Is AOL Skirting Worker-Protection Law With Mass Layoff?

Forbes - Jeff Bercovici
March 16, 2011

Last week, as you might already know, AOL laid off over 200 U.S.-based employees, the vast majority of them from its Manhattan-based media operation. But that’s not the full tally of those who will lose their jobs as a result of the merger with the Huffington Post because that media operation, like an increasing number of media firms, also utilizes dozens of so-called permalancers freelancers who function much as staffers but file Form 1099s rather than W-2s with the IRS.

In announcing last week’s layoffs, AOL chairman Tim Armstrong made it clear that most freelance writers and editors will be let go. Going forward, AOL will invest more heavily in our in-house editorial team and transition away from a reliance on freelance journalists, ” he said in a memo.

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Just how many freelancers get the chop is a question whose implications go beyond those immediately affected, however. That’s because their numbers could drive the total number of layoffs above the threshold required to invoke the New York State Workers Adjustment Retraining and Notification Act, or WARN Act. Under that law, companies that lay off either 33 percent of their workers or 250 workers must give them 90 days of notice. Those employees terminated last week, meanwhile, reportedly received four weeks of severance plus an additional week for each year spent with the company.

AOL’s spokesman says the WARN Act does not apply to contract employees in this situation. ” But two employment law specialists I spoke with say the act can indeed apply to contract employees, even those who work remotely, as most of AOL’s freelancers do.

The WARN Act doesn’t say anything bright-line about contract employees, ” says Jack Raisner, co-head of the WARN Act practice at Outten & Golden LLP, a firm that represents workers. Unless they’re seasonal-type or project-based employees, I don’t think there’s anything different about a contract employee from any other payroll-type employee. ”

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Several former AOL editors I spoke with said their departments utilized large numbers of contractors who worked quasi-full-time hours on regular schedules well in excess of the minimum requirements of a full-time employee as defined by the WARN Act, which requires only 20 hours a week of labor and employment for at least six of the preceding 12 months. (Having worked at AOL previously, I can also personally attest to this.)

Of course, AOL has its own lawyers who would surely argue a different version of things if it ever came down to litigation. And there may not be much in it for potential plaintiffs, since the staffers let go last week were instructed to sign severance agreements waiving away their rights to additional compensation. Those agreements would supersede any guarantee of notice afforded to them by the WARN Act, says Raisner.

It would not, however, prevent them from counting toward the 250-person threshold meaning that if freelancers terminated in the next 83 days wanted to make the case in court that they were effectively employees entitled to WARN protection, and if the numbers add up, they might still be able to do so.