When the economy slides into a recession, layoffs are inevitable. Whether it’s three or four people laid off, a massive downsizing or a company that has been forced to shut its doors, the layoff experience is nothing short of a nightmare for most workers.
Years and even decades of valued work, input and influence on a company comes to a screeching halt in a surprisingly formal and succinct process. Rarely are the pink-slipped given time to download personal documents from their computers or say goodbye to peers. If severance is involved, there will be papers to sign. HR might want an exit interview.
And that’s all there is. The process happens so quickly, most are too stunned and shaken to consider what rights or entitlements they do or do not have.
1. Go to HR First
If you’re wondering why on earth you’d spend your first five minutes of unemployment with the people who delivered the message, you are not alone. But experts say this is the best place to start.
“The first thing someone who has been laid off should do is get to their HR department, instead of running in five other directions. They are a resource whose job is to help their employees,” said Brian Hoffman, a partner in the IT division of Winter, Wyman, a recruiting firm.
As every company handles layoffs differently, the HR department can let you know what the company is offering, from severance to paying out unused sick time. But there is another reason that an employee should talk first to HR.
“You’re entitled to some kind of reference from the employer, saying that you worked there, that you were a good employee and that you were laid off and not fired,” said Hoffman, something that will be no small distinction to make down the road.
2. Your Rights from Written Agreements
As a laid-off employee, you have three major categories of rights that you might be entitled to. The more you know about them, the better protected you will be.
The first source of rights is employment agreements, which can include an individual contract that extends for a period of time or a collective bargaining agreement–that from a union or union-like entity.
“Look at the original terms under which you are hired,” said Jay Warren, an attorney with Bryan Cave LLP with a specialty in labor and employment law.
“An individual contract for a period of time will include provisions of what will happen if you are terminated before the end of it. Check this first.”
What Company Policies Entitle You To
3. What Company Policies Entitle You To
The second source of laid-off employee rights is through company policies. ERISA (The Employee Retirement Income Security Act of 1974) is a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans.
“ERISA means you are entitled to certain things. If the company policy involves a lot of administrative discretion or complexity and could be ongoing, ERISA steps in,” Warren said.
4. Your Statutory Rights
The third source is statutory rights, including the Federal WARN (Worker Adjustment Retraining Notification) Act, which requires employers with more than 100 employees to provide at least 60 days advanced written notice of a plant closing, or a layoff affecting more than 50 employees at a single site. There are several other stipulations within the WARN Act, but all serve to help workers get back on their feet.
“If Bear Stearns had just gone out of business last Monday–if the liquidity crisis was generally unforeseen–60 days notice would have been required,” said Warren.
Other statutory rights come from anti-discrimination and anti-retaliation laws.
“You can’t be laid off, for example, as retaliation for taking family or medical leave,” explained Warren.
5. What You Are and Are Not Owed
Laid off workers are owed payment for every minute of work they have completed up until the moment they were handed the pink slip. Companies are also required to pay out any unused accrued vacation time.
However, sick time is not refunded, as it is not a cumulative benefit.
“Sick leave is not a statutory requirement, unless you’re part of a union, quasi-union or bargaining arrangement that may have arranged it into your employment contract,” said Hoffman.
Because sick time’s purpose is only to keep a paycheck coming in the event of an illness, companies won’t pay it out if this is not the case.
How Severance Does and Does Not Work
6. How Severance Does and Does Not Work
Severance packages, usually a combination of salary, a lump sum of cash, stock options or other benefits, are used to provide for an employee for a period after they leave the employer or as a thank you for service.
It is typically scaled according to the number of years an employee had with their company, as well as their position.
But workers don’t have an inherent right to them. There is simply no legal requirement for severance pay. It is more of a bargaining tool; an employee may be able to negotiate for higher severance by agreeing not to hold the company responsible for wrong-doing.
7. What Signing a Release Means
If severance is offered, it is nearly guaranteed to be accompanied with a package of papers that need to be signed, clearing the employer of any wrong-doing. Once this is signed, an employee will have a nearly impossible time trying to sue their employer for wrongfully terminating them, so it is best to consider this before signing.
Older workers will have an easier time, as a law entitles them to extra protection.
According to the federal Older Workers Benefit Protection Act, an employer must give workers 40 or older at least 21 days to review their severance package. These workers are allowed to consult a lawyer to review the contract before signing it, and they have can change their minds within seven days after signing it and revoke acceptance.
8. What Benefits You’re Entitled To
Unless an employee is terminated for misconduct or poor performance or their position is eliminated, they are able to receive unemployment benefits. But there are other ways to receive it as well, which is why consulting an employment lawyer may help.
“If you’re offered another job within the company at a substantially lower level of compensation and you don’t want to take it, you are still eligible for unemployment,” said Warren.
Terminated employees have a right to COBRA (Consolidated Omniubus Budget Reconciliation Act) benefits as well, a federal law which allows an individual and their dependents to continue group health and dental coverage even if terminated.
The coverage will generally be with the same carrier at the same level that they had before, at the same price that their company paid, but they have to pay for it themselves. They also cannot let it lapse.
“If you have COBRA and think you’re going to need it, you need to exercise those options immediately,” said Hoffman.
Why Employers Want to Minimize Your Trouble
9. Why Employers Want to Minimize Your Trouble
So why are your employers being so nice to you as they send you packing? The reasoning lies deeper than various federal statutes that keep them from doing otherwise. It is just as likely that they’re trying to save their reputation and legal position.
“If they get pennywise or foolish and don’t handle this well, they’ve bought themselves long-standing employee relations blemishes on their reputations. Years later, I hear candidates saying that they don’t want to work for a certain company because they remember what they did to their employees,” said Hoffman.
The same goes for the departing worker. They may be asked to take part in an exit interview, but there is no law requiring them to do so. But experts will advise them to be courteous just the same–when the employer gets back on their feet down the road, they might be glad they didn’t burn that bridge.
10. What the Recession Will Mean for the Laid-Off
As the U.S. economy continues to edge into a recession, it is unfortunately likely that the pink-slipped population will increase. Even worse, what is offered to employees as they are shown the door might slip as well–such as severance negotiations.
“It depends on the company. If it is in relatively strong economic shape and they’re just adjusting their expenses to avoid problems in the future, they’re likely to continue with their normal severance packages. But if the company is in the middle of a financial crisis and doing everything it can to survive and avoid bankruptcy, it may reduce its historic severance benefits. Legally, it can do this, or not pay severance at all,” said Warren.
But these companies put themselves at a much greater risk for lawsuits, and open themselves up to even higher legal fees. It is for this reason that even if significantly diminished during a recession, almost all companies will offer some token.