issued an executive order that temporarily relaxed California WARN Act requirements imposed on employers during the massive layoffs during the coronavirus epidemic. Normally, the employers that must comply with the California WARN Act are those with at least 75 employees in the past 12 months and they must give a notice 60 days prior to mass layoffs or company shutdowns. However, the executive order modifies the requirement for layoffs due to the coronavirus pandemic, as employers only need to issue as many notices as possible and briefly explain their reasons for curtailing the advance notice time period. Written notices given on or after March 18, 2020 must include the employee’s eligibility for unemployment insurance.