Transcript Slide 1

Making Tough Personnel
Decisions in a Global Recession:
Doing it Right and
Minimizing Liability
United States Session
March 24, 2009
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Presenters
Moderator – Stephen J. Hirschfeld
CEO, Employment Law Alliance, San Francisco, CA
[email protected]
Vicente Antonetti, Goldman, Antonetti & Cordova, P.S.C., Hato Rey, Puerto Rico
[email protected]
John F. Baum, Curiale Hirschfeld Kraemer LLP, San Francisco, CA
[email protected]
Michael Blue, Ray, Quinney & Nebeker, Salt Lake City, UT
[email protected]
G. Joseph Curley, Gunster, Yoakley & Stewart, P.A., West Palm Beach, FL
[email protected]
Daniel D. Johns, Crowley Fleck, PLLP, Kalispell, MT
[email protected]
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Presenters
Tamara Hjelle Olsen, Gray Plant Mooty, Minneapolis, MN
[email protected]
Michael Porter, Miller Nash LLP, Portland, OR
[email protected]
Ginger D. Schröder, Schröder, Joseph & Associates, Buffalo, NY
[email protected]
Elizabeth Torphy-Donzella, Shawe & Rosenthal, LLP, Baltimore, MD
[email protected]
Timothy P. Van Dyck, Edwards Angell Palmer & Dodge LLP, Boston, MA
[email protected]
Keith M. Weddington, Parker Poe Adams & Bernstein LLP, Charlotte, NC
[email protected]
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INTRODUCTION
and
OVERVIEW
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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?
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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.
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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?
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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.
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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?
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The American Recovery
and Reinvestment Act
• Enacted on February 17, 2009; most changes
effective March 1, 2009.
• 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.
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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.
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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
employee’s involuntary termination of employment
between September 1, 2008 and December 31, 2009.
What is “involuntary termination”?
– Not defined; further guidance needed.
– Develop consistent policy for treatment.
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COBRA Subsidy
How much is the subsidy?
– AEI only required to pay 35% of COBRA premium. Note:
subsidy is excluded from AEI’s 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.
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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 1st 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.
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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.
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Special Enrollment
Provisions
• When does special election coverage begin?
– March 1, 2009.
– NOT RETROACTIVE to date of original loss of
coverage.
• When does such coverage end?
– When otherwise would have ended.
– No extension of COBRA duration.
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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, 2009.
– DOL to provide model notice by March 19, 2009
laying out content.
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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, 2009.
3. 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.
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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?
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Federal and State
WARN Laws
What are the hottest issues?
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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.
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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.
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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.
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New York State
WARN Law
• Effective on or about February 1, 2009.
• 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.
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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).
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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.
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New York State
WARN Law
• Relocation: Must give 90 days’ advance
written notice in the event of an employer’s
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.
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New York State
WARN Law
• NOTE: New York State Labor Law Section
195 - Notices in Event of Employment
Terminations.
Notice of termination date of employment
and termination dates of all associated
benefits.
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• How are your clients coping with
implementing overseas layoffs?
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Lessons Learned from Bad Personnel Decisions
Made During Tough Economic Times
• What should have been done differently?
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CONCLUSION
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