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How Do I Temporarily Lay Off My Employees?

Author: Ginny Cascio Bonifacino, Natasha M. Nazareth Date: 03/20/2020

Categories: Covid-19 News and Resources, Employment Law & Litigation

Businessman holding box of desk items symbolizing a temporary layoff due to Coronavirus. Due to our current global pandemic, employers are faced with very difficult decisions as the government further restricts movement and closes businesses in an effort to contain the community spread of Covid-19.  One of these questions is – should I shut my doors and temporarily lay off my employees?  

As you are considering this action, here are a few things to keep in mind:

  1. Cost-Benefit Analysis.  On-boarding and off-boarding has a cost for a business.  As part of your decision making, we recommend documenting a cost-benefit analysis.  For example, if the impacts of Coronavirus are relatively brief and employees don’t return to work, would the costs of termination, including leave payouts, unemployment benefits charges to the employer, and hiring and training new employees, outweigh the benefits of maintaining streamlined operations?  When is the tipping point for your business? 
  2. Communication.  During this crisis, clear and thoughtful communication to your employees is essential.  You want to be frank and open about the issues that you are facing. We are all in this together.  If you cannot continue to pay your employees, it is beneficial for them to be laid off temporarily so that they can claim unemployment insurance and receive some income during this time.  The risk is that when you are back up and running, they will decide not to return. However, being upfront and honest about this situation will encourage goodwill and employees will be more likely to return.
  3. Non-Discrimination.  Our laws have not been suspended during this time and employers can be liable for discrimination.  If you are not laying off all of your employees, please document how you reached the decision of which employees to lay off.  For example, categories may be: all non-essential staff, all customer service representatives, all field employees, all lunch shift employees, etc.  Avoid decisions based on age, level of compensation, or other factors which could lead to a disparate impact on a class of employees who are protected by civil rights laws. 
  4. Termination.  Please remember that a temporary layoff is still a termination.  You need to ensure that you take all the normal steps that you would do in the event of a termination – turn off employees’ access to email and the network; obtain all company property from the employees; notify them of COBRA and other benefit issues; pay out all earned vacation or paid time off (if required by your policy); ensure your confidential information and trade secrets are protected, etc. 
  5. Government Notification.  When an employer does mass layoffs there are often federal, state and local requirements.  In Maryland, if you are laying off 25 or more employees at once, then you must notify the Unemployment Commission.  If you have 100 or more employees, then the federal WARN act, which details specific notice requirements, may apply to you.  Please ensure you comply with these laws. 

While everything is changing on a daily basis, we are here to help you through this time and ensure that you do not inadvertently expose your business to liability.  Please feel free to contact Ginny Cascio Bonifacino at gcbonifacino@mcmillanmetro.com or Natasha M. Nazareth at nnazareth@mcmillanmetro.com