LAYOFF ISSUES

With more and more companies closing plants and laying off employees, this is a good time to review the basics of the federal WARN law – which requires companies to give 60 days advance notice of plant closings and mass layoffs.

The WARN law applies to all plant or facility closings that affect 50 or more employees and to “mass layoffs,” which is defined as a reduction affecting 50 or more employees and at least 33 percent of the workforce. Failure to provide the notice allows employees to collect severance pay for the notice period.

No notice is required where the closing or mass layoff is the result of a natural disaster, circumstances that were not reasonably foreseeable, or where the employer is a “faltering company” whose creditors or lenders might pull the plug on the enterprise if the notice were given. A recent decision by the Federal Appeals Court in Philadelphia put strict limits on the “faltering company” exception, saying that the employer must prove that it was actively seeking additional capital that it could not have obtained if lenders or investors knew that a closing or mass layoff might be in the works.

There are other sensitive issues that should be considered when planning a reduction in force, including whether the reduction has a disproportionate impact on any protected group and the information that must be provided to affected employees under the Older Workers Benefits Protection Act if employees are asked to sign a release as a condition of receiving severance pay.

HARASSMENT LAW – LIABILITY FOR HARASSMENT OF A NONEMPLOYEE

A court recently affirmed that a company can be held liable for harassment by a supervisor even when the harassment victim works for another company. In this case, the harasser was a supervisor for a general contractor and made repeated racial slurs towards the employee of a subcontractor at a common job site. The general contractor argued that it was only obligated to provide a harassment-free work environment for its employees and that it had no duty to protect employees of other companies. The general contractor said that while the victim could sue the offending supervisor, the company had no liability to nonemployees. The court disagreed and upheld a judgment against the general contractor.

While this case involved an employer in the construction industry where it is common to have workers from several different companies working together on a common project, there is no reason why the same standard would not apply outside the construction industry. Harassment is unlawful and should be stopped regardless of where the victim happens to be employed.

PERFORMANCE EVALUATION PREVIEWS – NEW APPROACH TO AN OLD PRACTICE

Two recent Wall Street Journal articles (October 13 and 20) contained important tips on how companies might consider restructuring performance evaluations. The first article compares the attitudes of Generation Y employees (those born after 1980) with Baby Boomers (those born between 1946 and 1964). Gen Yers want feedback concerning their work, and they want it now – not in an annual performance review session. Some experts have suggested that Gen Y employees cannot take criticism, but several studies show just the opposite – they don’t mind hearing criticism but they cannot stand hearing nothing. They want feedback every week on what they are doing right and where they need to improve.

The second article maintains that traditional annual performance evaluation sessions – backward-looking report card exercises – inhibit communication and impede organizational effectiveness. In a typical session, the manager wants to talk about areas where performance can be improved but the employee is focused on “What is my raise?” It is difficult to have effective communication when the parties are thinking about different subjects – it’s a lot like the old “Who’s on First” comedy routine.

The author suggests renaming the Performance Review to Performance Preview and says that pay decisions should be communicated separately. The Preview meeting would focus on how the manager and employee can work together in the coming year to improve both individual performance and organizational success. With pay issues out of the way, the chances of effective communication – with both parties being on the same page – increases.

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Disclaimer regarding legal advice: The information in this newsletter should not be construed as legal advice. This information is not intended to create or constitute an attorney-client relationship. For more information or an explanation about the matters discussed in this newsletter, please contact an attorney in this practice group.