How to Make Layoffs with Heart: Three Questions

How to Make Layoffs with Heart: Three Questions

Question:

We view our employees as family. They stuck with us throughout the worst of the COVID crisis. At first we reduced everyone’s paychecks, except for the several workers where a reduction would have taken them below minimum wage. Then we furloughed all but the two of us and three employees, so everyone else could get unemployment.

But even though we cut our expenses to the bone, without revenue we used up most of our savings. We’ve applied for every government program available to us and have secured a loan, so we can rebuild. Things are coming back, but it will be a long time before we can afford to hire anyone back because we’ll first have to repay the loan.

We’ve decided to layoff those we’ve furloughed so we don’t give them false hope. Our attorney has said it’s the only realistic option. How do we do this right?

 

Question:

I got laid off by a text message from my supervisor. He said an email would follow. The email came from his manager but just repeated the text message and advised me to apply for unemployment as soon as possible. There was nothing else, nothing about severance or anything. Don’t companies have to give two weeks’ notice or pay?

Question:

Can we keep our furloughed or laid-off employees on our group health plan?

 

Answer:

When an employer has run out of other options and wants to handle layoffs correctly, it arranges individual meetings with each employee. The individual conducting these meetings explains the situation truthfully and answers as many questions as possible. If in-person meetings aren’t feasible, the employer arranges virtual ones, often with video connection.

If you’re the manager, supervisor or HR representative conducting these meetings, prepare for the meetings by making a list of talking points so you won’t forget key topics. These include whether you’ll provide severance pay, cash out accrued paid time off leave, and maintain health insurance until the end of the month or longer. You’ll also need to arrange for the return of keys and other company property. You’ll want to let your employee know how to apply for unemployment benefits and give each employee a strong letter of recommendation to help your employee gain new employment.

If you can, offer outplacement services to enable your employees to more quickly find new jobs. Employers aren’t obligated to pay severance unless severance pay was included in an employee’s contract, mentioned in an employee handbook, or negotiated for in exchange for a release of claims. The Fair Labor Standards Act requires employers to pay terminated employees their regular wages through their completion date and for any time the employee has accrued, which normally includes accrued vacation time.

When an employer lays off or furloughs employees, reducing the employee’s working hours to zero, it can make your employee ineligible for your group insurance plan. Your company’s plan will have written documents that outline eligibility, however, contact your insurance agent as some insurance agencies are modifying eligibility rules in response to COVID-19.  For many plans, an employee who has worked fewer than thirty hours for four consecutive weeks becomes ineligible for health coverage. Employers often have the ability to amend their group insurance plans, as long as they avoid discrimination when making any changes.

There are dangers to keeping ineligible individuals on group health plans. These include the potential loss of the plan’s tax-exempt status, resulting in both the employer and employees to potentially owing back taxes and the insurance company denying claims for employees they deem ineligible.

If an employer’s plans documents don’t address work absences or reduction in hours, the employer may need to amend the plans. An employer hard-hit by COVID-19 may not be able to sustain the costs of keeping furloughed or laid off employees on its health plan. Multiple states have issued directives requiring or encouraging insurance companies to allow employers to make changes to their eligibility requirements and including grace periods for premium payments. Employers can contact the Alaska Division of Insurance to check for Alaska updates. Employers can also cover some or all of a furloughed employee’s insurance premiums or a laid off employee’s COBRA continuation coverage.

While no employee wants to be laid off and no employer wants to lay off a valued employee, it can be done respectfully and well.

© 2020, Lynne Curry

Lynne Curry writes a weekly column on workplace issues. She is author of “Solutions” and “Beating the Workplace Bully” and www.workplacecoachblog.com.

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