Notifying Employees When You're Going Out of Business

A few years ago, a young woman called me in tears requesting legal advice. Her employer - a small coffee shop in downtown Houston - had closed its store without any notice, and she wanted to know what her legal recourse might be. This was an extreme case because she showed up for her scheduled workday and found a note taped to the glass front door advising employees that their services were no longer needed. Although I don't think that this happens very often, it does beg the question: What are the laws regarding notifying employees when you are going out of business?

First of all, Texas is a right-to-work state, also known as an "employment-at-will" state. This means that employers have the right to terminate employees for any reason - or no reason - as long as it doesn't fall under the category of illegal discrimination. The owner of the coffee shop for which that young woman was an employee had every right to fire employees with no notice because he was not violating any laws.

That said, there are a few laws that govern the notification of employees when you go out of business, and you should be aware of these laws before you make any decisions.

Notifying Employees When You're Going Out of Business: Number of Employees

Many employees are covered by the WARN (Worker Adjustment and Retraining Notification) Act, which protects the employees of business enterprises. This usually refers to a business with more than one hundred employees who work at least twenty-five hours a week and who have been employeed for at least six of the previous twelve months. It requires a sixty-day notification of the closing of a business or of a massive lay-off. If you fall under the category of a business enterprise, you will need to give sixty-day notice to your employees.

Worker Adjustment and Retraining Notification: Benefits

Even though you might not be required by law to notify employees about the closing of your business, you may be under obligation to notify employees of the termination of benefits. This varies from state-to-state and will also depend on the types of benefits offered. If you have full-time employees for whom you provide benefits, you should consult an experienced attorney to find out what your obligations are.

Worker Adjustment and Retraining Notification: Severence Packages

Some states require that businesses offer severence packages to employees who are laid off. If this is the case for you, it would be better if you notified your employees well in advance and hired an attorney to negotiate severence packages. Further, you will need to let your employees know when they should receive their last paycheck. Some states require that you deliver final paychecks within fourteen days of laying employees off.

Worker Adjustment and Retraining Notification: Consider the Future

Even if there are no legal problems with failing to notify employees that you are going out of business, you should consider the future. What if you decide to re-open under a new name? Your employees will likely not come back to work for you if you've terminated their employment without warning. Loss of employment is a stressful, painful experience, and you might also end up fending off lawsuits from angry ex-employees, even if their suits have no legal merit.