In our litigious society, practically any negative personnel move can land an employer in court. That's particularly true of layoffs and severance policies, so compliance with applicable laws is critical.
"The first steps an employer should take involve checking the requirements of the plant-closing law bill, the Worker Adjustment and Retraining Notification Act," said Robert C. Kellner, an attorney with Gordon, Feinblatt, Rothman, Hoffberger & Hollander.
"Employers should also ensure that they've satisfied the requirements of the pension reform act, or Employee Retirement Income Security Act, which heavily regulates employee benefits."
The pension reform act affects severance policies that might be construed as an employee benefit plan, Mr. Kellner said.
"It provides certain reporting and disclosure obligations that an employer must meet and certain fiduciary obligations that an employer must meet," he said, adding that "an ad hoc severance policy may not equal a [severance] plan."
The plant-closing act was voted into law three years ago and affects companies that have released at least 50 full-time employees during a 30-day period. It basically says a covered employer may not order a plant closing or mass layoff until two months after giving notice to affected workers or their union representatives, as well as the state unemployment agency and the chief elected official of the local government body where the action is to occur.
The law "doesn't apply to an employer unless the employer has (( 100 or more employees, exclusive of part-time employees," Mr. Kellner said. The plant-closing law doesn't cover moves precipitated by natural disasters, strikes or the closing of temporary facilities.
Promises made to employees can also have legal ramifications, said Mr. Kellner, who handles labor law and employment law matters for his firm.
"If an employer has created a contractual obligation, either expressly by promising them severance pay, or in some cases through an employee handbook or by written policy, they would have to live up to those commitments," he said.
A company can leave itself open to a lawsuit if its severance policies can be proven to be discriminatory.
"An employer must set policies without regard to an employee's age, race, sex, religion, handicap status, etc., but an employer is permitted to base severance pay on neutral criteria, such as length of service," Mr. Kellner said.
"Obviously, in designing a severance policy you would need to look at your compliance with federal, state and local anti-discrimination laws," he said. "Maryland has a fairly comprehensive set of anti-discrimination laws."
Finally, an employer letting workers go needs to take heed of Maryland's Wage Payment and Collection Act, which comes under the auspices of the state's Division of Labor and Industry. "Their job is to make sure that Maryland employees are paid the wages and fringe benefits promised to them," Mr. Kellner said. "I think severance benefits would be included in the definition of wages under the Maryland Wage Payment and Collection Act."