While some businesses report improved business or hiring outlooks for the upcoming year, many others are running out of time before the economic downturn and financing restrictions will force them to implement workforce reductions, close plants, or shut down all or portions of their business operations.
Where a distressed business contemplates a plant closing or mass layoff, the business and its leaders should consider its potential responsibilities under the Worker Adjustment and Retraining Notification Act (WARN) and where applicable, make appropriate arrangements to comply or implement the restructuring to minimize or avoid triggering WARN obligations. In addition to WARN, business contemplating or implementing a plan closing, mass layoff or other reductions in force also should evaluate and make appropriate arrangements to address potential obligations under state plant closing laws, the medical coverage continuation mandates of the Consolidated Omnibus Budget Reconciliation Act (COBRA), retirement plan funding, notice and distribution, vesting or other obligations, for unionized environments, union notification, negotiation or other obligations, voluntary or contractually obligated termination pay or other severance obligations, unemployment, and other obligations. In this respect, particular attention generally is warranted to ensure that vesting and funding requirements for employee benefit plans are assessed and fulfilled, including any new or accelerated obligations to vesting if the reductions result in a partial or complete plan termination, cause underfunding of a defined benefit plans, special tax, securities or other obligations arising from the vesting of payment of deferred compensation under Internal Revenue Code § 409, golden parachute payments under Code §280G or other special compensation or benefits, as well as providing for appropriate application of employee benefit contributions withheld from pay., or otherwise. Employers and members of management also will want to ensure that any employee contributions withheld from final pay are timely paid into trust or otherwise properly applied and that appropriate funding arrangements are put in place to meet employee benefit responsibilities, particularly since executives and others exercising discretion over these matters often become the targets of government or private plaintiff fiduciary liability claims when their distressed corporation fails to make appropriate arrangements. Read more.
Noncompliance with or mismanagement of these responsibilities not only can trigger expensive liabilities for businesses, they often expose commonly controlled or affiliated businesses, successors, officers, directors and management employees to risks. For instance, various tax and benefit rules frequently provide that other related businesses, acquiring entities and other businesses may under certain situations become liable as successors, expose assets to liens, or face other risks. Similarly, employment, employee benefit and tax laws under various circumstances may expose officers, directors or other leaders with discretion or control over certain decisions or activities to person liability when certain employee benefit, payroll or other responsibilities are not met. To minimize these exposures, businesses and their business leaders concerned about a distressed business or anticipating the bankruptcy, merger, acquisition or sale of a business should seek the advise of competent counsel about these potential exposures and opportunities to mitigate these risks.
If your business needs assistance with distressed or bankruptcy company, defined benefit plan funding or other employee benefit, human resources, corporate ethics, and compliance practices, or other related concerns or in responding to restructuring and bankruptcy, employment or employee benefits related charges, audits, investigations or suits, please contact the author of this update, attorney Cynthia Marcotte Stamer here.
Ms. Stamer is experienced with assisting employers, fiduciaries, bankruptcy creditors and trustees, investors, purchasers and others about employee benefit, labor and employment, compensation and other services related concerns involved with distressed businesses or benefit plans, bankruptcy and restructuring transactions and other corporate or plan related events. Board Certified in Labor and Employment Law by the Texas Board of Legal Specialization and Chair of the American Bar Association RPTE Employee Benefits & Other Compensation Group and a Joint Committee on Employee Benefit Council Member, Ms. Stamer has advised and represented these and other business clients on employee benefit, labor and employment, compensation, employee benefit and other personnel and staffing matters for more than 22 years. Her experience includes significant experience representing and advising clients about the planning, implementation, risk management and defense of reductions in force and other labor and employment, employee benefits, compensation, insurance, compliance and other concerns affecting transactions involving bankrupt or distressed corporations. Ms. Stamer also speaks and writes extensively on these and other related matters. Among her many publications are her recent November, 2009 publication, Calculation of Minimum Contributions Required For Single Employer Pension Plans: The Final Rules for The Measurement of Assets and Liabilities For Pension Funding Purposes under Final Treasury Regulation Section 1.430(d)” and A Proactive Approach To Hr And Benefits Planning For Mergers, Acquisitions, Downsizing, Reengineering And Other Organizational Changes.” Persons interested in a copy of either of these publications may contact Ms. Stamer. For additional information about Ms. Stamer and her experience see CynthiaStamer.com.
We hope that this information is useful to you. Solutions Law Press offers a variety of updates, publications, training and other resources to assist its businesses and their leaders meet their legal and operational challenges. If you or someone else you know would like to receive future updates about developments on these and other concerns, please register at Businesses leaders struggling to deal with economic setbacks frequently may be tempted to use employee benefit plan contributions or funds for added liquidity or otherwise fail to take appropriate steps to protect and timely deposit plan contributions or other plan assets. A long and ever-mounting series of decisions demonstrates the risks that distressed businesses, their officers, directors and other employees fail to make appropriate arrangements for the proper fulfillment of employee benefit plan related obligations.
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