As the Market Goes Down, Layoffs Go Up

As the market continues to be volatile, more and more California employees are facing actual and potential layoffs (for example, on Friday, the San Francisco law firm of Heller Ehrman laid off more than 100 employees). Here’s what employees and employers alike need to know about the legal rights and obligations associated with layoffs:

When Final Wages and Benefits Are Due

Under California law, if an employee is laid off without a definite return-to-work date that is in the same pay period as the last day worked, the employee must be paid all wages and benefits due on the day that they are laid off. This includes earned but unused vacation benefits, earned bonuses and commissions, expense reimbursements, and most other earned deferred compensation. Payment of final wages and benefits to laid-off employees cannot be delayed to coincide with the regular payroll schedule. Employees who do not receive all wages and benefits on their last day of work are entitled to “waiting time penalties” in the amount of one day’s wages for each day that payment is delayed, up to a cap of thirty days. This applies to all employees and employers in California, regardless of the size of the company.

California’s “Baby” WARN Act

Companies that have employed 75 or more persons in the preceding 12 months also have legal obligations under the California “Baby” WARN Act (the analogous state law to the Federal Worker Adjustment and Retraining Notification Act) for “mass layoffs.” A mass layoff is a layoff involving 50 or more employees during a 30-day period due to cessation of work, relocation and transfer of work, and closures.

Generally, employers must give laid-off employees 60-days notice of the impending layoff, as well as provide notice to the California Employment Development Department (EDD). Failure to provide the required notice results in back-pay liability to employees during the violation period, as well as civil penalties. Employees are authorized to bring civil actions for enforcement of the WARN Act requirements, and can recover attorneys fees and costs paid to bring suit.

Unemployment Insurance Benefits

Unless an employee is terminated for “gross misconduct,” he or she is entitled to Unemployment Insurance (UI) benefits for up to eighteen months following termination (or layoff). UI benefits can be applied for online through the EDD here.

COBRA and Retirement Benefits

Employers who provide group health coverage to their employees must provide notice of COBRA rights to laid-off employees, as well as notification of the employee’s status to the health plan administrator within 30 days of the layoff. It is also good practice for employers to provide laid-off employees with information about their retirement benefit plans.

Employees should be mindful to review their deferred compensation plans, such as employee stock ownership plans (ESOPs) to make certain they understand how and when the compensation can be liquidated.