Companies & Industries

When the Ax Falls


J.C. Penney (JCP) is laying off 5,300. Lucent Technologies (LU) is canning 10,000. DaimlerChrysler (DCX) plans to get rid of some 26,000. If you read the news these days, it seems as though companies are cutting jobs faster than a Benihana chef chops bamboo shoots.

Although layoffs are rarely a good thing for employees, most companies provide some protections, as do several laws. Depending on your situation, it could be important to know your legal rights if the boss should announce it's time for you to find an Aeron chair to warm at some other company.

Paula Brantner is senior staff attorney at the National Employment Lawyers Assn., a specialty bar association for lawyers who represent workers in employment- and civil-rights cases. The San Francisco-based association has more than 3,000 members across the country. Brantner recently talked with BusinessWeek Online writer Eric Wahlgren about what rights employees have when they're being let go. Here are excerpts from that conversation:

Q: When employees are fired, what type of severance are they entitled to, if any?

A: Generally, you are not entitled to any kind of severance. However, many companies have made severance a guarantee in their personnel policies and in practice over the years. The basic rule is that you can't treat employees unfairly or differently. And so, if a company has promised some kind of severance in the past and has given that severance to other employees in equivalent job situations, then they would need to honor that [for everyone].

Q: Does an employer have to give an employee any advance warning about a layoff? After all, it is common practice for an employee who plans to leave a job to provide two weeks' notice to an employer.

A: It is common practice for employees to give two weeks' notice. But that's more of a business courtesy than a legal requirement. And similarly speaking, there are employers who -- when they want to terminate an employee -- will give them advance notice plus an opportunity to find another job, whether it's two weeks or even longer.

But in most situations, employers aren't legally required to do that. We've all heard of situations where employees have been asked to leave the premises immediately. Some companies fear that employees are in possession of sensitive information. And some companies have reason to fear that employees, once they're terminated or know they're going to be terminated, are going to do some harm to the company.

In certain situations, the Worker Adjustment Retraining & Notification Act [WARN] of 1989 applies. It applies to plant closings and other sorts of mass terminations, as opposed to individual terminations. Reading from the booklet, it says, "Employers with 100 or more full-time employees [are] to provide 60 days' advance notice that they're going to lose their jobs before closing a facility and before putting into effect any other mass staff reduction that will last six months or more."

But there are a lot of loopholes. It doesn't apply to part-time workers. One way for an employer to get around it is by voluntarily offering severance pay [if] the company is short on the 60-day notice. So you could basically pay off that notice.

Q: If an employer tells employees that they're being laid off and that they need to leave the premises immediately, do the employees have a right to demand to go back to their desks to pick up personal belongings?

A: I am not aware of law that applies to that situation. Obviously, property that belongs to the employee doesn't cease to belong to the employee by virtue of the fact it's in the company's office. I don't know that there is necessarily any law on whether the company couldn't mail your belongings to you vs. allowing you to box them up under supervision. If an employee could be harmed because they lacked immediate access to something, such as important medication, that could create some risk for the company. I think most companies would allow you to go retrieve your personal belongings, even if it's under some kind of supervision.

Q: What about access to e-mail? Can employees demand to log on to their e-mail account before they're asked to leave?

A: The answer to that, I think, is pretty clearly no. Your work e-mail address is on the employer's account or on the employer's server. If you used your work e-mail for personal reasons -- if that's even allowed in your company, as some companies just don't allow it -- you certainly wouldn't have a right to retrieve something. Even if personal e-mail was allowed, it's kind of risky to use your work e-mail for personal communications.

I think the employer would have even more of an interest in not allowing you access to it if you were planning to use it for getting contacts that might enable you to compete with the company. An employer might say that an employee developed client lists or contact lists through work for the company and that's proprietary, confidential information. The way the law is going, I think employers have a lot of

latitude in terms of maintaining some control over their e-mail accounts.

Q: That brings up the next question. If you've cultivated contacts or sources through the course of your job with a company, what are the guidelines concerning contacting these people in the future for other work or jobs?

A: It would be bound, if at all, by some kind of noncompete clause. And some companies require their employees to sign something saying that within a certain period of time, they will not do business in the field or use those contacts. Those laws vary state by state in terms of how restrictive they are.

And in some cases, they've been thrown out because they're so restrictive that they would virtually forbid employees from getting another job in the field of expertise that they've built over the years. They can pretty much make a person unemployable. And so, many courts have rejected noncompete agreements that have been drafted that broadly.

But a lot of states will permit an employer to have some kind of noncompete agreement that's reasonably tailored to the information that is being protected. These agreements are for a relatively short length of time. Many of these industries are so dynamic that in six months or a year, a lot of that information is not going to be nearly as valuable.

Q: So, your advice would be to have employees consult their noncompete agreement?

A: Yes. And they should consult an attorney, if they need to, because some employees have been asked to sign contracts that would not be valid under the laws of that state or that would be easily thrown out in court. So if there's any question as to whether they could engage in activity under the clause, they should consult with an attorney to see if, in the attorney's opinion, the clause would be upheld or to see what kind of risks they would be taking.

Q: Would the same rules apply for intellectual property, such as any products or services that an employee may have worked on at a company?

A: Well, there's a different body of law on that. But I think a lot of the same considerations apply. How secret is it? What is the extent of the patent protection? What would someone be doing if they went to another company, etc.?

Q: What about health care? If an employee has had health benefits with a firm, is the firm required to provide a COBRA-type plan?

A: The COBRA law applies if a firm has a certain number of employees. It could also depend on the company's relationship with the health-care program in the first place. Some companies contract with insurance providers. And others are self-insured and self-administered.

But basically, the COBRA plan allows an employee to convert an employer health plan to an individual plan and maintain coverage for a certain period. COBRA is not cheap. A lot of these programs are pretty costly. But they may be the only route for someone who needs health-care coverage and can't otherwise get it.

Q: Are employers required by law to provide any sort of assistance in helping employees find new jobs? Is there anything in the law that requires employers to try to find a job in the company where the employee is actually employed before they lay them off?

A: It's generally a courtesy, and not a legal requirement, to provide outplacement assistance. It's a similar case to severance. If the company has provided outplacement assistance for other employees and it doesn't provide it for a particular individual, then it runs the risk of facing some kind of discrimination suit for treating certain employees differently. So the company needs to honor what it has promised the employees through its personnel policies or through actual practice with previous employees. Some companies will make an effort to find another job for employees in the company. A company could also be bound by a collective bargaining agreement that prohibits it from hiring people from the

outside until it hires back people internally.

Q: What about pensions or 401(k) programs? Those are perfectly portable, right?

A: A lot of steps have been taken in recent years to prevent companies in difficult financial straits from raiding pensions. Sometimes people have left companies, and they have found that the money isn't there. Otherwise, the law is pretty straightforward as to what you can and can't do in terms of rolling over the money into another fund.

Q: Have you heard any horror stories about how layoffs have been handled recently?

A: I haven't heard a lot of stories yet. I'm sure they'll trickle down. There's been a lot of talk of large companies doing mass layoffs -- DaimlerChrysler and Amazon.com [AMZN

]. Some companies seem to have a handle on how to handle it better than others.

Some seem to give employees as much notice as possible and as much assistance as possible in finding other jobs. And then some companies just kind of close down and lay everyone off, and that's it. Obviously, the former is better than the latter.

If you're the one having to choose who gets laid off and who stays, it is important to have very clear criteria as to how that decision gets made. If you eliminate all the women or all the ethnic minorities or all the older workers, you're going to find yourself faced with a lawsuit. You will be in a position of justifying why you made the decisions you did. And so it is important that companies have very clear guidelines so employees know how and why the decision was made, even if the employee doesn't agree with it.

Q: Lastly, where can employees go for more information if they feel they haven't been treated fairly in a layoff?

A: We have a sister organization that helps workers. It's the National Employee Rights Institute. They have a number of publications, including a book called Job Rights & Survival Strategies. They tout it as a self-help guide for the newly unemployed and for those who want to be prepared if and when the ax falls.

[Editor's note: NERI is now known as Workplace Fairness. Its Web site is www.workplacefairness.org.]


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