HOUSE BILL REPORT

HB 1411

BYRepresentatives Vekich, R. King, Cole, Prentice, Winsley, Ebersole, Fraser, Sayan, Jones, Leonard, Basich, Scott, Baugher, Rector and Dellwo

Defining employer obligations to employees.

House Committe on Commerce & Labor

Majority Report:  The substitute bill be substituted therefor and the substitute bill do pass.  (7)

      Signed by Representatives Vekich, Chair; Cole, Vice Chair; Jones, R. King, Leonard, O'Brien and Prentice.

Minority Report:  Do not pass.  (4)

      Signed by Representatives Patrick, Ranking Republican Member; Smith, Walker and Wolfe.

House Staff:Chris Cordes (786-7117)

AS REPORTED BY COMMITTEE ON COMMERCE & LABOR FEBRUARY 24, 1989

BACKGROUND:

Washington statutes do not regulate or otherwise require severance pay to employees or rehiring of employees if a plant is closed, relocated or sold.  The federal plant closing law, effective February 4, 1989, also does not provide for severance pay or address the rehiring of employees by a new plant owner.  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 were not preempted by the National Labor Relations Act.

SUMMARY:

SUBSTITUTE BILL:  An employer with 15 or more employees 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 months' 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 (1) the employee is covered by an express contract providing severance pay equal to or greater than the severance pay required under the act or (2) the employee accepts employment with the old employer or new owner at the same wages and benefits as the employee received prior to the termination of the business or 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 12 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.

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:  (1) bona fide restructuring of the business; (2) bankruptcy; (3) death, serious illness or Act of God that results in termination of the business; (4) the business being not profitable, if the employer gives 6 months prior notice; and (5) any termination, if the employer gives 12 month's prior 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.

SUBSTITUTE BILL COMPARED TO ORIGINAL:  The threshold for employer coverage is changed from eight or more employees to 15 or more employees.

Under the original bill, an employer was not liable for severance pay to an employee if the employee was covered by an express contract providing for severance pay.  In the substitute bill, the severance pay in the contract must be equal to or greater than the severance pay required under the bill to excuse employer liability.

Fiscal Note:      Available.

House Committee ‑ Testified For:    Al Brisbois, Washington State Labor Council; Ralph Burnett, Hotel & Restaurant Employees, Local 8; Bob Dilger, Washington State Building and Construction Trades Council; Dean Olson; Helen Reader, United Food and Commercial Workers, Local 367.

House Committee - Testified Against:      Gary Smith, Independent Business Association;  Enid Layes, Association of Washington Business; Bob Seeber, Restaurant Association.

House Committee - Testimony For:    Employees and communities suffer when a business is sold and the employees are not rehired or the collective bargaining agreement already in place is not honored.  The result is a dislocated worker problem that the state must then address.  Many workers who are rehired lose all seniority and other benefits. These workers may start their careers over each time the workplace is sold and new owners begin everyone at the entry level.

House Committee - Testimony Against:      Small businesses cannot absorb another measure that will decrease the value of their businesses.  Making businesses harder to sell will harm economic development in the state.