United States: Layoffs In The Energy Sector – Are Employers Prepared?

Over the past few weeks, the media has focused intently on the oil and gas industry's extensive layoffs. Well known energy companies have made front-page news with their announcements of their significant layoffs that have often resulted in the termination of thousands of employees or a significant percentage of their workforce. This trend, it appears, is only beginning, and many employers in the industry or that work closely with the industry will face tough decisions regarding their employees. This is, by and large, common knowledge. As a result, employees, plaintiffs' attorneys, and government agencies charged with upholding labor and employment law are paying close attention. As companies prepare to conduct future layoffs, they must be vigilant in ensuring that they are complying with federal and state laws and tackling the layoffs in the most efficient and practical way possible. Below are some quick tips for employers to consider as they contemplate and plan actions affecting their workforce.

• Employers should ensure that they are aware of any terms contained in employment contracts or policies that must be followed with regard to termination. For example, certain notice or severance obligations may arise under an employment contract or policies and procedures. The employer should also review any continuing contractual obligations applicable to employees subject to layoffs, such as non-competition, non-solicitation, or confidentiality clauses.
• If employees in non-United States jurisdictions are subject to the layoff, the employer should carefully review and follow the applicable jurisdictions' laws related to layoffs. For example, in many foreign jurisdictions, employers must seek government or employee representative (such as a union) approval, must provide notice, must provide severance or termination payments, and must document the terminations in a specific manner. This process takes time and significant effort, so an employer should consider these issues as early as possible.
• Analyze whether the layoffs (or future layoffs when considered with current terminations) trigger any notice or disclosure obligations under the federal Worker Adjustment and Retraining Notification Act (WARN Act) or similar state laws. The federal WARN Act applies to companies with more than 100 employees. These notice requirements, which typically require 60 days' written notice to affected employees and a state labor office, are generally triggered when a certain percentage of employees are subject to a layoff over a period of time (generally 30 or 90 days depending on the circumstances) or an employer closes an entire facility. Liability for failing to provide the notice can be significant, with employees eligible to receive 60 days' pay (or a portion thereof) for an employer's failure to provide the notice, and other penalties.
• Analyze potential public relations issues. As evidenced by the extensive media coverage, layoffs are news. This news can have an adverse impact on the business and employee morale. Companies, then, must not only consider the legal issues applicable to layoffs, but the press and public relations issues associated with the same.
• Consider and analyze the identities of those subject to termination. Does a particular protected category make up a larger percentage of those affected? Has an affected employee recently engaged in protected conduct, such as reporting allegedly unlawful activity? Understanding the makeup of the group chosen for termination helps an employer manage the risk related to the layoff "fall out."
• Consider the legal and practical issues related to the layoffs. When employees are terminated, employers must comply with state laws related to the timing of the final paycheck. Moreover, certain payments, like accrued but unused vacation, may need to be included in the final paycheck. Employers must also consider how the layoffs will be communicated to the employees. Will there be private meetings? A group meeting? Regardless, the employer should always ensure that two or more trusted company representatives are present in the meetings to ensure each representative has a witness. Employers should also consider whether, regardless of contract or policy, any severance payments will be made. If so, employers should engage counsel to assist in preparing severance and release agreements and coordination of the communications to each employee concerning the payments being offered. Many practical components of the layoffs are not considered until it's too late.

Layoffs are a necessary part of business. After an exciting boom, the oil and gas industry is seeing a retraction that requires employers in the industry to recalibrate and adjust to the business's current needs. As employers face the prospect of letting go of their employees, they should consider the above-mentioned issues and reach out to legal counsel to ensure that they are conducting their layoffs in a legal, efficient, and practical manner. Failure to do so will result in unnecessary and expensive consequences.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.