SENATE BILL REPORT

EHB 1552

BYRepresentatives Wang, Fisher, Sayan, Cole, Patrick, Dellwo, Gallagher, O'Brien, P. King, Winsley, Crane, Hargrove, Scott, Ebersole, Appelwick, Jacobsen, R. King, Leonard, Locke and Unsoeld

Establishing employer obligations for relocation, termination, or sale of a business or part of a business.

House Committe on Commerce & Labor

Senate Committee on Economic Development & Labor

Senate Hearing Date(s):February 25, 1988

Senate Staff:Bill Lynch (786-7427)

AS OF FEBRUARY 24, 1988

BACKGROUND:

Washington statutes do not regulate or otherwise require severance pay to employees in the event of a plant closing, relocation or sale.  In Maine, employers with over 100 employees are required to pay severance pay at the rate of one week of pay for each year of service if a plant is relocated or closed.  The Maine severance pay requirements were upheld by the U.S. Supreme Court as a legitimate exercise of the state's police power to establish minimum labor standards that was not preempted by the National Labor Relations Act.

SUMMARY:

An employer that relocates, terminates or transfers ownership in a business is liable for severance pay to employees at the rate of one month's pay for each year of service, for a maximum of 12 month's pay.  For employees who have worked a pay period but less than one year, the severance pay is in the amount of one month's pay.  The employer is not liable for severance pay if the employee is covered by an express contract providing severance pay or the employee accepts employment with the new owner at the same wages and benefits as the employee received prior to the transfer of ownership.  The employer's liability for severance pay is limited to the value of the business at the time of the transaction.

A successor employer must offer a position to each employee of the predecessor employer who was employed during the twelve months preceding the transfer of ownership.  The position must be the same position that the employee previously held, or if that work is no longer performed, then a comparable position at pay and under conditions of employment not inferior to that provided to new employees.  For one year, employees accepting positions with the successor employer may not be discharged except for misconduct connected with work.

These obligations apply to employers with 8 or more employees.  The successor employer's obligation to rehire the predecessor's employees does not apply if there is no work available for which the employee is qualified or the former employee held a managerial position with responsibility for setting fundamental company policy.

The employer may not avoid his or her severance pay or rehire obligations by a layoff or discharge of employees prior to the termination or transfer of ownership of the business.  An employer may be relieved of these obligations if the employer proves by clear and convincing evidence that the layoffs did not result from the expected termination or transfer of ownership.

The act does not apply to employees who are terminated because of bona fide restructuring of the business; bankruptcy; death, serious illness or Act of God that results in termination of the business; the business being not profitable, if the employer gives six months notice; and any termination, if the employer gives 12 month's notice.

The employee may bring suit in superior court to enforce the rights granted in the act and the court may direct specific performance of the rehire requirement.  The Department of Labor and Industries is authorized to pursue collection actions for severance pay.  The employee may have a lien against property used in the business in the amount of money owed by the employer.

If any provision of the act is held invalid, the remainder of the act is not affected.

Appropriation:    none

Revenue:    none

Fiscal Note:      none requested