Many businesses are still struggling to find employees, but recent business closings serve as a reminder that employers need to comply with a range of laws when they cease operations, experience a mass layoff or eliminate positions.

Among the key laws are the Massachusetts Unemployment Insurance (UI) law, the Worker Adjustment and Retraining Notification (WARN) law, the Older Workers Benefit Protection Act (OWBPA), COBRA, Massachusetts Mini-COBRA, Massachusetts Wage and Hour law, and the Massachusetts Noncompete law.

Each law affects an employer in different ways, and awareness of their impact is crucial. In some cases, failure to comply with the law may lead to government investigations and sanctions, and individual cases may lead to private litigation and potential damage awards.

Worker Adjustment and Retraining Notification (WARN) – The WARN Act was passed in 1988. It applies to employers with 100 or more employees. The purpose of the law is to provide affected employees with 60 days’ advance notification that their employer is going to cease operations or experience a mass layoff. The penalty for not providing the notice is the employees’ right to recover up to 60 days of unpaid wages   The law applies when an employer does one of the following:

• Closes a facility or discontinues an operating unit permanently or temporarily, affecting at least 50 employees, not counting part-time workers, at a single site of employment.
• Closes an operating unit that has fewer than 50 workers, but the closing also involves the layoff of enough other workers to make the total number of layoffs 50 or more.
• Lays off 500 or more workers (not counting part-time workers) at a single site of employment during a 30-day period; or lays off 50-499 workers (not counting part-time workers), and these layoffs constitute 33% of the employer’s total active workforce (not counting part-time workers) at a single site of employment.
• Announces a temporary layoff of fewer than six months that meets one of the criteria above and then decides to extend the layoff for more than six months.
• Reduces the hours of work for 50 or more workers by 50 percent or more for each month in any six-month period. Thus, a plant closing, or mass layoff need not be permanent to trigger WARN.

The law is enforced by the US Department of Labor.

The Older Worker Benefit Protection Act (OWBPA) regulates the use of releases of claims (i.e., waivers of rights) at the time of separation of employment for employees 40 years old and older.

The law lists seven factors that must be satisfied for a waiver of age discrimination claims to be considered “knowing and voluntary.”  For a release of age claims to be enforceable under the OWBPA, it must:

1. Be written in a manner that can be clearly understood.
2. Specifically, refer to rights or claims arising under the ADEA.
3. Advise the employee in writing to consult an attorney before accepting the agreement.
4. Provide the employee with at least 21 days to consider the offer.
5. Give an employee seven (7) days to revoke his or her signature.
6. Not include rights and claims that may arise after the date on which the waiver is executed.
7. Be supported by consideration in addition to that to which the employee already is entitled.

The law also makes it clear that the release will be unenforceable and invalid if an employer used fraud, undue influence, or other improper conduct to coerce the employee to sign it, or if it contains a material mistake, omission, or misstatement. An example of a mistake here would be providing an employee with a release of claims and insisting the employee sign it that day to receive the benefit.

Group layoffs of older employees

As part of a group termination process, an employer must give impacted employees written notice of the layoff and those employees must be given up to 45 days to consider the waiver before signing it.  For a valid release of age claims in a group layoff, the employer must inform employees in writing of the following in addition to complying with the requirements set out above:

• the decisional unit, or group of employees from which the employer chose the employees who were, and who were not, selected for the program;
• eligibility factors of the program;
• the time limits applicable to the program;
• the job titles and ages of all individuals who are eligible or who were selected for the program (the use of age bands broader than one year, such as “age 40-50” does not satisfy this requirement) and
• the ages of all individuals in the same job classifications or organizational unit who are not eligible or who were not selected.

Finally, while most signed waivers are enforceable if they meet certain contract principles and statutory requirements, an employer may not lawfully limit an employee’s right to testify, assist, or participate in an investigation, hearing, or proceeding conducted by the EEOC or prevent an employee you from filing a charge of discrimination with the EEOC or the employee’s state anti-discrimination agency.

Keep in mind that using or reusing a previous or long-standing release of claims document to terminate an employee is a risky proposition since each release is going to involve particular conditions.

More information is available from the Equal Employment Opportunity Commission.

COBRA and Massachusetts Mini Cobra – Cases in which there is a separation from employment and the employee is on a company-sponsored health insurance plan, in most cases require a company to offer the employee the right to continue health insurance for 18 to 36 months depending upon specific circumstances. The federal COBRA law applies to employers with 20 or more employees.

The Massachusetts Mini COBRA law applies to employers of 2 to 19 employees that offer health insurance. There is more information on the benefits available under the mini-COBRA law here.

Unemployment insurance (UI) – Massachusetts unemployment-insurance law requires that an employer give every separated employee, regardless of whether the separation was voluntary or involuntary, a two-page brochure outlining the employee’s rights to file for unemployment insurance.  The pamphlet is available in a variety of different languages.

Massachusetts Wage and Hour Laws – Massachusetts requires all employers to pay separating employees their final wages under the following terms:

• If the person is voluntarily quit, the employee may be paid their final wages on the date of the next payroll cycle.
• In the case of an involuntary quit, the employer must pay on the same day as the final day of employment. Employers unable to generate a final paycheck on the same day as the employee’s termination may want to consider paying the employee for one more day in order to give them time to generate a final paycheck and pay it to the employee.

The law defines final wages to mean all wages earned and accrued up until that time and any accrued but unused vacation time. Failure to pay the employee their final wages under the terms required by law may expose the employer to enforcement action by the Attorney General’s Fair Labor Division or litigation to recover lost wages by a private individual. If the employee prevails in a lawsuit, the employee is entitled to treble damages (i.e. three times the unpaid wages)

Massachusetts Noncompete Act – The employer will want to remind the employee of the terms of any noncompetition agreement signed by the employee during employment. The law also contains provisions that may require the employer to make certain payments to the employee, for example, in cases where the employee is entitled to a garden leave payment.

There is more information on non-compete agreements here: https://www.mass.gov/info-details/massachusetts-law-about-noncompetition-agreements.

Employment separation can be a complex and risky undertaking, requiring attention to detail and possibly consultation with outside legal counsel.

AIM members with questions about this or other human resources issues may call the AIM helpline at 1-800-470-6277.