Recent layoffs raise questions about severance, notification - Press Herald

Whitcraft, a manufacturer of components used in commercial aircraft, laid off 125 workers in Scarborough last week and said it will close its plant. Whitcraft’s CEO said Monday that the company is still developing potential plans to give severance pay. Shawn Patrick Ouellette/Staff Photographer

The Tasman Leather Group announced Monday that it would be closing its tannery facility in Hartland by late summer, putting 115 employees out of work.

Tasman joins a growing list of companies in Maine that have ceased or dramatically reduced operations as part of the economic fallout from efforts to reduce the spread of coronavirus. Wex Inc. and the nonprofit Council on International Educational Exchange are among other local employers with recent layoffs.

Some laid-off workers are entitled to severance pay. Others may be out of luck. When it comes to plant closings and mass layoffs, state and federal laws are similar – but not identical – regarding company liability and workers’ rights.

“These statutes are not well understood,” said Jeffrey Young, a lawyer with Johnson, Webbert & Young who has handled many severance pay cases involving state and federal regulations and provided input when Maine updated its law on severance pay.

Last week, Whitcraft Group, a manufacturer of commercial airplane engine components, told 125 employees in Scarborough, many of them furloughed since mid-March, that the majority of them would be laid off the following day. About a third were invited to stay on for another month or two to help close down the plant by the end of July.

On the surface, Whitcraft appears to fit the definition of a “covered establishment” because at least 100 people worked at its facility in the preceding 12 months. Under Maine law, when such establishments decide to close or reduce their workforce by at least one-third (and by a total of at least 50 employees), eligible workers are entitled to severance at the rate of one week’s pay for each year of service time.

On Friday, several laid-off Whitcraft workers said they were told no severance pay would be forthcoming. On Monday, Whitcraft CEO Doug Folsom responded to a Portland Press Herald request to explain the apparent inconsistency by saying the company is still developing potential severance plans.

“We hope to have something to tell employees (Tuesday) afternoon,” said Folsom, who added that the company had been forced to react quickly to a sudden decline in work orders and thus was unable “to communicate to employees what severance would be paid” when they were given notice of the plant closure.

“Hopefully, employers will do the right thing,” said Young, the labor lawyer, “which it sounds like Whitcraft is going to do.”

Typically, companies with at least 100 full-time employees are required to give notice of impending mass layoffs or plant closures. The federal Worker Adjustment and Retraining Notification Act requires a 60-day notice to employees. Maine law, amended in 2019, requires even more advance notice of 90 days to employees, to local municipal officials and to the state director of labor standards.

In the first six months of 2019, Maine received one such notice. In early January, a call center in Wilton for Barclaycard U.S. announced it would close, and 227 employees would lose their jobs.

This year, between March 20 and April 20, Maine received 11 mass layoff notices. Mike Roland, the state’s director of labor standards, said more have yet to be posted to the department’s website.

There won’t be any penalty for not giving 60- or 90-day notice, Roland said, because “unforeseen business circumstances” are an allowable exception. Exceptions to the severance pay provision, however, are not as lenient. Under Maine law, employers are not obligated to pay severance if the closing or mass layoff “is necessitated by a physical calamity or the final order of a federal, state or local government agency.”

The statute further defines physical calamity as “any calamity such as fire, flood or other natural disaster.”

Is COVID-19 a physical calamity?

“That’s the question we’re asking ourselves,” Roland said. “Is COVID-19 a natural disaster? And if it is a natural disaster, is a particular plant closing or layoff the result of that natural disaster?”

Roland said the Maine Attorney General’s Office is weighing in on the decision, but ultimately, “it’s a judgment we have to make.”

Young, the lawyer who gave input into Maine’s amended statute, argues against such an interpretation.

“I don’t think it qualifies, based on the language there,” he said. “I don’t think a pandemic is necessarily what I would classify as a physical calamity.”

As for the “final order” of some government official leading to a plant closure or mass layoff, neither Roland nor Young believe the mandate issued in late March by Gov. Janet Mills for nonessential public-facing businesses to close, or municipal orders that were even more restrictive, are applicable.

Looming above such questions is a larger issue of how many Maine employers will decide they have no choice but to join the list of closures or mass layoffs. Young said he fears for the retail and hospitality sectors.

Roland did not say when a decision is likely to be made on how to classify a pandemic in terms of severance law.

“We haven’t been in a situation like this,” he said. “We’re trying to figure it out.”

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