essential employer rules for a rif€¦ · offshore drilling rig a single site of employment....

ESSENTIAL EMPLOYER RULES

FOR A RIFRachel Powitzky Steely – Gardere Wynne

Sewell LLP, Houston

Targeted Enforcement Initiative

“The oil and gas industry is one of the most fissured

industries. Job sites that used to be run by a single

company can now have dozens of smaller contractors

performing work, which can create downward economic

pressure on lower level subcontractors. Given the

fissured landscape, this is an industry ripe for

noncompliance.”

-- Dep’t of Labor Press Release 12/9/14

PRESENTATION OUTLINE

I. The WARN Act

II. Voluntary Retirement Programs

III. Effective Severance Agreements: Strategies and Considerations

IV. New Wage Payment Rules under the Fair Labor Standards Act

I. The WARN Act

• WARN Act – enacted in 1988Purpose is to require companies to provide

notice to employees of mass layoffs and plant shutdown, or to at least provide 60 days pay and benefits in lieu of notice.

• Largely ignored by Plaintiffs’ attorneys in the oil and gas industry until recently:In 2014 and 2015 a group of about 20 oil and gas

service companies were sued under WARN as a result of layoffs associated with drop in oil prices.

I. The WARN Act

When is the WARN Act Triggered?

• Only to employers with at least 100 full-time employees on the day notice is due.

• Employers are required to provide 60 days advance notice to employees of a plant closing or mass layoff.

I. The WARN Act

What is a plant closing or mass layoff?

• Plant closing: Permanent or temporary shutdown of a single site of employment or one or more facilities or operating units within a single site of employment during any 30-day period for 50 or more employees excluding part-time employees.

• Mass layoff: Employment loss at a single site of employment in any 30-day period of 500+.

I. The WARN Act

What time period do I consider when calculating minimum thresholds?• Look ahead and behind 30 days to determine

whether actions both taken and planned will, in the aggregate, reach the minimum numbers.

• Look ahead 90 days and behind 90 days to determine employment actions (both taken and planned) that separately do not trigger WARN coverage, but will in the aggregate trigger WARN coverage.

I. The WARN ActWhat time period do I consider when calculating minimum thresholds?The 30- and 90-day periods differ in two respects:

• All employment losses occurring within a 30-day period must be aggregated, BUT only employment losses that do not separately qualify as mass layoffs/plant closings must be aggregated into the 90-day period.

• Is the reason for layoff considered?

No - 30-day period Yes - 90-day period

The employer may defeat liability by showing that the layoffs were caused by separate events and that there was no intent to evade WARN.

I. The WARN Act

Business circumstance exceptions to WARN liability

The three exceptions apply to businesses facing extraordinary problems that may call for immediate layoffs:

1. faltering business;

2. unforeseeable business circumstances; or

3. a natural disaster.

I. The WARN Act

Can separate facilities be aggregated to constitute a “single site of employment”?• Yes, in some cases. WARN notice is only necessary

if a RIF involves 500 or more full-time employees, or at least 50 full-time employees who represent 33% or more of the full-time workers at a single work site.

• Separate locations may constitute a single site of employment if they share the same staff or operational purpose or if the court finds they have truly unusual organizational structure.

I. The WARN Act

Offshore drilling rig a single site of employment.• The layoff of employees from floating drill rigs does

not constitute a mass layoff subject to the 60-day notice requirement.

• In Voisin v. Axxis Drilling, Inc., the court found that the employer’s office and each of its five drilling rigs was not a “single site of employment” that triggered the requirements under the WARN Act 141 F.Supp.3d at 675.

I. The WARN ActOffshore drilling rigs can constitute a single site of employment• The sole question in the Voisin case was whether the

employer’s five drilling rigs—together with its land office—constituted a “single site of employment” under the WARN Act.

• The court analyzed the three factors:(1) “the separate facilities are in ‘reasonable

geographic proximity to one another;’ (2) they are ‘used for the same purpose;’ and (3) ‘they share the same staff and equipment.’”

I. The WARN Act

Land drilling rigs can constitute a single site of employment

• Meadows v. Latshaw Drilling Co., LLC, No. 3:15-CV-1174-D, 2016 WL 3057657 (N.D. Tex. May 31, 2016)

• Kenneth W. Mercer, et al. v. Patterson-UTI Drilling Company LLC; Civil Action No. 4:15-cv-00346


• Over the last few years, employers in the oil & gas industry have conducted large-scale, involuntary reductions-in-force (“RIFs”).

• A voluntary early retirement program (“VERP” or “voluntary program”) is one way by which employers may reduce the size of their overall workforce without having to implement an involuntary RIF.


• Age Discrimination in Employment Act (“ADEA”): employer must determine what age the program will start (probably above 40) and cannot set an age ceiling.

• ERISA: Plan, no jury.

• OWBPA: Waiting period, severance considerations.

• WARN: Notices.


What are the advantages of a voluntary program?

• Employees who leave voluntarily are less likely to raise claims of discrimination or other allegations related to termination.

• Can create a more positive work environment.

• Release.


What are the disadvantages of a voluntary program?

• Mystery of who will participate.

Employer must accept that employees who remain may not be those the employer would have chosen

• Mystery as to how many employees will participate.


What are the risks of a voluntary program?

• Proper design and implementation of the program.

Improper Motive

Managers make it seem involuntary

How to respond if ee asks about future layoffs

Plan administrators must properly implement the plan in order to avoid claims of discrimination or inequitable treatment


How does a voluntary program work?

There are two options:

1) ERISA Option

2) Non-ERISA Option


Release and Severance Agreements:

• Eliminates risk – if properly written (ADEA & OWBPA)

• Provides employees additional compensation and/or benefits

• Solves issue with aging workforce


Separation agreements address two kinds of risk:

1) Direct damage to the business.

Example: Misappropriation of trade secrets or unfair competition

2) Claims by former employees against former employers.


Restrictive Covenants: A Powerful Tool to Protect a Business

There are four types:

1) Nondisclosure

2) Non-solicitation of customers, clients

3) “No poach” of former coworkers

4) True “noncompetition” agreements


Confidentiality and Nondisclosure Agreements

• Best practice: Have confidentiality agreements in place during employment.

• If no agreement is in place, include in a separation or severance agreement.


Confidentiality and Nondisclosure Agreements (cont’d.)

Best practices:

• Tight, specific definition of confidential info and trade secrets.

• Define obligations clearly (esp. post-termination).

• What is the “consideration”?

• Compliance with new law: Defend Trade Secrets Act of 2016.


Non-solicitation Agreements

• Can be standalone agreements or included in a non-compete agreement.

• Non-solicitation agreement often preferable to an outright non-competition agreement.

More likely to be enforced.


Non-competition Agreements

• Nuclear option

• Enforceable when they protect former employer’s legitimate business interest

Examples: Trade secrets, confidential or proprietary information, customer goodwill

• Best use: Where unfair competition is unavoidable

• Note: Enforcement is a question of state law


Age Discrimination Issues

• 21 or 45 day waiting period

• 7 day revocation

• Plain language – letter v. contract

• OWBPA – schedule, strategy


Agreements to Arbitrate

• Private alternative to civil litigation

• Federal Arbitration Act (“FAA”) provides a mechanism to compel arbitration of claims

• Why arbitration?

• Faster, cheaper (?)

• Is litigation a better deterrent to potential claimants?

• The cost of litigation itself is the real business cost.


Agreements to Arbitrate: Considerations

Define what is arbitrable:

• Must define specifically what claims are subject to arbitration.

How arbitration is to be conducted:

• Selection of state arbitration rules.

• Specify exactly how a claimant must initiate a claim.

• Limitations on timing or discovery


Agreements that Limit Employee Remedies (cont’d.)

Class Action Waiver

• Supreme Court: Class action waivers enforceable

• NLRB: Class action waivers unenforceable• Violates NLRA Section 7 rights

Jury Waivers

• Jury-trial waivers have been enforced specifically with employment claims.

See, e.g., Farrell v. Toys R’ Us, (N.J. Super. Law Div. March 22, 2013

Choice of Law

• Texas: Good choice because of location of industry and favorable enforcement of restrictive covenants.

IV. New Wage Payment Rules under the FLSA

• As of December 2016, longstanding criteria for treating certain employees as exempt from the overtime requirements of the Fair Labor Standards Act (“FLSA”) will change.

• Millions of workers will suddenly become eligible for overtime.


How Has the Law Changed?

• Increase in the minimum weekly salary to the 40th percentile of weekly earnings for full-time salaried workers, based on the Bureau of Labor Statistics (BLS) data.

• Employees earning less than $47,476 ($913 a week) will automatically qualify for overtime pay.


How Has the Law Changed?

• The new rules allow non-discretionary bonuses, incentive payments and commissions to count for up to 10% of the minimum salary, provided that these amounts are paid at least quarterly.

• Salary and compensation levels will be updated every three years to maintain the levels at the above percentiles, beginning January 1, 2020.


What Classifications Do the Changes Impact?

• The changes impact the white collar exemptions: executive, administrative, or professional.

• The changes also do not apply to outside sales employees and other professionals, like doctors, lawyers, and teachers.

• Biggest impact: “administrative” exemption .


Practical Impact on the Industry

• 4.2 million currently exempt workers will become eligible for overtime.

• What about your managers?

• The DOL estimates that employers will spend $592.7 million to comply with the new rule.

• Employers should be diligently planning for the impact on their operations and finances.


Practical Impact on the Industry

• Employers have until December 1, 2016 to reclassify any exempt employees: Window of opportunity

Note: Exempt status of employees who meet the minimum salary requirement is still contingent on satisfaction of the duties test (unchanged).


What To Do Now:

• Reclassify affected employees as non-exempt.

• Make changes in time & attendance systems, payroll processing and IT systems.

• Develop internal communications plans – including a plan for how to communicate this change to reclassified employees.

• Consider employee morale after making the change.

Gardere Wynne Sewell LLPRachel Powitzky Steely

email: [email protected]

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