Employers Advised to Ponder Worst-Case Scenarios

Mass layoffs and business closings might not happen, but what if they do?

Stephen Miller, CEBS By Stephen Miller, CEBS March 17, 2020
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With the spread of COVID-19, the disease caused by the new coronavirus, employers are strategizing on what to do when employees have stopped coming to work and customers are staying away from their businesses. Their options include shift reductions, furloughs, reductions in force (RIFs) or even permanent office or plant closures, all of which raise compliance issues under federal, state and local laws.

The virus creates "not just a health crisis but an economic crisis," said Aaron Goldstein, a partner in the Seattle office of law firm Dorsey.

For industries that can't tell employees to work from home, such as manufacturing, retail, and hospitality, employers may take steps to have fewer workers in a building at any one time to reduce contagion in the workplace. For employees who can't work remotely, there are scheduling options "that could allow you to keep employee density down or that would allow you to accommodate the same output with a smaller workforce at any one time," Goldstein said.

Staggered shifts, for instance, could limit the number of employees interacting and reduce the likelihood of transmission.

Beware of any local predictable-scheduling laws, he noted. Seattle's Secure Scheduling Ordinance, for example, requires employers to post work schedules at least 14 days in advance and to pay for half of the hours not worked when an employee is sent home early from a shift or when an employee is scheduled for an on-call shift and not called in.

Local scheduling laws often have exceptions, however, Goldstein noted. Under the Seattle ordinance, employers are exempt from the notice requirement when operations are suspended because of threats to employees or on the recommendation of a public official.

SHRM Resource Spotlight
Coronavirus and COVID-19

Preparing for the Worst

"The pressure on companies to squeeze costs is building as consumers, governments and others pull back on activity," reported The Wall Street Journal on March 14. "Purges of workers could become unavoidable in some industries such as shipping, air travel, retail and dining as demand slows."

Plan cost-saving measures and be sure to understand the legal issues, advised Trina Ricketts, an attorney with Ogletree Deakins in Kansas City, Mo.

When reducing hourly workers' shifts, she said, "make sure you comply with any employment contracts and collective bargaining agreements."

Employers should also ensure they can articulate a legitimate business reason for reducing hours or wages. "Consider doing an analysis to see if any of these changes have a disparate impact on a protected category of workers," Ricketts noted, which could lead to discrimination claims.

Also keep in mind the federal Worker Adjustment and Retraining Notification (WARN) Act, which requires qualifying employers—generally, those with 100 or more full-time employees—to provide 60 days of advance notice of a temporary or permanent plant closing or mass layoff.

"A 50 percent reduction of hours for six months or more can be an employment loss that triggers notice," Ricketts said.

"The WARN Act is inexpensive to comply with but very expensive to violate: Employers must provide lost pay and benefits to each employee who should have received notice 60 days ahead of a covered event," she pointed out.

There are two WARN Act exceptions that allows layoffs and shutdowns without a full 60 days' notice: a natural disaster or an unforeseeable business circumstance. In either situation, the employer must still provide a WARN notice, but it may not have to be a full 60 days in advance. In a natural disaster, the notice can even follow the shutdown.

Along with state-specific employee-notice requirements triggered when businesses change work hours or reduce wages, states also can have their own WARN laws for temporary or permanent factory closings or layoffs, Ricketts added, with stricter requirements or higher penalties than under the federal WARN statute.

[SHRM members-only how-to guide: How to Conduct a Layoff or Reduction in Force]

Voluntary Separations

In a worst-case scenario, employers may choose to first offer voluntary separation programs, including early retirement, as an alternative to layoffs and RIFs.

"Asking employees to voluntarily take a separation-from-employment package is a softer approach," Ricketts said.

While separation offers can be based on age and tenure, comply with all disclosures required under the Older Workers Benefit Protection Act.

Update Business Continuity Plans

It's important that employers prepare or update their business continuity plan to accommodate a possible long-term work-from-home business model," said Jeff Christianson, chief legal officer at Nintex, a business software firm. "Senior leaders need to work together with HR, legal and IT teams to ensure there are proper resources to accommodate the implications of working from home."

For example, "the HR team should be involved to protect the privacy rights of any employees exposed to the virus, the IT department needs adequate infrastructure and personnel to accommodate the number of employees working at home, and the legal team needs to flag any applicable local law implications when employees work from home."


Related SHRM Articles:

U.S. Factories Closing Due to Coronavirus Concerns but Some Must Keep Producing, SHRM Online, March 2020

Most Companies Leaving Pay Programs Alone for Now, SHRM Online, March 2020

Hourly Workers Lose Pay Due to Coronavirus, SHRM Online, March 2020


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