It is no secret that a large percentage of businesses will face uncertain
financial circumstances at some time. Business owners may reach the point
where they must make hard decisions, such as benefit reductions and layoffs.
If your business is struggling to stay above water, it’s important
that you understand your employees’ legal rights and your obligations
under employment law.
What to Consider About Layoffs
If you simply cannot afford to keep all of your employees, we know that
is a very difficult position to be in, especially when you have managed
to build an employee family of sorts. If you are seriously considering
layoffs, we urge you to review the Worker Adjustment and Retraining Notification
If an employer has 100 or more employees (not including new employees who
have worked less than six months in the last year, and employees who work
less than 20 hours a week), WARN requires employers to provide employees
with at least 60 calendar days’ notice, in advance and in writing.
While this federal law may not apply if you have a small business, some
states have enacted similar laws that apply to smaller businesses, so
you should speak with a business law attorney before you start handing
out pink slips.
If You Intend to Reduce Employee Hours
If you intend to reduce your employee’s hours, the rules will depend
on whether the employee is salaried or hourly. Employers have every right
to reduce the schedules for hourly employees, but reducing the hours of
salaried employees is more complicated.
Since salaried employees get paid the same amount each pay period no matter
how many hours they work, reducing their hours will not save your business
If you decide to pay salaried employees less and have them work less hours,
they could be considered hourly employees, and thus eligible for overtime.
Often, employers avoid this alternative because it could actually lead
to increased labor costs.
Taking Advantage of Pay Cuts
An employer has the option of cutting the pay for hourly employees. Some
states require that employers provide employees with advance written notice
to their employees. Check with a
business law attorney for the specific laws in Illinois.
Cutting Fringe Benefits
While workers’ compensation and Social Security are mandatory, Chicago
employers are not required to provide certain fringe benefits, such as
holiday pay, paid time off, and retirement packages.
Often, businesses offer these “perks” so they can be more enticing
to new job candidates, but when a business is insolvent, these benefits
can be the first to go.
If your business is facing poor financial circumstances and you are considering
layoffs, hour reductions, or eliminating benefits,
contact our office for legal and financial advice.