In the current economic climate, employers struggle everyday with difficult decisions designed to keep the company afloat. In a recent Web seminar hosted by CalChamber/Calbizcentral, we received questions from attendees that highlight some of the major issues.
Q: Can a company reorganize a department, change someone's job description and post their job, lay them off and replace them with another employee who makes less money?
A: A critical concern with laying off employees, especially if you are replacing them, is to be sure the reason for layoff is nondiscriminatory. If your company can accomplish the work it needs to accomplish by restructuring and hiring employees at a lower pay grade, then be sure you have the documentation to support that. If you are terminating someone, for example, who is over 40 and replacing them with someone younger than 40, you could expose yourself to an age discrimination claim. California law specifically prohibits consideration of salary as a determining factor in making a decision to lay off someone.
Q: How do the California courts view the difference between terminating employment for performance and at times raising the bar on what constitutes poor performance, as opposed to laying off for lack of work?
A: At will employers may terminate or layoff employees for any legal reason. Whether it is for poor performance or due to lack of funds or work, you may end the employment relationship if it is consistent with company policy or practice and it is not because of the employee’s protected status (pregnancy, filing a workers’ comp claim, etc.) Whether you are terminating on the basis of performance or laying off for lack of work, good documentation is critical.
Q: Just say a company loses significant business in January that would justify a layoff. To avoid layoffs, the company tries alternatives. In March, it is determined that the alternatives are not working out. Even if there is little change in the financial situation from January to March, can the company still use financial justification to layoff?
A: The law does not address this specifically. The company needs to be able to codify how the layoff determination was made and why should an employee later challenge the layoff decision. A company should not be dissuaded from attempting alternatives to layoffs.
Q: If a company decides to offer an alternative position as an alternative to layoffs, are there any considerations related to how long we need to commit to the employee in the new position? If they are not suited or perform poorly in their new role, can we layoff immediately?
A: That would depend on your discipline/termination policy and any other promises/commitments you may have made to the employee.
Q: Can you pay a now ex-employee the bonus via 1099?
Q: Are you allowed to pay a sales commission or bonus after term if policy requires a receipt of pay from customer as trigger for bonus pay?
Q: What about sales incentive plans and quarterly quota bonuses? LTIP and shares? Are any of these due the last day of employment?
Q: What if bonuses are paid out after the customer pays their invoice in full? Can we pay the employee bonus after layoff if the customer has not yet paid?
A: Bonuses are considered wages, so they must be run through payroll with all proper deductions. The schedule for payout of a bonus is directly tied to how the bonus is earned and if there are conditions precedent to the earning of the bonus, which may delay the due date of the bonus payment. The safest way is to issue the bonus payment upon termination or consult legal counsel.
We are considering another Web seminar to address these issues and more. If this is something that would help your company, let us know!