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Making Tough Personnel Decisions in a Global Recession: Doing it Right and Minimizing Liability United States Session March 24, 2009 If you are unable.

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Presentation on theme: "Making Tough Personnel Decisions in a Global Recession: Doing it Right and Minimizing Liability United States Session March 24, 2009 If you are unable."— Presentation transcript:

1 Making Tough Personnel Decisions in a Global Recession: Doing it Right and Minimizing Liability United States Session March 24, 2009 If you are unable to listen to the webinar through your computer, please call: , enter Event No ## and you will be connected by phone. If you are experiencing any other technical difficulty, please contact Technical Support toll-free at , Option #1. 1

2 Presenters Moderator – Stephen J. Hirschfeld CEO, Employment Law Alliance, San Francisco, CA Vicente Antonetti, Goldman, Antonetti & Cordova, P.S.C., Hato Rey, Puerto Rico John F. Baum, Curiale Hirschfeld Kraemer LLP, San Francisco, CA Michael Blue, Ray, Quinney & Nebeker, Salt Lake City, UT G. Joseph Curley, Gunster, Yoakley & Stewart, P.A., West Palm Beach, FL Daniel D. Johns, Crowley Fleck, PLLP, Kalispell, MT 2

3 Presenters Tamara Hjelle Olsen, Gray Plant Mooty, Minneapolis, MN Michael Porter, Miller Nash LLP, Portland, OR Ginger D. Schröder, Schröder, Joseph & Associates, Buffalo, NY Elizabeth Torphy-Donzella, Shawe & Rosenthal, LLP, Baltimore, MD Timothy P. Van Dyck, Edwards Angell Palmer & Dodge LLP, Boston, MA Keith M. Weddington, Parker Poe Adams & Bernstein LLP, Charlotte, NC 3


5 Layoff Decisions How Companies Are Saving Money on Personnel Costs Short of Layoffs What are the federal and state legal challenges to implementing these decisions? Reducing overtime; Hiring freezes; Salary freezes; Salary reductions; Furloughs; Temporary shutdowns; Work-sharing arrangements; Shortened work weeks or workdays; Eliminating training programs; Boosting healthcare premiums; Creating incentives for employees to voluntarily resign or retire. 5

6 Layoff Decisions How to Make these Decisions Bullet-Proof What are the biggest challenges when making these decisions? What are the most common lawsuits being filed today on behalf of laid-off workers, and how could they have been avoided? 6

7 Separation Agreements and Releases What are the hottest issues to know? Clawbacks / forfeitures of severance pay and / or equity rights for breaches of restrictive covenants. Re-affirmation of ownership of all company IP. Carve-outs for rights to defense and indemnification for executives acting within the scope of their employment. Cooperation clauses, with teeth. Non-disparagement clauses, with teeth. 7

8 Separation Agreements and Releases Other Important Issues What problems and issues are arising when preparing the age statistics required by the OWBPA? How much time should workers under the age of 40 be given to decide if they wish to sign a release? What are the brand new COBRA rules, and how do they apply to employees laid off last year and those scheduled to be laid off in 2009 and the future? 8

9 The American Recovery and Reinvestment Act Enacted on February 17, 2009; most changes effective March 1, Provides significant changes to COBRA continuation coverage (federal and state law). Applies to employer-sponsored group health plans (self-insured and fully insured, regardless of size) and multi-employer plans. 9

10 The American Recovery and Reinvestment Act The Act includes three major changes to COBRA: –New COBRA subsidy; –Changes to COBRA enrollment provisions; –Additional notice requirements for plan administrators. 10

11 COBRA Subsidy Who is eligible for the subsidy? –Assistance eligible individual -- or AEI (including qualifying dependents) is an individual who lost or will lose group health plan coverage because of an employees involuntary termination of employment between September 1, 2008 and December 31, What is involuntary termination? –Not defined; further guidance needed. –Develop consistent policy for treatment. 11

12 COBRA Subsidy How much is the subsidy? –AEI only required to pay 35% of COBRA premium. Note: subsidy is excluded from AEIs gross income (but special rule for high income individuals). –Subsidy applies to employee portion of premium only – not the amount subsidized by employers. –Employer pays remaining 65% (unless multi-employer or small fully insured plan). –Government will reimburse employers in the form of an offset to the amount of payroll tax due subject to ordering rule. –IRS has revised Form 941 (Employer Quarterly Tax Form) to take into account these new rules. 12

13 COBRA Subsidy When does it begin? –Generally, March 1, 2009 (subject to potential two-month lag). When does it end? –Generally, up to 9 months. –Earliest of: Date eligible for other coverage; Nine months after 1 st month of subsidy; or End of maximum COBRA period required by law. Employee obligation to notify plan of other coverage; or penalty (110% of subsidy) from date eligible for other coverage. 13

14 Special Enrollment Provisions Some will get second bite at the COBRA apple. Who? –individuals who lost coverage due to involuntary termination between September 1, 2008 and February 16, 2009 (with no current COBRA election). What notice is required? –Special election notice to within 60 days of enactment, or by April 18, 2009 (DOL model notice). –60 days to elect after notice sent. Penalties for failure to send notice –$110/day per affected individual plus excise taxes. 14

15 Special Enrollment Provisions When does special election coverage begin? –March 1, –NOT RETROACTIVE to date of original loss of coverage. When does such coverage end? –When otherwise would have ended. –No extension of COBRA duration. 15

16 Employer Notice Requirements Changes to general election notice –To individuals who have qualifying event (potentially broad) during the period from September 1, 2008 through December 31, –DOL to provide model notice by March 19, 2009 laying out content. 16

17 Action Steps 1.Identify individuals to receive revised notice and prepare notice. 2.Identify AEIs who currently are on COBRA coverage and become eligible for subsidy on March 1, Determine the correct premium subsidy for AEIs who are not currently required to pay the maximum COBRA premium (severance). 4.Modify or develop payroll and other administrative systems to: bill AEIs appropriately, track subsidy period, provide required information for government reporting. 5.Connect with COBRA administrator (if applicable) to ensure coordinated response. 17

18 Severance Pay and Benefits How much severance are your clients providing departing employees? Are there regional or industry differences? Are your clients providing other types of severance benefits? Are your clients cutting special deals for certain employees and, if so, what are the circumstances? Are your clients using stay-until-close bonuses and, if so, what challenges are they facing? 18

19 Federal and State WARN Laws What are the hottest issues? 19

20 Federal and State WARN Laws Series of Small Layoffs Two or more groups laid off at a single site. Each group does not have the minimum number for a plant closing or mass layoff. Total exceeds the threshold. Employment loss occurs within a 90-day period. Need to look backward and forward 90 days. Unless the employment losses were the result of separate and distinct reasons. 20

21 Federal and State WARN Laws Can you really fit into one of the exceptions to WARN? Faltering Company – plant closings only. Unforeseeable Business Circumstances – plant closings and mass layoffs. Natural Disaster – plant closings and mass layoffs. 21

22 California State WARN Law Employers who have a covered establishment (any industrial or commercial facility) employing 75 or more persons. Mass layoff of 50 or more employees or termination of the operations of a covered establishment or a relocation of operations more than 100 miles away. Mass layoff looks at a 30-day period. No unforeseen business circumstances exception. 22

23 New York State WARN Law Effective on or about February 1, Applies to New York employers with 50 or more full-time employees. Requires at least 90 days (as opposed to 60 days under federal WARN) advance written notice of mass layoffs, relocations, and plant closings. 23

24 New York State WARN Law Notices go to affected employees, unions who represent them, and governmental offices stated in the statute. These governmental offices are in addition to the offices that would receive notice for a Fed WARN mass layoff or plant closing. Unlike Fed WARN, New York WARN notices to unionized employees go to both the employees and their union (a Fed WARN notice for a unionized employee goes only to the union, not to the employee). 24

25 New York State WARN Law Unlike WARN, where 50 full-time employees for a plant closing, or 50 full-time employees who constitute at least 33% of the workforce for a mass layoff, must suffer an employment loss to trigger an advance written notice obligation, the new legislation mandates that an employer provide notice if: –the mass layoff impacts 25 full-time employees who represent at least 33% of the workforce; or –the plant closing results in 25 employees losing their positions over a 30-day period. 25

26 New York State WARN Law Relocation: Must give 90 days advance written notice in the event of an employers relocation of operations to a location at least 50 miles away. Violations are policed by the New York State Commissioner of Labor and are subject to civil penalties and back wages. 26

27 New York State WARN Law NOTE: New York State Labor Law Section Notices in Event of Employment Terminations. Notice of termination date of employment and termination dates of all associated benefits. 27

28 How are your clients coping with implementing overseas layoffs? 28

29 Lessons Learned from Bad Personnel Decisions Made During Tough Economic Times What should have been done differently? 29

30 CONCLUSION Immediately following the webinar, after you disconnect, a survey will automatically appear on your computer screen asking you to evaluate the webinar. We would appreciate your taking a few minutes to complete it so that we can continue to improve the quality and delivery of future ELA-sponsored webinars. Thank you for attending our webinar. Please visit our website at: for more resources and to listen to past 30

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