Employers frequently schedule companywide shutdowns during peak summer or winter holidays, generally for one to two weeks. Effectively managing these shutdowns necessitates planning, scheduling, and effective communication with employees.

Effective communication is key when scheduling shutdowns, whether annual or unexpected. Employers should inform the workforce at the beginning of the year or upon hiring about any planned shutdowns, ensuring everyone has ample time to prepare. For unplanned shutdowns, it is crucial to notify employees as soon as the decision is made. This helps to maintain transparency and mitigate any concerns about the company’s stability.

Understanding the impact of employment laws is crucial, particularly the distinctions between exempt and non-exempt employees. Key regulations to consider include, the Massachusetts unemployment insurance law, the federal Fair Labor Standards Act (FLSA), Massachusetts Wage and Hour Law, and the federal WARN Act

Massachusetts Unemployment Insurance Law

Massachusetts Unemployment Insurance (UI) law provides support for affected employees during a shutdown. Employees may be eligible to file for UI benefits if a shutdown lasts for a week or more. Although benefits can’t be collected for the first week, it counts as the waiting period for subsequent weeks within the same 52-week benefit year or if the employee faces job loss later. Employers may require the use of vacation or PTO during a shutdown, which may impact eligibility for UI benefits.

Fair Labor Standards Act Compliance

Non-exempt employees: Managing non-exempt employees during unplanned shutdowns is straightforward: they are not paid if they do not work. Considerations include:

• Vacation Time: Decide whether to allow the use of vacation time or PTO during the shutdown, which can impact unemployment claims if denied.
• Advance Notice: Provide as much notice as possible to minimize disruption to employees’ personal plans and reduce potential dissatisfaction or turnover.

Exempt employees: According to a 2009 U.S. Department of Labor opinion letter:

• PTO Use: Exempt employees may be required to use accrued vacation or PTO during shutdowns without affecting their exempt status, provided they are paid their full guaranteed salary.
• No Work, No Pay: Exempt employees do not need to be paid for weeks they do not work, which does not affect their exempt status. However, ensuring no work is done, especially remotely, requires clear communication. Measures may include retrieving company equipment to prevent work during the shutdown.

For more comprehensive details on the salary basis requirements and permissible deductions under the FLSA, please consult the official documentation on the Cornell Law School’s website.

Massachusetts WorkShare Program

Consider the Massachusetts WorkShare program as an alternative to total shutdowns. The program allows the employer to temporarily reduce employee hours so that the workforce is significantly reduced and the employees “share” jobs. A key advantage of participating in this program is that it could prevent the need for layoffs while allowing employees to supplement their reduced income with unemployment insurance benefits.

Massachusetts Wage and Hour Law

Under Massachusetts Wage and Hour Law, employees must be paid within six days after the pay period ends. During a complete week shutdown, there is no obligation to pay employees unless otherwise specified in the company’s handbook or policy manual. However, employers must navigate more complex issues if a short-term shutdown extends longer than planned. Notably, Massachusetts General Law ch. 149 § 148 requires that employers pay out any accrued but unused vacation time on the next payday after an employee voluntarily leaves or immediately if she or he is terminated. Importantly, non-compliance with these regulations can lead to private lawsuits, with the possibility of the courts awarding treble damages to affected employees.

WARN Act

If your company has 100 or more employees, it is subject to the WARN Act, which mandates at least 60 days’ advance notice for plant closings or significant layoffs.

Covered employers must notify employees, local governments, unions (if applicable), and state dislocated worker units. The WARN Act allows limited exceptions, such as efforts to secure new capital to keep the business running. If a shutdown extends, employers must communicate with all necessary parties as quickly as possible.

For companies with fewer than 100 employees, managing shutdowns requires careful consideration. Employers should assess the likelihood of recalling employee’s post-shutdown. If rehiring seems unlikely, it’s advisable to pay out accrued vacation wages to avoid the risk of treble damages.

More Resources

If AIM members have questions about shutdowns, layoffs, or any other HR matter, contact the AIM Helpline at 800-470-6277 or email helpline@aimnet.org. For more complex HR matters, visit our website, www.AIMHRSolutions.com to learn how we can help.