You’re fired!  While seemingly everyone is familiar with this now ubiquitous Donald Trump catch phrase, how many nonprofit executives have actually been preparing to say it to whole groups of their employees? 

Until recently, any nonprofit leaders have repressed the unpleasant specter of mass terminations and layoffs.  However, given the recent economic downturn and the resultant impact on government budgets, foundation funding and private giving, the prospects of widespread staff reductions have become a reality at best and a certainty at worst.

Since many previously stable nonprofits throughout New York have not had to contemplate layoffs, many remain woefully unprepared to conduct them in ways that protect themselves, their employees and their charitable assets.  Here are some things nonprofits need to be thinking about now – long before the actual need to begin layoffs arrives.

First, ensure that your personnel policy includes provisions that render all employment “at will.”  New York law provides that all employment, unless contractually tied, is “at will”, meaning that it can be terminated at any time for virtually any reason.  However, many employers fail to adequate provide for such a termination and instead may insert clauses within their personnel policies giving rise to a “quasi-contractual” employment.  Employers should ensure that their “at will” employment language is unequivocal and that no “quasi-contractual” devices exist within their personnel or other company polices providing enhanced protection to their employees. 

Be certain that your policies don’t confer “permanent” employment or provide for special grievance procedures prior to termination.  Such “quasi-contractual” devices may cause extreme administrative burdens preventing you from enacting a needed force reduction.  The delay caused by such devices, and the potential after-effects of costly litigation, could mitigate any gains an employer hoped to reap from the planned terminations.

Second, ensure that you carefully document the reasons for your layoffs.  While most often layoffs are tied to economic conditions, employers should be sure to compile detailed records on their decision making process relevant to whom they decide to terminate.  This information, while not technically required, could prove useful in the event a terminated employee attempts to bring a wrongful termination action in a court or administrative proceeding.  Obviously, becoming embroiled in such a proceeding is a burden to be assiduously avoided.  However, if litigation becomes inevitable, possessing the proper documentation regarding the reasons for termination could prove invaluable.

Third, New York State employers with more than 50 employees are now subject to the newly promulgated NYS Worker Adjustment and Retraining Notification (WARN) Act.  Effective February 1st, 2009, employers falling under the purview of the Act must provide 90 days notice, including salary and benefits for that period, if they plan on laying off the greater of 25 employees or 1/3 of their workforce.   Further, if 250 workers are to be laid-off, the notice must be given regardless of whether the 250 represents 1/3 of the workforce. 

For many nonprofits, hitting these trigger points – the need to layoff the greater of 25 workers or 1/3 of the workforce – may seem unlikely except under the most catastrophic of circumstances. Unfortunately, it is easy to foresee scenarios through which many smaller to mid-size nonprofits might be impacted.  Take, for example, a $5 million agency with 100 employees and a half-dozen government contracts.  The complete loss of one or two programs, together with across-the-board cuts in others could easily force layoffs of these magnitudes.

Moreover, the NYS WARN Act also provides that if an entire plant (or location), a single site or a unit or operating unit at a single site, is closed, meaning all industrial or commercial capacity is to be shutdown for a period in excess of 30 days, the notice must be provided in the event at least twenty-five workers will be affected.   Under this provision, larger agencies which close individual program offices with 25 or more staff could be impacted by the new law.

Finally, in contrast to Federal law, the NYS WARN act also contemplates the relocation of all or “substantially all” of a plant (or location) to a site at least 50 miles away.  In these circumstances, the 90-day notice requirement applies even if fewer than 25 workers are affected and even if the employer does not contemplate the termination of the affected employees.  This provision could impact larger regional or statewide nonprofits which seek to move or consolidate their operations.

Employees under this Act are entitled to their 90 day salary and fringe even if they are not performing any work for the employer during that period.   Stiff penalties can befall any employer falling under the Act for failing to provide the required notice to the employees, their union representative if applicable, the New York State Department of Labor, and any local workforce investment boards established pursuant to the federal Workforce Investment Act for the locality in which the mass layoff, relocation or employment loss will occur.  However, there are several exceptions to the notice requirements of the New York State WARN Act and the law in still evolving given its recent implementation.  Suffice to say that any employer meeting the 50 employee threshold who is contemplating mass layoffs, location closures or relocations should consult an attorney before proceeding to the brink of terminations.

Fourth, ensure that your policies regarding sick and vacation time accruals are up to date.  While many employers have policies regarding payment of accrued vacation and sick time following termination, these policies may not be adequately expressed in the context of the personnel manual or corporate policies.  Employers in New York are not required to pay employees for their accrued sick or vacation time upon termination as both Federal and State law do not mandate payment for days not worked.  However, if an employer wishes to have their employees forfeit their accrued time at termination, a written policy must be provided to their employees.  If no policy is provided, most likely an employee suing for his unpaid accruals will be successful.

Finally, enact policies that ensure a smooth transition for your employees.  For the employee, the loss of a job is a traumatic event.  Employers should be prepped to offer information on Unemployment Insurance, continuation of employer sponsored health insurance through COBRA, and any policies on severance pay.  Having a packet of materials ready for employees who have been laid off may assist them in their transition.  Additionally, as the economy may improve in the future, it’s best to give your employees a proper send-off so as to increase the possibility of re-hire in the future. 

Keep in mind that this advice applies primarily to non-unionized employees.  Unionized employee’s employment is generally subject to an overriding collective bargaining contract that controls many aspects of employment including termination.

While necessary in these difficult economic times, staff layoffs will always be painful for everyone involved.  However preparing for their possibility can minimize the damage they do both to your organization and the affected employees themselves.

Kevin M. Stadelmaier, Esq. is Legal Advisor, New York Council of Nonprofits, Inc (NYCON, Inc.) (formerly, CCSNYS.)

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