Plant closings

Scope

Plant closings not only have a negative effect upon the workers of the plant, but also on the community where the plant is located.

Regulatory citations

• None

Key definitions

• Plant closings: Generally refer to a permanent closure of a single office, plant, or facility or the closure of an entire business unit. These events not only have a negative effect upon the workers of the plant, but also on the community where the plant is located.

Summary of requirements

Legal issues. Plant closings have legal ramifications, beyond the legal hurdles which may be brought by up by the community or labor groups. Some laws which can apply to a plant closing situation are outlined below.

The National Labor Relations Act. Depending upon the circumstances, a union and employer will normally have a duty to negotiate regarding the effects of the closing and may have a duty to negotiate regarding the decision.

The Worker Adjustment and Retraining Notification Act (WARN). WARN which requires that, with certain exceptions, employers of 100 or more workers must give at least 60 days’ advance notice of a plant closing or mass layoff to:

• Affected workers or their representatives,
• The State dislocated worker unit, and
• The appropriate local government.

WARN generally covers employers with 100 or more employees, not counting those who have worked less than six months in the last 12 months and those who work an average of less than 20 hours a week. Many states have WARN-type statutes which may have broader coverage and other requirements.

Employee Retirement Income Security Act of 1974 (ERISA). ERISA requires employers with 20 or more employees to provide an opportunity to terminated employees to continue employee health benefits following termination. The employee is responsible for paying the premiums. COBRA does not require the continuation of life insurance or other types of benefit plans. The employee has 45 days from the date of notice to accept or decline the benefits, and has at least 60 days to make payments. It is the employer’s obligation to show that the proper notice has been sent, if coverage is declined, that the employee affirmatively declined that coverage.

The Fair Labor Standards Act (FLSA). The FLSA governs wages and compensation of employees. Wages, compensation, and nondiscretionary bonuses earned must be paid to employees even after termination. Various state laws also apply.

Foreign workers and plant closings. Employers facing layoffs should review all foreign workers and their status. Alien workers with certain types of visas who are laid off may place a financial burden upon the employer. When considering plant closing, keep these general guidelines in mind:

• Provide as much advance notice as possible to all workers including foreign employees so that they can try to secure an alternate visa status. This may allow those employees to remain legally in the United States without spending time out of status or being required to leave the country.
• Different visa categories carry with them different financial requirements when the visa holder is terminated. Be aware of any immigration-related obligations that may apply to your organization as the plant closing occurs. Failure to comply could result in considerable financial liability for the employer.
• Consult an immigration attorney if unsure of the issues involving foreign employees.

Employee records. Prior to announcing a plant closing, review all personnel records to ensure that they are up to date and contain all of the necessary documentation on that employee.

• Make sure all relevant employee reviews are included. Employee information should be available in order to meet future claim activities.
• Be sure to include information on the employee’s supervisor and the department they were working in.
• Fully document employment dates, titles, and employment status at the time of the plant closing.
• Include all information on the employee’s current work status, such as if that individual is on restricted duty following an accident or illness.
• Establish the authenticity of the records via custody by an employer representative, so it can be verified that the information is accurate and has not been altered.

Effects upon employee morale. When a company begins a program of closing, it creates a tremendous amount of stress on the employees and upon the community in which the operation was located. In some cases, the employer will face threats of or incidents of workplace violence or vandalism. Communication with the displaced employees, with remaining employees, and with the community at large is one way to minimize such effects. Members of the community should know that the company sought other avenues to avoid a plant closing, and may need to understand the reasons that a plant closing became necessary to avoid ill-will toward the organization.

Injury/illness claims. Review prior injury and illness claims in the OSHA 300 log for the facility going back at least two years. Examine what types of claims have occurred, both lost time and medical only.

The first analysis the Transition Team should make is of prior claim activity.

• Look at all current, active claims with a view to how the timeline of the plant closing will affect the time the worker may return to full duty. The employer remains responsible for that claim until the employee is medically cleared to work again.
• Do not be surprised if there is a substantial increase in new claims when the closing is announced. In some states, stress-related injuries are compensable under workers’ compensation insurance. There is the potential for stress-related claims brought on by the plant closing to be covered.
• Employers may want to hire a dedicated workers’ compensation attorney to develop a strategy for handling workers’ compensation claims.
• Note all employees who are on restricted duty or are making the transition from restricted duty to non-restricted work. These employees may be covered by workers’ compensation.

Available options. Before announcing the plant closing, have all necessary information available to inform employees about what will happen. Know:

• Whether severance packages will be offered, and to whom;
• What transfer or relocation is available;
• If benefit plans allow for continuation or conversion privileges;
• What outplacement services are available; and
• If state or local government agencies will assist in finding new employment or skill retraining.

Loss prevention. Keep existing safety and incentive programs operational through the plant closing.

• Pay attention to the accident and injury rate for the last few weeks that the plant is in operation.
• The plant safety manager and claims adjuster of the insurance company should promptly investigate all claims that occur following the announcement of the plant closing.
• Try to anticipate the conceivable claims that may arise, such as those for hearing loss, exposure to second-hand smoke, occupational allergy, or any other specific injury or illness spelled out in the state workers’ compensation law.

Chemical exposure records. OSHA requires employers to keep workplace chemical exposure records for the life of the employee’s employment plus thirty years. The three pieces of information OSHA says you must have are the name of the chemical, when it was used, and where it was used.

Also keep the final set of material safety data sheets (MSDSs) to document that the file existed and to indicate what substances may or may not have been in the facility at the time it closed.

Employer responsibilities. Downsizing places requirements upon the employer with respect to continuing health coverage, vested retirement benefits, and unemployment insurance benefits. Most states do not require the payment of severance pay or other benefits to the employees who are being let go, as this would be handled by unemployment insurance.