Factors to Consider if You’re a Small Employer Conducting Layoffs

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Question: We’re a privately owned company with fewer than 100 employees. Do we have to follow the Worker Adjustment and Retraining Notification (WARN) Act regulations if we decide to conduct a temporary layoff in the near future?

Answer: No. Because you have fewer than 100 employees, you aren’t an “employer” within the meaning of the federal WARN Act and aren’t covered under it. That said, if any of your employees live or work outside of Colorado, you should check to see if their states have “mini-WARN acts” (i.e., state-law equivalents of the federal WARN Act). Some state mini-WARN acts apply to smaller employers and layoffs, so you should check these laws before finalizing a reduction in force.

Also, be sure to consider other laws related to reductions in force, including the Older Workers’ Benefit Protection Act (OWBPA). Under the OWBPA, all employers (regardless of size) are required to follow certain procedures whenever they lay off two or more employees who are aged 40 or over.

Further, it’s generally a good idea to evaluate your risk exposure under antidiscrimination laws by running a “disparate impact analysis” to determine whether the layoff disproportionately affects any single protected group (e.g., persons over 40, female employees, black and African American employees, etc.). Conducting this analysis early on can help guide your decision-making and avoid discrimination claims down the road.

Another way to protect yourself against future claims is to offer departing employees severance if they sign a release and waiver. Although a release won’t prevent them from filing an administrative complaint with the Equal Employment Opportunity Commission (EEOC) or Colorado Civil Rights Division, it will bar them from recovering money damages or pursuing a civil lawsuit.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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