Mass Layoffs, Reductions in Force and Plant Closings: Maine
Federal law and guidance on this subject should be reviewed together with this section.
Author: Linda D. McGill, Bernstein Shur Sawyer & Nelson
Summary
This guide provides an overview of the Maine Severance Pay Act's advance notice and severance pay requirements applicable to mass layoffs, relocations and closures.
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Mass Separation of Employees
The Maine Severance Pay Act (MSPA) works hand-in-hand with the federal Worker Adjustment and Retraining Notification (WARN) Act. It is more expansive in its coverage in certain ways, particularly in terms of its notice requirements and unique severance pay requirements. The MSPA applies to a closing, substantial shutdown or relocation of a covered establishment.
Severance pay. Any employer that closes or engages in a mass layoff at a covered establishment is liable for severance pay to eligible employees under Maine law. The rate of severance is one week's pay for each year worked, and partial pay for any partial year, from the employee's last full month of employment in that establishment.
The severance pay is in addition to any final wage payment to the employee and must be paid within one regular pay period after the employee's last full day of work.
The years worked are calculated from the most recent date of hire or date of rehire, in case of a break in employment, to the last date the eligible employee worked at the covered establishment.
The employer may only discount the severance pay by making voluntary and unconditional payments to the eligible employee (including payments made under a contract for providing severance pay). However, premiums or bonuses offered to encourage employees to continue working through the termination or relocation period may not be used to discount severance.
Severance pay exceptions. There is no liability for severance pay if:
- The closing or mass layoff is due to a physical calamity (e.g., fire, flood or other natural disaster) or the final order of a federal, state or local government agency;
- The employee has worked for the employer for fewer than three years; or
- The employee is covered by, and has actually been paid under the terms of, an express contract providing for severance pay that is in an amount greater than the severance pay required by law. An employer bears the burden of showing that the terms of the contract provide a greater benefit to the employee than the law's requirements.
However, a covered employer is not exempt from liability for severance pay due to a voluntary petition for bankruptcy protection under Chapters 7 or 11 of the Bankruptcy Code, or because of an involuntary petition for bankruptcy. 26 M.R.S. § 625-B(3-A).
Employer Coverage
A covered establishment under the MSPA means any industrial or commercial facility that employs 100 or more persons, or has employed them, at any time in the preceding 12-month period. 26 M.R.S. § 625-B(1)(A).
The MSPA defines an eligible employee as any employee who:
- Has been continuously employed at the covered establishment at the time of the closing or mass layoff for at least three years, including any period when the employee was on a leave of absence;
- Has not been terminated for cause; and
- Has not accepted employment at another or relocated establishment operated by the employer or remains employed at the covered establishment.
An eligible employee also includes any employee who voluntarily quit their job with a covered employer to take a new job within 30 days before the date set by the employer for the closing or mass layoff in the initial notice. 26 M.R.S. § 625-B(1)(B-1).
Triggering Events
A closing means the permanent shutdown of industrial or commercial operations at a covered establishment. A closing may occur due to relocation, termination or consolidation of the employer's business.
Unlike the federal WARN Act, a relocation of a business may also trigger coverage. Relocation is defined as the removal of all, or substantially all, of a covered establishment's industrial or commercial operations to a new location, within or outside of Maine, 100 or more miles away from the original location.
Similar to the federal WARN Act, a mass layoff means a reduction in workforce, which is not the result of a closing, that results in an employment loss at a covered establishment for at least six months of at least:
- 33% of the employees and at least 50 employees; or
- 500 employees.
Notice Requirements
Notice requirements under Maine law differ in some respects from the federal WARN Act, which requires notice to:
- Each representative of an affected employee or, if there is no representative, each affected employee;
- The state dislocated worker unit; and
- The chief elected official of the unit of local government within which the plant closing or mass layoff is to occur. If there is more than one such unit, the employer should notify the local government unit to which it paid the highest taxes for the year before the determination is made.
State notice. Maine requires covered employers to provide at least 90 days' written notice to the Director of the Bureau of Labor Standards prior to a relocation or closing. This is more stringent than the 60 days' notice required under the federal WARN Act for closings or layoffs.
Anyone initiating a mass layoff at a covered establishment must notify the Director as far in advance as practicable and no later than within seven days of the layoff. In addition, they must report to the Director how long the layoff is expected to last and whether it is of an indefinite or definite length.
The Director can also require an employer to report on a regular basis, at least every 30 days, on any facts that would be relevant to determining if the mass layoff constitutes a closing or whether there is a substantial reason to believe the affected employees will be recalled.
The notification or report to the Director must contain all relevant information in the employer's possession regarding a potential recall, if applicable.
Notice to employees and localities. A Maine employer proposing to close a covered establishment must provide written notice to eligible employees and municipal officers of the municipality where the covered establishment is located at least 90 days prior to closing, unless the Director of the Bureau of Labor Standards waives this requirement. 26 M.R.S. § 625-B(1),(6-A).
Exceptions to Notice Requirements
The state has no laws granting exceptions to notice requirements for purposes of mass layoffs, reductions in force and plant closings.
Penalties and Enforcement
An employer that violates the severance pay requirements may be subject to a fine of up to $1,000 per violation. Each employee affected counts as a separate violation.
In addition, any employer that fails to provide notice to the Director, affected employees or municipal officers may be liable for a civil fine of up to $500 per day. Exceptions to this rule include:
- A closing due to a physical calamity;
- A closing due to the final order of a federal, state or local government agency; or
- The failure to give notice is due to unforeseen circumstances.
Violations of the MSPA may be enforced by:
- Any one or more employees, through a claim in an appropriate state or federal court, on behalf of the employee or employees or any other similarly situated employees;
- A labor organization through a claim on behalf of its members; and
- The state.
Courts will award reasonable attorney fees and costs to the prevailing claimant.
Displacement, Retention and Recall
Maine has no requirements regarding employee displacement, retention and recall applicable to private employers.
Future Developments
There are no future developments.