The Office of Management and Budget issued a vaguely worded memorandum on Jan. 27, 2025, ordering a blanket freeze (with very limited exceptions) in all federal grants, federal loans, and other forms of federal financial assistance, until the new administration could conduct an across-the-board review of the government’s spending. The directive appeared to apply to governmental and nongovernmental entities alike and it was not immediately clear whether certain aspects of the directive are permitted by law. While the directive was temporarily blocked by a federal judge just one day later, on Jan. 28, this federal stay is set to expire on Feb. 3, when the court may hear argument following expedited briefing. Challenges also have been filed in other federal courts. For more on this litigation whirlwind, see “Trump Administration (Sort Of) Abandons Funding Freeze | The Federal Government Contracts & Procurement Blog.”
No matter what the courts decide with respect to the memorandum, the issues surrounding it will likely remain hotly contested in the courts, causing uncertainty for all employers, particularly nonprofit organizations and businesses — both large and small. Even just short pauses in federal funding may force employers to lay off, or permanently terminate, their workers, implicating an array of federal and corresponding state statutes. The prospect of significant budget cuts still loom.
Employers anticipating a need to terminate or lay off any of its employees due to cuts in federal funding should be mindful of the following statutes.
The Federal Worker Adjustment and Retraining Notification Act (WARN Act) and Corresponding State Statutes
The statute that first comes to mind is the federal WARN Act, which generally requires employers, including nonprofit organizations, with 100 or more full-time employees to provide any affected employees, or the representatives thereof, with at least 60 days’ written notice of any mass layoffs or plant closings. A failure to follow the federal WARN Act will expose such employers to civil penalties, requiring them to pay back pay to the affected employees, and benefits under employee benefit plans, including the cost of any medical expenses incurred by the employee during the employment loss that would have been covered had the layoff or termination not occurred.
While the federal WARN Act will generally not apply to smaller businesses given their size, multiple states have their own “Mini-WARN” statutes, which may impose additional requirements and that can be more expansive than the federal requirements. For instance, and while this list is far from comprehensive, Maryland law requires employers with 50 or more employees that lay off the greater of 25% of their workforce or 15 employees over any three-month period to give at least 90-days’ notice to the affected employees whenever possible. The Mini-WARN statutes in effect in Hawaii, Wisconsin and Vermont also apply to employees with more than 50 employees and have various additional requirements. In California, if an employer does not pay its affected employees their back pay and the value of their benefits within three weeks of the mass layoff or termination, they will be liable for up to $500 per day for each day they continue to be in violation.
To ensure compliance with the federal WARN Act (and any corresponding state, “Mini-WARN” statutes), employers who anticipate that cuts to funding may affect their workforce may want to be prepared to immediately consider proactively notifying affected employees, government agencies and any collective bargaining representatives of mass layoffs or plant closings triggered by a loss of federal funds. They should also contact counsel regarding any potential, state-specific requirements for mass layoffs under their states’ respective Mini-WARN statutes or otherwise. Because the federal WARN statute (and some state Mini-WARN statutes) provides some limited exceptions that allow for reduction of the notification periods if specific reasons are provided, employers should develop a compliance plan with their legal counsel.
State Wage Payment and Collection Laws
In addition to the federal WARN Act, multiple states have specific wage payment and collection laws, requiring employers to pay employees the wages due to them before their next regular payday if they were terminated or laid off. For instance, Alaska requires unpaid wages to be paid within three days of termination under most circumstances. While this list is also not comprehensive, in Massachusetts, Hawaii, Nevada, Colorado and California, any and all unpaid wages must be paid to terminated employees immediatelyupon termination in most instances. In certain states, bonuses, commissions and other forms of guaranteed compensation are often considered to be “wages” under certain states’ wage payment and collections laws. Unlike many state mini-WARN statutes, the application of state wage payment and collections laws often does not hinge on having some threshold number of employees. As just one example, the Massachusetts Wage Act does not require a minimum number of employees to trigger coverage. And, in some states such as Massachusetts, violations of the states’ wage payment and collection laws trigger treble damages.
Again, employers who anticipate a need to terminate or lay off employees due to potential continued cuts in federal funding should consult with counsel to determine requirements for compliance within their respective states.
Requirements for Terminating Non-Citizen Employees
Finally, in addition to the above-mentioned notice and wage payment requirements, employers must be mindful of immigration requirements when terminating non-citizen employees under federal immigration laws. As just one example, if an employer terminates an H-1B employee before the expiration of the underlying H1-B petition approval, the employer must effect a bona fide termination in order to end wage obligations under the certified labor condition application (LCA) that supports the H-1B petition approval. Federal regulations require the employer to notify the Department of Homeland Security of the termination and withdraw the LCA. In addition, when an H-1B employee is involuntarily dismissed, the employer must offer the reasonable costs of return transportation back to their home country or most recent place of residence. Failure to comply with the notice and return-transportation requirements may mean that a bona fide termination has not occurred and could subject the employer to back wages. That is the case even if the employer has made the H-1B employee aware of the termination.
Similarly, if there is a material change to an H-1B worker’s employment including but not limited to a change in hours from full-time to part-time or a reduction in salary, an amended LCA and H-1B petition should be filed prior to the change. Employers must keep in mind that the obligation to pay the proffered salary typically remains even when an H-1B worker is in non-productive status.
While employers generally do not have additional immigration law obligations when terminating an employee who has a green card, the impact of employment termination on a nonimmigrant employee with pending green card paperwork will often be significant.
Because federal immigration laws continue to be in flux, contact experienced immigration counsel to ensure that you are following all current laws when terminating non-citizen employees, while still ensuring that the non-citizens’ rights are being respected.
