Lay-Off Due to Economic Difficulties - Essay Example

? Lay-Off Due to Economic Difficulties Lay-Off Due to Economic Difficulties Case Scenario Given that Company ABC has been affected by economic difficulties, management is deciding on laying off as much as 25 percent of its 100 employees. Case facts revealed that management suggested an inverse seniority policy would be implemented to determine who gets laid off.  Accordingly, under the policy, the twenty-five people who have been employed the longest will be laid off.  A severance package will be offered to those being let go. In this regard, as a human resource professional tasked to evaluate and propose recommendations for the situation, the following discourse would initially present a description of the facts, the relevant law, application of the law, and suggestions of handling the issue. Recommendations would be proposed in the form of a memo addressed to the supervisor. Description of Facts 1. Advance Notice of 60 calendar days Company ABC employs 100 employees and is therefore covered by the Worker Adjustment and Retraining Notification Act (WARN) in cases where lay-offs are being reflected on at least 33% of their work force. Supposedly, ABC must provide a 60-day notice to the employees being laid-off. But since ABC plans to lay-off only 25% and that the reason for laying off is economic difficulties, the 60-day required notice is thereby not required. In one of the frequently asked questions posted in the US Department of Labor, the exception to giving a 60-day notice is hereby addressed: “if an employer believes their situation is the result an economic crisis, it may apply the unforeseen business circumstance exception; however, there could be a burden on the employer to prove why it could not plan 90 days in advance” (U.S. Department of Labor, 2010). During the termination meeting, the only time period indicated was that the benefits of the employees would be terminated at the end of the month. Therefore, there was no stipulated number of days from the time the employees were informed up to the time their services would be terminated. This does not violate any labor law because as the Department of Labor disclosed, “the Fair Labor Standards Act (FLSA) has no requirements for notice to an employee prior to termination or lay-off. In certain cases, employers must give the workers advanced notice of mass layoffs or plant closure. The Warn Act provides specific information on advance notice, employer responsibility and workers rights during mass layoffs or plant closure” (U.S. Department of Labor, N.D.). 2. Severance Pay Company ABC will offer a severance package that depends on gender and members of the union. As indicated: “because men generally are the heads of households and support dependents, ABC is going to offer them more severance pay than women.  Some employees are union members and their CBA provides less severance than the Company plans to offer, so management is going to be nice and give them the higher severance amount” (Case Facts, N.D., par. 1). According to Employee Issues (2011), under the Fair Labor Standards Act (FLSA) and state equivalents, “severance pay is generally considered to be a matter of agreement between employers and workers or employers and unions” (Employee Issues.com, 2011). 3. Age of Employees being Laid-Off By suggesting the inverse seniority policy, ABC could face violations of wrongful termination due to Age Discrimination in Employment Act (ADEA). The U.S. Equal Employment Opportunity Commission revealed that “the law forbids discrimination when it comes to any aspect of employment, including hiring, firing, pay, job assignments, promotions, layoff, training, fringe benefits, and any other term or condition of employment” (U.S. Equal Employment Opportunity Commission, N.D. ). Application of the Law Since ABC is planning to lay-off a lesser percentage of employees than the prescribed 33% threshold, it is not covered by the 60-calendar days notice for the employees due to be laid-off. However, their suggestion to apply the inverse seniority policy exposes them to violating the ADEA for laying off employees who have been employed longer and would therefore have lesser opportunities to find employment opportunities elsewhere. In terms of severance pay, although there are no stipulated laws for severance pay, by according diverse amounts depending on gender and membership to union, ABC is likewise exposing itself to discrimination in providing severance pay due to gender and union membership. It should apply laws prescribed by the Employee Retirement Income Security Act (ERISA) (U.S. Department of Labor, N.D.). Suggestions for Handling the Issue To protect both the employer and the employees in this situation, ABC should provide at least a 30-day notice to all employees that would be laid-off. The selection of lay-off due to economic difficulties should be due to performance rather than seniority. Low performing employees as shown from a regular performance evaluation report should be the one’s chosen to be laid-off. The severance pay must be structured uniformly based on basic pay plus a factor to provide for exigencies and the time frame to search for new employment. MEMO FOR : HUMAN RESOURCES SUPERVISOR, Company ABC FROM : Human Resource Professional, Student’s Name RE : Recommendations for Laying-Off Employees DATE : August 30, 2011 Based on the conducted evaluation of the proposal to lay-off 25 employees from among the 100 employees of Company ABC, the suggestions for handling the issue have been incorporated in the attached report. The highlights of the suggested measures would cover notice for laying off employees, selection criteria and the computation of severance pay, to wit: 1. Provide at least a 30-day notice to all employees that would be laid-off. This would provide them ample time to search for new employment opportunities and give an appropriate transition period for the one assuming their responsibilities. 2. The selection of lay-off due to economic difficulties should be due to performance rather than seniority. Low performing employees as shown from a regular performance evaluation report should be the one’s chosen to be laid-off. 3. The severance pay must be structured uniformly based on basic pay plus a factor to provide for exigencies and the time frame to search for new employment. These recommendations are proposed after considering the legal labor laws that would be violated from the initial proposed measures. Please be advised that these recommendations would ensure that both employer and employees’ interests are considered and appropriate labor laws are adhered and complied with, as required. References Employee Issues.com. (2011). Severance Pay. Retrieved August 29, 2011, from http://employeeissues.com/severance_pay_laws.htm U.S. Department of Labor. (2010, March 15). Addendum to the Worker's and Employer's Guide to Advance Notice of Closings and Layoffs. Retrieved August 29, 2011, from Employment and Training Administration (ETA): http://www.doleta.gov/layoff/faqs.cfm U.S. Department of Labor. (N.D.). Employee Retirement Income Security Act. Retrieved August 29, 2011, from http://www.dol.gov/dol/topic/health-plans/erisa.htm U.S. Department of Labor. (N.D.). Frequently Asked Questions (FAQs). Retrieved August 29, 2011, from http://webapps.dol.gov/dolfaq/go-dol-faq.asp?faqid=328 U.S. Equal Employment Opportunity Commission. (N.D. ). Age Discrimination. Retrieved August 29, 2011, from http://www.eeoc.gov/laws/types/age.cfm Read More