The notification law, known as the WARN Act, is a legacy of an era when the economy was more dependent on manufacturers and legislators were concerned about blue-collar workers being locked out of their factory. That kind of shutdown is hard to hide, while white-collar layoffs spread across many locations are not.
The WARN Act requires 60 days’ notice, but the events that require notification are site-specific — a plant closing, a layoff of 500 or more people at one location, or a cut of at least one-third of the work force at a site.
If notification is not required, the standard practice at large companies is to give 30 days’ notice before a layoff. Some states have passed their own WARN Acts to cover more layoffs. California, for example, now requires a WARN notice when a company cuts 50 or more workers in one place. Last month, New York enacted a law requiring 90 days’ notice when laying off 250 or more workers at a site.
Companies sometimes have good reason for dismissing workers quietly. Depending on how the businesses want to portray themselves to investors and the public, layoffs might not fit the message.
Most companies today, of course, are not hesitating to make layoff announcements. Managers are straining to demonstrate that they are taking forceful action on expenses, the one front where they have some control amid economic turmoil and uncertainty.
Two days after IBM’s report, Microsoft said that its quarterly profits were disappointing. It declared it would cut annual operating expenses by $1.5 billion, lopping off up to 5,000 jobs over the next 18 months, including 1,400 immediately.
Labor experts advise taking near-term cuts seriously and being skeptical about intentions several months down the road. “The most effective job-cutting is done on a short timetable, clearly explained inside and outside the company, and grafted tightly to the business strategy,” said Peter Cappelli, director of the Center for Human Resources at the University of Pennsylvania. “Plans for cuts 12 and 18 months in the future are mostly irrelevant, even if the companies are sincere at the time.”
At IBM, the layoffs are coming swiftly, if with less disclosure. The estimate of 4,600 job cuts comes from adding up the itemized headcounts in information packages given to employees in each of the businesses. Some of them were supplied by Alliance@IBM, a small but active unit of the Communications Workers of America union, and some by IBM workers directly.
The cutbacks surfaced only because of their size and timing, with word spread through blogs, employee message boards and the union group.
In its financial statements, IBM does report the cost of severance payments and outplacement counseling for layoffs — about $400 million annually in the last five years — but not head counts.
IBM says it remains the largest high-tech employer in the nation, with 115,000 workers. The company is adding jobs as well as slicing, in a cycle that it says has helped make it increasingly global and successful as it shifts toward higher-profit software and technology services businesses.