Personnel Actions: Layoffs & PTO

As businesses and employers are getting a better handle on their staffing needs after several roller coaster months of COVID-19, the fortunate businesses are facing decisions about bringing people back to work who had previously been laid off and also addressing paid time off of employees that may not have utilized much of it.  With this in mind, employers should understand their options and any legal requirements.

A common question we often get, and one we are getting more often at this time, is what requirements apply to employers when they begin restaffing positions that were vacant due to recent layoffs and reductions in force.  When it comes to federal law and Texas state law, there is no legal requirement that an employer bring back previously laid off employees to fill the now available positions.  This means that if you laid off 8 employees in April as a result of the COVID-19 pandemic and you are now looking to re-staff those 8 positions, you are not required to bring back the same 8 employees.  You are permitted to fill some or all of the 8 positions using new employees if you choose to do so.  This means that you can take prior performance into account when determining whether or not to bring employees back.

The one major caveat to this is that you must, as always, make the decision on a non-discriminatory basis.  What makes it more complicated is that you must be mindful of disparate impact.  Disparate impact discrimination is a form of discrimination whereby an employer makes a seemingly neutral decision, but the decision ultimately has a discriminatory impact on a protected category.

For instance, consider the following example.  Assume an employer laid off eight employees in April and of that eight, seven are in their 30s and one is 60 years old.  Now assume that the employer chooses to bring back the seven but hire a new employee to replace the 60-year-old.  Finally, assume the newly hired employee is also in his 30s.  Such a scenario clearly has a disparate impact on the 60-year-old and also implicates a protected category, age.  Even if the decision were based upon a legitimate reason, perhaps performance, the employer could be facing a discrimination claim.  In this instance, the employer would ideally have immaculate records demonstrating the positive performance of the seven and the negative performance of the one.  The employer also would ideally have no history of age-based decision-making or age-based comments.  Finally, at the time of the layoff in April, the employer ideally would not have made any specific promises regarding returning the employees to work.

As you can see, the takeaway is that even though you have the leeway to make return to work decisions as you see fit, you should examine such decisions carefully and thoroughly to avoid any potential discrimination claims.

Another question we have been asked repeatedly recently centers around the level of authority employers have regarding paid time off.  Under federal and Texas state law, paid time off is a benefit provided by the employer and, thus, employers have the right to administer paid time off in any way they see fit.  The only limitation is that under the Texas Payday Act, employers must provide paid time off as outlined in their written policies.  That said, employers have the right to alter their written policies.

These questions and issues are arising as a result of many employees holding large amounts of accrued but unused paid time off as a result of the pandemic.  These same employers often are now in a position such that they have steady work and cannot afford for their employees to be away from work.  For employers that did not require, or were legally unable to require, employees to utilize paid time off during the pandemic, they are faced with a dilemma.

So, what are employers able to do?  Many employers have within their paid time off policies a requirement that paid time off be approved.  The easiest route is to provide a directive to employees that for the time being, paid time off requests will be approved sparingly.  While this may not solve all your problems if you have unlimited PTO carryover, it will at least temporarily resolve the issue of staffing needs.

Another option to avoid the carryover concern (for those with unlimited carryover) is to mandate sporadic PTO usage by your employees.  It is likely that your written policies are silent as to mandating PTO usage and if that is the case, then you are legally permitted to mandate PTO usage.  This will allow you to “burn off” accrued PTO at a rate that is less harmful to your bottom line while also limiting the amount of carryover into 2021.

The main point to understand is that as an employer, you have options to control and/or alter PTO as you are returning your employees to the workforce.  You should examine it closely, though, so that it is done in a manner that does not run afoul of the Texas Payday Act.

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