By Carlyn Kolker
Feb 27 (Reuters) - With steep budget cuts set to go into
effect on March 1 unless Congress reaches a deal, lawyers are
warning companies that do business with the government that
important employment decisions are coming up.
Companies with large government contracts, such as defense
contractors, could be the most affected.
Employers are asking the most questions about how to
furlough employees, said Paul DeCamp, who heads Jackson Lewis's
wage and hour division. For exempt employees, who are salaried
and not paid hourly, companies simply can't reduce a worker's
weekly hours and expect to reduce pay too, DeCamp said.
Labor Department regulations specify that exempt employees
cannot have weekly work reduced because of the employer's
"For exempt employees, the key issues is to make sure
employers understand that a partial week is not a basis for
salary deduction," said DeCamp.
To address this, he recommends that government contractors
who are facing the prospect of large contract reductions
consider rotating furloughs of a week or longer. Furloughs of
that length can be unpaid.
The employees who are told to not show up for work must
really not work. If exempt employees perform any work during
unpaid leave, they are entitled to compensation, said DeCamp.
"Consider turning off their remote access, their email
access," he said. "Some employees can't help themselves."
Employers are also grappling with whether they must advise
employees of potential large-scale layoffs, according to
employment lawyers. Under the federal Worker Adjustment and
Retraining Notification law, also called WARN, most companies
anticipating a major reduction in force must give 60 days notice
to employees so they can search for other work.
But there are exceptions to WARN, such as if companies
experience an unforeseen business circumstance. The question of
whether the looming budget cuts, known as the sequester, is such
an unforeseen event is the subject of debate.
In July, the Labor Department issued a letter saying federal
contractors did not have to provide the 60-day notice if the
budget cuts were triggered.
But lawyers are divided about whether courts would agree
with the department's opinion.
"We are not sure that the Department of Labor's position on
that is correct," Kerry Notestine of Littler Mendelson told
Reuters. At a hearing before a U.S. House of Representatives
subcommittee on workforce affairs on Feb. 14, Notestine
testified that it is "highly questionable" whether the Labor
Department can issue guidance on WARN issues, according to the
Warn Act itself.
"It is unclear what amount of deference, if any, a court
would apply to such an opinion," Notestine said.
He said that he is advising clients to furlough employees,
which doesn't require a WARN notice as long as the furlough
lasts for less than six months.
That advice rests on the assumption, Notestine said, that
any sequester would last for less than six months and the budget
cuts wouldn't be permanent.
Follow us on Twitter @ReutersLegal | Like us on Facebook