1. EMPLOYMENT LAW FOR HUMAN RESOURCE PRACTICE, 5E David Walsh © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

2. Downsizing & Post-Termination Issues Chapter 19 © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

3. Chapter Outline Downsizing Post-Termination Issues A Concluding Thought © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

4. Downsizing Downsizing is not a legal term, but a euphemism to describe the involuntary termination of many employees where the employees’ performance is not at issue Downsizing or Reduction in Force (RIF) refer to terminations that are based on employers’ judgments that the number of employees, positions or facilities must be reduced Employers regularly decide to go out of business, close facilities, relocate, subcontract, outsource, and reduce staffing to save money © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

5. Downsizing – The Decision to Downsize (1 of 13) Challenges come primarily from the National Labor Relations Act (NLRA) in two ways: ◦ Downsizing might be an unfair labor practice (ULP) if it interferes with employees’ NLRA rights or is used to discriminate based on union activities ◦ Downsizing might be a mandatory topic of bargaining, requiring negotiation with union representatives prior to taking action © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

6. Downsizing – The Decision to Downsize (2 of 13) Employers can choose to go out of business entirely, but must not selectively close facilities to inhibit unionization at their remaining facilities If downsizing decisions are mandatory topics of bargaining, unionized employers must negotiate in good faith before finalizing such decisions Successor employers must bargain with unions that represent employees at acquired companies, although they are generally not bound by the terms of existing labor agreements ◦ Privatization of public services raises questions about whether the private companies taking over are successor employers who must bargain with unions © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

7. Downsizing – …The WARN Act (3 of 13) The implementation of the decision to downsize may be affected by the Worker Adjustment and Retraining Notification Act (WARN) Employers covered by the WARN Act are prohibited from ordering plant closings or mass layoffs until the end of a 60-day period that follows the provision of written notice to affected employees (or to union representatives) and to state and local government officials Details & definitions under the Act are exacting © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

8. Downsizing – …The WARN Act (4 of 13) The WARN Act applies to employers with 100 or more full-time employees or 100 or more full- and part-time employees working at least 4,000 hours per week Counting employees to determine whether WARN applies is problematic because downward fluctuation in employment levels is inherent in the circumstances under which the Act is applied © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

9. Downsizing – …The WARN Act (5 of 13) The relevant point in time for determining coverage is the date that first notice of a closing or mass layoff is required to be given (60 days before downsizing) There may be “waves” of layoffs, none of which is large enough to require notice, but employment losses over a 90-day period can be combined to prove a mass layoff Multiple notifications may be required © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

10. Downsizing – …The WARN Act (6 of 13) Plant closing is defined by the Act as a permanent or temporary shutdown of a single employment site when that shutdown results in employment loss during any 30-day period for at least 50 full-time employees A mass layoff is a reduction in force not caused by a plant closing, but that results in employment loss at a single work site during any 30-day period for at least 500 full-time employees ◦ (or at least 50 full-time employees when these comprise at least 33 percent of total employment at the work site) © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

11. Downsizing – Selecting Employees… (7 of 13) Rule: The means of selecting individuals for downsizing must not be discriminatory. Determining whether a discharge is part of a reduction in force (RIF) is not always straightforward ◦ A RIF situation occurs when business considerations cause an employer to eliminate one or more positions within the firm. But an employee is not RIFed if he or she is replaced after discharge. A genuine RIF means that someone else is assigned to do the employee’s work, or the work is redistributed among other existing employees already performing related work © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

12. Downsizing – Selecting Employees… (8 of 13) Of particular concern is age discrimination Age discrimination plaintiffs must show that they were treated less favorably than employees who were “substantially younger” even if those employees were not under 40 If an employer uses “reduction in force” to explain a discharge, the employer must explain why certain employees were selected © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

13. Downsizing – Selecting Employees… (9 of 13) © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

14. Downsizing – Early Retirement Incentives (10 of 13) The Age Discrimination in Employment Act (ADEA) prohibits mandatory retirement except for certain persons in bona fide executive and high policy-making positions. Rule: Employers must not force employees to retire when they reach a certain age. © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

15. Downsizing – Early Retirement Incentives (11 of 13) Under the Older Workers Benefit Protection Act (OWBPA), it is legal for employers to offer early retirement incentives, even though the minimum age or service requirements might exclude younger employees ◦ However, early retirement offers cannot be extended to one age group (employees between 52 and 56), but denied to older employees Employees must be informed if early retirement incentive plans are under serious consideration © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

16. Downsizing – Effects of Bankruptcy… (12 of 13) Employees are not secured creditors, but wages earned after a Chapter 11 filing have high priority ◦ Claims for wages and benefits earned prior to bankruptcy are weaker and limited Nonunion employers may cancel expected raises or bonuses, cut wages, or reduce benefits Union employers may ask the union for concessions, but filing for bankruptcy does not necessarily absolve an employer of its obligations under a labor agreement © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

17. Downsizing – Effects of Bankruptcy… (13 of 13) Firms must present union representatives with proposals based on the most complete and reliable information available, provide the union with all relevant supporting information, and bargain in good faith © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

18. Post-Termination Issues – Unemployment Insurance (1 of 6) Employees who suffered involuntary unemployment and are able to work, available for work, and actively looking for it are eligible to receive unemployment insurance ◦ Employees who are discharged for misconduct or who voluntarily leave are not eligible for unemployment insurance To be eligible, employees must show “an attachment to the workforce” and be able and willing to accept suitable work Most states establish eligibility by examining the claimant's work history over the base period prior to job loss © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

19. Post-Termination Issues – Unemployment Insurance (2 of 6) Eligibility Criteria and Benefits If an employee is discharged for misconduct, she might be disqualified from benefits ◦ Only serious, intentional misconduct will disqualify Employees who quit their jobs are usually not eligible for benefits, but there are exceptions ◦ A quit which is a constructive discharge ◦ Employees who leave because of health hazards Employees who go on strike are not eligible, unless the employer has said they have been replaced, and no longer have jobs © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

20. Post-Termination Issues – Unemployment Insurance (3 of 6) Eligibility Criteria and Benefits Availability for work raises more questions The unemployed must be willing to seek and accept suitable employment Insurance Claims Unemployment insurance taxes are experience rated; employers who produce more claims pay more taxes Employers should not routinely contest unemployment insurance claims, but should contest when the former employee voluntarily quit, was terminated for serious misconduct, or committed fraud © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

21. Post-Termination Issues – Restrictive Covenants (4 of 6) Restrictive covenants are contractual agreements that aim to protect employer interests by limiting the ability of former employees to do such things as: ◦ going to work for competitors ◦ disclosing trade secrets or other sensitive information ◦ soliciting clients or former coworkers to do business with or join other firms ◦ making disparaging comments about their former employers The increasing use of restrictive covenants to constrain the activities of former employees raises important legal and public policy questions © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

22. Post-Termination Issues – Restrictive Covenants (5 of 6) Noncompetition agreements are restrictive covenants designed to prohibit former employees from working for competitors Courts recognize such agreements as restraints on trade and will enforce them only to the extent that the restraint is necessary to protect legitimate business interests. Rule: Employers should use noncompetition agreements only if important business interests are at stake, and should craft the agreements to be no broader than necessary to protect those important business interests © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

23. Post-Termination Issues – Restrictive Covenants (6 of 6) Nonsolicitation agreements prevent former employees from soliciting the firm’s clients after the employee leaves ◦ Some courts give employers more leeway in using these agreements because they impose a lesser restriction on the employee’s ability to earn a living Trade secret refers to information that has actual or potential economic value because it is not generally known to others and the owner makes reasonable efforts to keep this information secret ◦ Courts have traditionally recognized a duty of employees under common law not to divulge such information © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

24. A Concluding Thought… Terminated employees will begin the search for new work and their former employers will seek to fill at least some of the vacated positions. This discussion brings us full circle in our tour of legal issues in employment. You should now have a better idea of how to meet both the spirit and the letter of the law—and to keep your employer’s name out of any future editions of this book. © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

25. What Would You Do? You are a regional sales manager for a technology firm, and have just received notice under the WARN Act that you are about to be laid off, along with about 230 other employees who work for your employer. You have been with the firm for about 12 years. What would you do? © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.