The recent downturn is fueling the legal profession as impacted employees with time on their hands take their former bosses to court.
It should come as no surprise to anyone that the large number of layoffs going on in the oil industry because of the decline in the price of oil have resulted in more lawsuits being filed by those affected by the downsizings. According to the Louisiana Workforce Commission, as of August 2015 there were almost 8,000 fewer jobs in the oil and gas sector than last year in Louisiana. The state’s 46,000 mining jobs represents the lowest employment has been in the oil and gas sector since 2005. Nationally, a recent Bloomberg/BNA report indicates that during the third quarter of 2015, 81,000 jobs were cut.
Several large oilfield service companies have recently announced additional plans to lay off thousands more of their employees. Everyone in South Louisiana knows someone who has lost his or her job recently as a result of a layoff.
The reality is that employees impacted by layoffs are more inclined to consider filing a lawsuit on some basis against their employer, since they have more time on their hands, and often feel that they have nothing to lose, since they are out of work with no regular income. Thus, the effort to bridge the financial gap between jobs may involve filing a lawsuit.
My law firm, Ogletree Deakins, a boutique international labor and employment firm representing only management interests, has definitely experienced a large increase in the number of lawsuits against our clients in the firm’s Louisiana and Texas offices since the oil downturn. The types of suits range from wage and hour class actions attacking alleged failures to properly pay overtime or hours worked to basic employment discrimination or harassment claims.
A plaintiff’s lawyer from Houston who represents clients in wage and hour lawsuits was recently quoted in an article appearing in Energy Wire: “I know when there’s a layoff because my phone will explode.” Another lawyer’s website recently posted the following caption: “Oilfield Layoffs Will Mean More Overtime Lawsuits,” and then went on to explain possible wage and hour violations for his future clients to look for and, of course, to call him if they had experienced any of the alleged violations.
Many companies in the oil and gas business are taking alternative steps to avoid more layoffs. Pay reductions and pay freezes, hiring freezes, reduction in scheduled working hours, selling off divisions or subsidiary businesses, encouraging use of vacation or other paid leave time, restructuring operations to optimize the use of current employees, renegotiating employment contracts with employees, and voluntary exit incentive programs are
among the alternatives being considered or taken. However, regardless of these efforts, many employers will be forced to cut jobs on an involuntary basis.
If employers are forced to lay off employees, there are many legal and practical issues that need to be carefully considered, with the advice of experienced counsel and human resources professionals, and a full discussion is beyond the scope of this article. But the following summary (not exhaustive) checklist of some tips to consider in implementing an effective layoff is a starting point for employers to consider:
• Develop a layoff policy before conducting a layoff, and follow it.
• Consider a hiring, promotion and transfer freeze before implementing a layoff.
• Determine whether any advance notices to employees are required under federal or state law.
• Consider offering severance pay to laid off employees in exchange for full releases from any future claims related to employment or the layoff.
• Carefully document the justification for the layoff in a confidential and privileged business plan with the advice of counsel.
• Select and train decision makers. • Select the individuals to be laid off, preferably using objective factors instead of subjective factors.
• Carefully analyze and adjust the proposed layoff, if necessary, with advice of counsel.
• Train all supervisors on the company’s position and basis for the layoff, and on what to say and not to say.
• Notify employees of the layoff in well-planned meetings with affected employees.
• Stress the finality of the decision, and don’t make any promises.
• Advise employees of their benefits rights.
• Provide a list of open positions, if any.
• If appropriate, explain the general procedure used to make the layoff selection decision.
• Keep the communications brief and professional.
• Consider offering outplacement assistance to affected employees.
• Assist with unemployment compensation processing.
• Consider security precautions related to angry or disgruntled employees after the layoff.
• Consider various forms of post-layoff employee assistance programs, such as counseling, benefits assistance, job search assistance, resume assistance, job training and referrals, educational opportunities.
Of course, treating employees fairly, consistently and honestly at all times during their employment, the layoff process and even after the layoff will also go a long way to minimize the chances of your business getting sued by an employee who has just lost his or her job.
Greg Guidry, a shareholder in the Lafayette office of Ogletree Deakins, specializes in employment law.