As technology, demand and regulations rapidly evolve, the tech sector generally and semiconductor companies specifically must learn and master how to legally expand and contract their workforces to meet both business needs and budgetary constraints. Fluctuating demand due to the cyclical nature of the industry and the growing talent shortage with nuanced and evolving laws related to layoffs (including WARN and mandatory severance) mandate a clear understanding and application of compliance obligations to manage legal risk.
Since layoffs are a reality in the semiconductor industry, a robust workforce contraction strategy is key. At its core, employers should establish legitimate non-discriminatory and non-retaliatory selection criteria and supporting documentation to document those decisions in order to protect against legal claims, including both disparate treatment and disparate impact theories of discrimination. Ideally, objective selection criteria should be used as the most defensible strategy, even if it isn’t foolproof. Objective layoff selection criteria may include last in/first out; length of service; RIF-specific performance ratings based on objective metrics; or even the elimination of specific job functions no longer necessary to the business due to an objective issue, such as the loss of an account or end of production of certain technology.
Subjective layoff decisions are more fallible and subject to challenge. Subjective criteria would ideally be measurable and tied directly to the organization’s operational needs, including but not limited to reducing salary expenditures, eliminating positions due to loss of contracts, or even evaluating departmental outsourcing. Should the criteria be performance-based, employers should ideally review source materials, such as past performance evaluations, to ensure that ratings have been applied consistently to avoid unlawful bias or discrimination.
Documentation of the decision-making process is essential. In the case of litigation, RIF documentation can serve as evidence showing that the process was fair, consistent and grounded in legitimate business needs. Some courts have eroded deference to business judgment as a justification recently, so companies should consider what evidence they will need to show that both criteria and selections will pass muster if challenged. Of course, implementing a severance plan under ERISA and/or offering severance with a waiver and release of claims can afford enhanced protection, presuming the company achieves full participation. It’s important that releases are modernized and refreshed to comply with evolving legal requirements. With any documentation, whether created in planning or executing a RIF, companies should ensure legal counsel is involved and documentation is protected by attorney-client privilege, including by issuing an instruction to treat all documents and information as such and marking documents clearly with the privilege and a message stating not to share the documents or information.
Chipmakers with multiple manufacturing sites and a large number of employees must be aware of the Worker Adjustment and Retraining Notification Act (WARN) in executing workforce management. Federal WARN requires 60 days’ notice before a covered plant closure or mass layoff and is triggered by 50 or more employment losses at a single site. A mass layoff occurs when there are employment losses for at least 50 full-time employees that amount to 33% or more of the workforce at the site, or when 500 or more full-time employees are affected regardless of percentage. Part-time employees and contractors do not count toward these thresholds but are still entitled to notice, whereas temporary employees do count but are not entitled to notice. Companies should also be aware of state-level “mini-WARN” laws that tighten thresholds and requirements, as well as burgeoning state laws mandating severance pay.
Furthermore, under the Older Workers Benefit Protection Act (OWBPA), an amendment to the Age Discrimination in Employment Act (ADEA), employers must provide employees aged 40 or older a 45-day consideration period and a seven-day revocation period for a valid release of claims. OWBPA also mandates disclosure of decisional unit; eligibility and selection criteria; and a list of job titles, departments, ages and selection status for both discharged and retained employees. Determining a decisional unit and what to disclose to impacted employees on the required OWBPA attachment to a release and waiver is an art without much case law guidance, so legal guidance helps mitigate risk on the front end.
Beyond these considerations, semiconductor companies with operations in multiple states should keep updated separation agreement templates in accordance with various state laws. State-specific forms are essential and should reflect restrictive covenants, such as noncompete and non-solicitation clauses, which also vary significantly by state. In addition, separate agreements may also be needed under the OWBPA. Thus, companies are advised to work closely with human resources, management and legal counsel to ensure timeliness and compliance at all stages.
Nonnie Shivers is Phoenix office managing shareholder for Ogletree Deakins. She partners with employers and managers in three primary ways: litigation avoidance through proactive and maximally compliant 50-state counsel and training; complex workplace investigations, including at the C-suite level; and litigating legally complex and factually challenging cases to defend employers’ lawful actions.
Shivers possesses super subject matter expertise in highly regulated industries, representing companies in nuclear, energy, mining, education, retail and e-commerce, as well as air carriers. As a Chambers-rated eminent practitioner leading the largest and only Band 1 Chambers-ranked employment practice in Arizona, Shivers advises and counsels employers in all aspects of employment law.
