Wilson Sonsini Goodrich & Rosati PROFESSIONAL CORPORATION Michael J. Nader Employment Litigation Group March 11, 2009 Managing Organizations in Challenging

Wilson Sonsini Goodrich & RosatiPROFESSIONAL CORPORATION

Michael J. Nader

Employment Litigation Group

March 11, 2009

Managing Organizations in Challenging Economic

Times

Wilson Sonsini Goodrich & RosatiPROFESSIONAL CORPORATIONDOC#

TOPICS

• The Organization’s Obligation to Pay Wages

• Reductions in Force

• Temporary Shutdowns

• Salary Reduction Programs

• Other Cost Saving Measures

• Personal Liability for Officers and Directors for Failure to Pay Wages

• Protecting Trade Secrets


The Company’s Obligation to Pay Wages

• Wages under CA Law Include:

• Salary

• Accrued vacation

• Contractual severance obligations

• Payment of wages/accrued vacation due on the termination date

• Penalties apply for late payments = up to 6 weeks of wages

• Earned bonuses and commissions must be paid according to contract and statute


The Company’s Obligation to Pay Wages

• Employees cannot volunteer their time

• Wages cannot be paid solely in non-cash means

• CA law prohibits a deferred wages plan


Reductions in Force“RIF”

• The most drastic cost cutting measure (consider alternatives)• Also could be the most costly scenario to address through litigation if done

wrong.

• Developing a Selection Process• Not a catch-all to get rid of undesirables. A problem is still a problem.

• Risks: Discrimination and Adverse Impact

• Notifying Selected Employees

• Severance Agreements (ADEA/OWBPA Requirements)

• Rehiring Plan and Hiring/Firing Freeze

• WARN considerations• Getting WARN wrong could result in liability that breaks the bank.


Reductions in Force

• Federal and CA WARN:

•Require 60 days advance notice of Plant Closings, Relocations, or Mass Layoffs


Reductions in Force

• Covered Employers

• Federal Warn: Organizations that employ either:

a) 100 or more employees (excluding part-time); OR

b) 100 or more employees (including part-time) working at least 4,000 hours per week (in aggregate, excluding overtime hours).

• CA Warn: 75 Employees


Reductions in Force

• Plant Closings

• Federal WARN The Permanent or temporary shutdown of:

A single employment site, facility within site, or operating unit within site

That causes an employment loss of 50 or more employees at the site (excluding part-time employees)

During a 30 day period

• CA WARN Termination of operations at establishment of 75 or more

employees


Reductions in Force

• Mass Layoffs

• Federal WARN: Employment loss at a single site of employment for at least:

500 employees (not part-time); or50 employees (not part-time), if the number affected is at least

33% of the work forcePre-layoff size of employer generally measured 60 days prior to

layoff.

• CA WARN Act Layoff of 50 employees at facility during a 30-day period


Reductions in Force

• WARN Act Considerations:

•WARN exceptions

•Liability for violating California WARN


Temporary Shut-Downs

• Non-Exempt and Exempt Employees

• Establishing vacation, PTO, and “floating” holiday policies

• Providing notice of shut-down policies and procedures


Salary Reductions

• Review employee contracts

• Check the salary basis for exempt employees

• Provide sufficient notice

• Consider conditional bonus incentives to retain key employees


Other Cost Saving Client Strategies

• Reduction of Hours

• Annual Payout of Vacation

• Forced Vacations

• Vacation Increase in Lieu of Salary

• Temporary Paid Leave of Absence at Reduced Salary


Personal Liability of Officers and Directors for Failure to Pay Wages

• Federal Law

•Officers and Directors are “Employers” under Federal law

•Officers and Directors can be personally liable for unpaid wages

•Personal liability potentially imposed on those who exercise “operational control”


Personal Liability for Officers and Directors

• CA Law

• Officers and Directors are not “Employers” under CA Law

• However, CA Labor Commissioner follows the definition of “employer” used by the Industrial Welfare Commission Wage Orders:

Employer = an individual who “exercises control over wages, hours, or working conditions of any persons.”

Thus, risk of personal liability remains under the following bases: fraud, intentional misrepresentation, fraudulent concealment, and the “alter ego” doctrine.

Criminal Liability.


Protecting Trade Secrets

• Exit interview

• Inventory trade secrets accessed and/or in possession of employee

• Inventory all Organization property in possession of employee and ensure return of all such property

• Ensure that no Organization confidential, proprietary, or trade secret information is in employee’s possession

• Review employee’s ongoing obligations under the Confidentiality Agreement

• Seek employee's signature on the Certification Form of the Confidentiality Agreement

• Consider letters to the employee and the new employer.


Conclusion

• Questions?

• The Company’s Obligation to Pay Wages

• Reductions in Force

• Temporary Shutdowns

• Salary Reduction Programs

• Other Cost Saving Measures

• Personal Liability for Officers and Directors for Failure to Pay Wages

• Protecting Trade Secrets

Wilson Sonsini Goodrich & RosatiPROFESSIONAL CORPORATION

Michael J. Nader

Employment Litigation Group

March 11, 2009

Managing Organizations in Challenging Economic

Times

Documents

Wilson Sonsini Goodrich & Rosati PROFESSIONAL CORPORATION Michael J. Nader Employment Litigation Group March 11, 2009 Managing Organizations in Challenging