Legal Updates

Energy Sector Layoffs-Considerations for Employers

Downsizing and employee layoffs are the harsh reality of the plunging oil prices, as reflected by the announcements of many oil and gas companies in recent weeks. When a reduction in force becomes unavoidable, employers with Colorado operations should take steps to ensure compliance with Colorado and Federal laws, as well as contract obligations. Highlighted below are a few of the legal issues that such employers will face in a layoff.

 Managing Risk

To avoid a wrongful termination claim or lawsuit, employers should use objective criteria in selecting employees for job separation that is well documented. Once an initial group is selected, the group should be viewed as a whole to determine whether a disproportionate percentage falls within a protected employee category, such as age, disability and race. Employers should also assess risk on an individual basis, with consideration of any recent protected activity by the employee or military status.


 Advance Notice

In general, companies with less than 100 employees are not legally required to provide advance notice for an impending layoff, although many companies often elect to provide some notice when possible. Companies with 100 or more employees, on the other hand, are required to provide 60 days’ advance notice of the layoff under the federal Worker Adjustment and Retraining Notification Act (WARN Act) in the event of a “plant closing” or “mass layoff,” as defined by the Act. Analyzing the Act’s applicability and requirements can be a complex exercise in certain circumstances. Employers with anywhere close to 100 employees should therefore seek legal advice as soon as the layoff decision is made to avoid the risk of potentially significant liabilities and penalties.

Even if the WARN Act does not apply, it is important to review all employment agreements and internal policies and procedures for any requirement of advance notice of employment termination.

 Final Wages

Colorado law requires employers to pay all final wages to a laid off employee at the time of job termination in most circumstances. Employers should keep in mind that “wages” include any earned and vested bonuses and commissions, as well as accrued vacation absent any written agreement with the employee stating otherwise. Failure to pay final wages can expose an employer to stiff penalties under Colorado’s Wage Protection Act.

 Severance Pay

There is no requirement under Colorado or federal law to pay severance to employees in a layoff, although, again, many companies elect to do so when possible. In making this decision, employers should be aware of any requirements to pay severance under the terms of any employee agreements and internal policies. Whenever possible, severance pay should be offered through a separation agreement that includes the employee’s release of all legal claims against the company. If there are employees age 40 or older who are offered severance in exchange for a release, the agreement must contain special provisions and disclosures for the release of an age discrimination claim to be effective.

 Post-Employment Obligations

Employers should review all employee agreements containing any post-employment obligations by the impacted employee, such as non-competition, non-solicitation, confidentiality and non-disclosure obligations. If a displaced employee has entered into such an agreement, it is advisable to remind the employee of these obligations in the notice of layoff and to include a copy of the agreement.

Layoffs are difficult for both employers and employees. Careful advance planning and preparation with assistance from legal counsel is the key to a smooth and successful process. For additional information regarding layoffs under Colorado and Federal law, please contact Danielle Wiletsky: