Layoffs and Restructurings

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With special thanks to Nadege Dallais (France), Emma Glazener (Netherlands), Fermin Guardiola (Spain), Stephen Ratcliffe (United Kingdom), Bernhard Trappehl (Germany) and Lucille Vallet (France).

Last week a group of our favorite European colleagues joined us in the Bay Area for a few special client visits. Even if you weren’t in the room, we’ll share a few key headlines here. (And, here’s link to listen in to our recent webinar: Global Employment Law Fastpass — Spotlight on Europe!)

From practical tips on the best ways to implement employee redundancies to the expected impact of the recently-passed EU Directive on Pay Transparency, here’s five things to know:

1. The EU Whistleblowing Directive (WBD) Requires Private Employers with 50 or More Workers to Establish a Local, Entity Level Reporting Hotline

The WBD was supposed to be implemented by the EU’s 27 member states by December 2021, but we are still waiting for around 8 EU member states to do so. For example, France, Belgium and Austria have transposed the WBD, Germany has not but is close. Spanish companies with at least 250 employees have until June 13, 2023 to comply. (For more, read our alert here.)

While legislation is still awaited in a number of jurisdictions, we are now in a much better position to see the challenges the WBD poses for global employers. . . and there are several.

  • It can be tricky to implement the new requirement for a local channel alongside a centralized group level reporting system (e.g., through a global “hotline”). Under the WBD, employers are not prevented from maintaining and encouraging the use of their central reporting hotline; however, now, entities with more than 50 workers, must establish a local, entity level, channel. This means employers who meet the threshold will need to establish local entity level reporting systems alongside existing global channels.
  • The second key challenge is where companies have multiple entities in one jurisdiction, whether one internal reporting channel can be established at a country level or whether the channel must be established in each entity. The implementing legislation in some countries is unclear on this point but, where the requirement is for entity level channels, this raises challenges for companies which have multiple entities within a jurisdiction but only one HR or Legal function which operates across multiple entities.

Fortunately, we have a multijurisdictional analysis matrix covering five key areas of WBD compliance at a local level available at a fixed fee per jurisdiction so that companies operating in the EU can wrap their arms around this new requirement. The matrix answers questions about the Directive’s scope and implementation requirements for internal procedures, protection of whistleblowers and data privacy issues. Our experienced team of lawyers can then assist with implementing the changes, as well as with training, communications and more.

2. The EU Pay Transparency Directive is Coming and as the Kids Say, It’s Extra

Last month the European Parliament formally adopted the Pay Transparency Directive and its provisions are likely to enter into force in most EU member states in 2026. It’s sort of a big deal, requiring significant attention and touching on many aspects of the employment lifecycle (read our detailed alert here).

A preview: there are pre-employment pay transparency requirements, and broad worker and representative rights to workforce pay information. The impact may be more muted in countries like France where works councils already have access to pay data, though the access will become much more granular under the Directive.…

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Special thanks to co-presenter, Jennifer Bernardo.

With a surge in layoffs taking place over the past year, many of those originally hired to diversify the workplace have been impacted, and studies show that inclusion, diversity and equity (ID&E) professionals have been affected by layoffs at a higher rate than others. The harm? Other than…

New Jersey may have started a trend. As of April 10, covered New Jersey employers must now comply with new requirements under the New Jersey mini-WARN Act (see our blog here). New York and California are giving chase, with proposed amendments to New York State’s WARN Act regulations, New York State’s WARN Act, and California’s WARN Act. And New York employers should take note: New York’s WARN Portal is set to go live this month.

Proposed Amendments to NYS WARN Regulations–And a New NYS WARN Portal

The New York State Department of Labor has proposed amendments to the New York State WARN Act (“NYS WARN”) regulations that are intended to account for the post-pandemic workforce, including clarifying how remote work impacts NYS WARN compliance and simplifying language to ensure employers understand their obligations under the law. The Department of Labor is accepting comments to the proposed regulations until May 30, 2023. 

Key items in the proposed amendments to the NYS WARN regulations include:

  • Remote employees included in threshold count: The employers covered by NYS WARN has been expanded to include any employer who employs 50 or more full-time employees, who work at the single site of employment plus individuals that work remotely but are based at the employment site, which may include remote employees in New York as well as other states.
  • Certain notices must be provided electronically: Notices being sent to the New York State Department of Labor Commissioner (“Commissioner”) must be provided electronically and are no longer required to have original signatures.
  • Notice must include additional information: The notice to the Commissioner must include more detailed information about the affected employees, including telephone numbers, job titles, and whether they are paid on an hourly, salary or commission basis. The notice to affected employees must include any other information relevant to their separation, such as information related to any financial incentives an employee may receive if they remain employed by the employer until the effective date of the employment loss, as well as available dislocated worker information.
  • The exceptions for notice are changing:
    • Faltering company exception reduced: The faltering company exception will apply only to plant closings, and will no longer apply to mass layoffs, relocations or reductions in hours.
    • Unforeseeable business circumstances exception expanded: The unforeseeable business circumstances exception will be expanded to expressly include in certain circumstances a public health emergency (including a pandemic) or a terrorist attack.
    • Exception to notice requires determination by Commissioner: The 90-day notice period can be reduced in limited circumstances (including under the faltering company, unforeseeable business circumstances, and natural disaster exceptions) only if:
      • The employer submits a request for consideration for eligibility of an exception to the Commissioner within 10 business days of providing the required notice under NYS WARN to the Commissioner (unless the Commissioner grants an extension);
      • The employer provides a reason for reducing the notice period in addition to any other documents the Commissioner may require; and
      • The Commissioner determines that the employer has established all of the elements of the claimed exception.
  • The calculation of back pay is being clarified for hourly employees: The calculation to be used to determine the average rate of compensation and final rate of compensation for hourly employees is clarified. Such calculation uses the number of hours worked instead of the number of days worked. The days worked method of calculation should still be used for non-hourly employees.
  • The use of payment in lieu of notice is being clarified: Liability for an employer’s failure to give the required notice to employees under NYS WARN will be reduced by amounts paid to an employee in lieu of notice, except where the following conditions are met (then such payments will be considered wages for the notice period):
    • There is an employment agreement or uniformly applied company policy that requires the employer to give the employee a certain amount of notice before a layoff or separation;
    • The employee is laid off without the required notice; and
    • The employer pays the employee an amount equal to the employee’s wages and any benefits for the required notice period.

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As discussed in our blog here, in February the National Labor Relations Board issued the McLaren Macomb decision prohibiting employers from “tendering” to employees separation or severance agreements that require employees to broadly waive their rights under the National Labor Relations Act.

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As we find ourselves firmly in the middle of Q1 of 2023, the avalanche of layoff headlines that started last quarter just keeps coming. Whether you follow the school of thought that the US entered a recession in summer of 2022 (after two consecutive quarters of negative gross domestic product) or not (given a strong labor market and corporate earnings growth), more and more companies are having to address overzealous pandemic hiring and the backlash from soaring company valuations. One comparatively “easy” place for multinational companies to cut costs — US workforces, where employment is generally “at-will” and absent contractual entitlements or triggering statutory notice requirements, layoffs can be carried out relatively quickly. With that said, as always, moving too quickly can create headaches that actually can be avoided — or at least dulled — with a little planning. 

Here are four tips to keep in mind when planning layoffs in the US:

  1. Beware of the WARN(ings)  

Larger layoffs have the potential of triggering the Worker Adjustment and Retraining Notification Act of 1988 (WARN Act) (and analogous state laws, known as state “mini-WARN acts”) statutes. These statutes impose notice and information obligations, which can be tricky to keep track of, and carry potentially heavy penalties for noncompliance.

Federal WARN requires employers to give advanced notice to affected employees in the event of a covered mass layoff or plant closing. Under the WARN, employers must provide 60 days’ notice of termination to the impacted employees, union representatives (if applicable), and certain government authorities. Under some state mini-WARN acts, 90 days’ notice is required. Click here for more on WARN.

  • Tip: WARN should become part of the layoff checklists (again), with teams (re)sensitized to the impact on timing and costs if triggered.

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Join us for our webinar series, “2023: Discussion on The New Legal Restructuring Landscape in Europe,” providing an overview of the regulatory and commercial issues to consider when contemplating restructuring across multiple jurisdictions against the backdrop of today’s political and economic climate, both locally and globally.

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