PrintPrintToday’s economy is challenging for employers of all sizes in nearly all industries. The economic downturn has caused many employers to re-evaluate their business plans and expenses. Some have reduced payroll by freezing or cutting salaries, reduced schedules, laid off employees or closed all or part of a plant.
Published March 16, 2009
Today’s economy is challenging for employers of all sizes in nearly all industries. The economic downturn has caused many employers to re-evaluate their business plans and expenses. Some have reduced payroll by freezing or cutting salaries, reduced schedules, laid off employees or closed all or part of a plant. Any of these measures can trigger significant legal challenges and potential liabilities. The following laws and issues can impact employers in South Carolina when downsizing.
The Worker Adjustment and Retraining Notification Act is a federal law that applies to businesses with 100 or more full-time employees. It requires covered employers to provide at least 60 days written notice before “an employment loss” due to a mass layoff or plant closing, as those terms are used in the WARN Act. This notice must be provided to nonunion workers, any union representing affected employees, state Dislocated Worker Unit and the chief elected official of the local government within which the plant closing or mass layoff will occur.
State notification
When a South Carolina employer requires an employee to provide advance notice prior to quitting, then the employer should give advance notice to its employees of its intent to stop work. This must be provided at least two weeks in advance or be equal to the time of notice an employer requires of employees who are quitting.
Instead of mandating written notice to each employee, South Carolina law requires employers to post a printed notice regarding the shutdown and its approximate length. Prior notice is not necessary, when the shutdown is due to an unforeseen accident or act of God.
Federal wage and hour issues
Under the Fair Labor Standards Act, when reducing the schedules or pay of exempt employees, employers should not adversely affect the “salary basis” of those employees. Exempt employees still must be paid a salary for each workweek in which work is performed. Also, employers may not reduce any employee’s pay below minimum wage.
State wage payment requirements
Employers in South Carolina must normally provide seven days advance written notice to employees before cutting their pay or schedules.
Discrimination issues
A principal concern with downsizing is the possibility that discrimination claims may follow. Employees may not be selected for layoff because of race, color, religion, sex, national origin, disability, citizenship, age or other characteristics protected by federal, state or local law.
Claims of discrimination may arise when neutral criteria used to select employees for layoffs have an unlawful, adverse impact on employees in a protected group. For example, selecting the employees who have been employed the longest may give rise to a potential age discrimination claim.
Waivers and releases
Waivers and releases can extinguish many potential liabilities arising from the employment context. Most potential federal and state claims may be waived.
Unemployment compensation
Employees who lose their jobs or who are temporarily laid off are eligible to receive unemployment compensation. Such benefits can be paid for up to 26 weeks. Extensions sometimes occur.
Employee benefits
Many employers offer benefits, such as health care, to their employees. To receive those benefits, employees must meet various eligibility requirements that frequently include remaining “actively employed” by the employer. Employees and their dependents may be entitled to continue group medical benefits at their expense through COBRA or a similar state statute. Too many departures from a retirement plan may trigger a partial termination.
Severance benefits
Some employers may offer a severance package to departing employees. The composition of this package varies and may include such things as outplacement assistance or severance pay. Severance pay can be subject to ERISA and its legal requirements, so employers should consult with their benefits counsel.
While downsizing or other actions may be part of a response to difficult economic times, employers should carefully consider the related legal issues and potential liabilities that can arise. Otherwise,
bad economic times could get even worse.
William H. Floyd, III is certified by the S.C. Supreme Court as a Labor and Employment Law Specialist. For more than 20 years, he has represented employers of all sizes and industries. He can be reached at 800-825-6757 or wfloyd@nexsenpruet.com.
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