Michael J. Nader Employment Litigation Group March 11, 2009

1. Managing Organizations in Challenging Economic Times Michael J. Nader Employment Litigation Group March 11, 2009

2. TOPICS • The Organization’s Obligation to Pay Wages • Reductions in Force • Temporary Shutdowns • Salary Reduction Programs • Other Cost Saving Measures • Personal Liability for Officers and Directors for Failure to Pay Wages • Protecting Trade Secrets

3. The Company’s Obligation to Pay Wages • Wages under CA Law Include: • Salary • Accrued vacation • Contractual severance obligations • Payment of wages/accrued vacation due on the termination date • Penalties apply for late payments = up to 6 weeks of wages • Earned bonuses and commissions must be paid according to contract and statute

4. The Company’s Obligation to Pay Wages • Employees cannot volunteer their time • Wages cannot be paid solely in non-cash means • CA law prohibits a deferred wages plan

5. Reductions in Force“RIF” • The most drastic cost cutting measure (consider alternatives) • Also could be the most costly scenario to address through litigation if done wrong. • Developing a Selection Process • Not a catch-all to get rid of undesirables. A problem is still a problem. • Risks: Discrimination and Adverse Impact • Notifying Selected Employees • Severance Agreements (ADEA/OWBPA Requirements) • Rehiring Plan and Hiring/Firing Freeze • WARN considerations • Getting WARN wrong could result in liability that breaks the bank.

6. Reductions in Force • Federal and CA WARN: • Require 60 days advance notice of Plant Closings, Relocations, or Mass Layoffs

7. Reductions in Force • Covered Employers • Federal Warn: • Organizations that employ either: • 100 or more employees (excluding part-time); OR • 100 or more employees (including part-time) working at least 4,000 hours per week (in aggregate, excluding overtime hours). • CA Warn: • 75 Employees

8. Reductions in Force • Plant Closings • Federal WARN • The Permanent or temporary shutdown of: • A single employment site, facility within site, or operating unit within site • That causes an employment loss of 50 or more employees at the site (excluding part-time employees) • During a 30 day period • CA WARN • Termination of operations at establishment of 75 or more employees

9. Reductions in Force • Mass Layoffs • Federal WARN: • Employment loss at a single site of employment for at least: • 500 employees (not part-time); or • 50 employees (not part-time), if the number affected is at least 33% of the work force • Pre-layoff size of employer generally measured 60 days prior to layoff. • CA WARN Act • Layoff of 50 employees at facility during a 30-day period

10. Reductions in Force • WARN Act Considerations: • WARN exceptions • Liability for violating California WARN

11. Temporary Shut-Downs • Non-Exempt and Exempt Employees • Establishing vacation, PTO, and “floating” holiday policies • Providing notice of shut-down policies and procedures

12. Salary Reductions • Review employee contracts • Check the salary basis for exempt employees • Provide sufficient notice • Consider conditional bonus incentives to retain key employees

13. Other Cost Saving Client Strategies • Reduction of Hours • Annual Payout of Vacation • Forced Vacations • Vacation Increase in Lieu of Salary • Temporary Paid Leave of Absence at Reduced Salary

14. Personal Liability of Officers and Directors for Failure to Pay Wages • Federal Law • Officers and Directors are “Employers” under Federal law • Officers and Directors can be personally liable for unpaid wages • Personal liability potentially imposed on those who exercise “operational control”

15. Personal Liability for Officers and Directors • CA Law • Officers and Directors are not “Employers” under CA Law • However, CA Labor Commissioner follows the definition of “employer” used by the Industrial Welfare Commission Wage Orders: • Employer = an individual who “exercises control over wages, hours, or working conditions of any persons.” • Thus, risk of personal liability remains under the following bases: fraud, intentional misrepresentation, fraudulent concealment, and the “alter ego” doctrine. • Criminal Liability.

16. Protecting Trade Secrets • Exit interview • Inventory trade secrets accessed and/or in possession of employee • Inventory all Organization property in possession of employee and ensure return of all such property • Ensure that no Organization confidential, proprietary, or trade secret information is in employee’s possession • Review employee’s ongoing obligations under the Confidentiality Agreement • Seek employee's signature on the Certification Form of the Confidentiality Agreement • Consider letters to the employee and the new employer.

17. Conclusion • Questions? • The Company’s Obligation to Pay Wages • Reductions in Force • Temporary Shutdowns • Salary Reduction Programs • Other Cost Saving Measures • Personal Liability for Officers and Directors for Failure to Pay Wages • Protecting Trade Secrets

18. Managing Organizations in Challenging Economic Times Michael J. Nader Employment Litigation Group March 11, 2009