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Notification to employees of closing down of business

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Notification to employees of closing down of business
November 13, 2018 Anniversary Wishes For Parents 3 comments

We see many employers who decide to close down or sell their business and woman whose employment was terminated because the business was closing down has . Make sure you give your employees the requisite notice and pay any.

Before going into the technical aspects of terminating an employee contract due to the closing down of the business, it is important to understand the softer aspects of the exercise. You will ultimately be dealing with humans, so their feelings should be taken into consideration. Having to let your employees go because you’re closing down your business is not an easy thing. However, when it comes down to it, there are ways you can do it that are kinder than most.

Be Kind and Respectful

Whether you’re letting your employee go because the business is closing down or for some other reason, treat them with respect and decency. The last conversation you have with the employee matters a lot. You have to do it just right. Here are some of the things you should remember.

Give Your Employee the Message the Right Way

Deliver the message to your employees in the most concise yet empathetic way you can. Make sure to mention the salient facts of the situation, such as the fact that the company is about to close down and is letting employees go as a result. You should give them any information that concerns their compensation, health insurance or other benefits, or job assistance that will be offered upon exit. Talk to them about the necessary procedures to be followed when gathering personal belongings, leaving the workplace, and returning any property that belongs to the company.

Understandably, the employees will want to know why the business is closing and whether anything can be done to save it. Explain the situation to them and let them understand why closing shop was your last resort.

Gain the Employee’s Confirmation

It is natural for employees to become emotional and lose track of the conversation upon hearing the news. However, you should obtain their confirmation that they understand the fact of the termination and its finality as well as any related procedures.

Answer Their Questions

Ideally, you should give the employees the opportunity to ask you questions. Be as generous as you can here and let them ask you whatever they would like to know. Answer them to the best of your ability. When it comes to procedural questions, make sure you answer all questions they have so they know exactly what process to go through, including such things as their last paycheck, their health insurance, and so on.

Try to be as understanding and calm as you can throughout the process. When you are calm, the employees are encouraged to be calm in light of the circumstances.

Notice to Employees When Closing the Business

When the business closes down, the process is different from a typical termination, particularly where employee contracts are involved.

You may have tried everything you can to keep your business afloat and keep it a going concern, and it still won’t do as well as you want it to. A time may come when you need to close shop and write off the entire business.

When you face such a situation, it is necessary for you to terminate contracts and legal agreements you have made with your employees. That requires satisfying what you owe them as well as releasing them from their work obligations. In this case, here are the things you should do:

Review the Contracts

Before you give a business closure letter to employees, review the terms and conditions of their employments contracts. The typical employment contract often has terms that dictate what happens in the event of the business closing. If such terms exist in the employment contracts, then you are bound by law to obey those terms and carry them out to the letter.

For example, if there is a term that dictates a severance package for the employee in the event of a business closing, then factor that amount in the costs you will incur in closing down the business.

Factor Severance Costs Into Your Closing Costs

The first step is to calculate the total costs you will incur with the closing down of the business. Take into account the contracts you have with the employees and any impact that the closure of the business will have on those contracts. If a severance package is specified in the event of the closure of the business, then you should factor this into your business costs.

Sometimes the contract might not specify such a package. However, if you want to maintain a strong relationship with the employee afterward, you may issue severance pay anyway, especially if they didn’t see the closure of the business coming. It is good practice to give severance pay to employees whether or not it was specified in their contracts.

Draft a Termination Letter

For the employees who have formal written contracts, draft a company closing letter to employees that explains why your business has to close shop and what you are doing to ensure that all the business obligations are honored before it shuts down. In the case of severance packages, explain how you calculated them. Notify the employees of any options or assistance you are prepared to offer to continue benefits, if applicable. To help employees on their job searches, offer to provide them with a recommendation and reference letters.

Legal Consultation and Advice

You may want to meet with your legal advisor to find out what your obligations are to the employees as far as the Consolidated Omnibus Budget Reconciliation Act, or COBRA, and other relevant laws are concerned. There may be situations in which you should contribute toward the continuation of benefits for the employees.

Finalization of the Termination

Once everything is done, have a personal meeting with each of the employees. Before you do that, make sure all the letters are finalized. During the face-to-face meeting, discuss with the employees the reason why you are closing down the business and express to them the appreciation that the company has for the contributions that they have made to it. Present the termination letter to the employee and tell them exactly what it is, then review it with them and answer their questions.

For the questions that you are unable to answer, record them somewhere and tell the employee that you will get back to them when you have answers.

About the Author

Nicky is a business writer with nearly two decades of hands-on and publishing experience. She's been published in several business publications, including The Employment Times, Web Hosting Sun and WOW! Women on Writing. She also studied business in college.

The WARN Act offers protection to workers, their families, and communities by Business closing: A covered employer must give notice if an employment site (or one or or operating units within an employment site) will be shut down and the .

Closing or selling a business

notification to employees of closing down of business

Under “at-will” employment laws (which apply in every state except Montana), the employment agreement between an employer and an employee is voluntary for both parties.

Unless there’s an employment contract or union agreement that says otherwise, that means an employer can terminate or lay off an employee at any time, for any reason that doesn’t involve discrimination.

If your company is closing—whether the shutdown is permanent or temporary—you have a few important rights to protect your interests. Some of these rights stem from state and federal employment laws (known as statutory rights), while others are established by the company’s formal policies.

If you have an employment contract or a collective bargaining agreement, these should have measures to protect your rights, too.


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Final Paycheck Requirements

Arizona employment law dictates that employers must pay a discharged employee their final paycheck within seven working days or the end of the next pay period, whichever is sooner (ARS 23-353).

Generally speaking, employers are prohibited from withholding the final paycheck unless there is a reasonable, good faith dispute over the owed amount, in which case the employer can only withhold the disputed amount.

The state of Arizona doesn’t require employers to pay out unused vacation time or accrued sick time. However, if a company offers to pay out accumulated benefit time in its company policy, the company is legally required to honor the policy.

If your company is closing and you have unused vacation time or sick time, check the employee handbook to see whether or not your employer is obligated to include your accumulated benefits in your final paycheck.

Unemployment Compensation

In the state of Arizona, unemployment compensation is available to residents who are temporarily out of work. Unemployment insurance and benefits are administered by the Arizona Department of Economic Security.

To qualify for unemployment compensation, you must be unemployed through no fault of your own (e.g. you didn’t quit and you weren’t fired for violating company policy), and you must be actively seeking a new job. You’ll also need to satisfy one of the following two financial requirements:

  • You earned at least 390-times the state’s minimum wage during the highest paid quarter of the base period, and you earned at least half of that amount during the other three quarters of the base period
  • You earned at least $7,000 in two combined quarters of the base period, with at least $5,987.50 earned in one of those two quarters

Advance Notification of Mass layoffs or Plants Closing

The federal Worker Adjustment and Retraining Notification Act (WARN) requires large employers with at least 100 employees to provide workers with at least 60-days-notice before a plant closes and/or mass layoffs. The WARN act imposes the following restrictions:

  • Plant closing – WARN defines a plant-closing as the temporary or permanent shutdown of a single employment site, or of one or more facilities/operating units within a single site, which results in 50 or more employees losing their job within a 30-day period.
  • Mass layoff – WARN defines a mass layoff as a reduction in workforce that results in job losses at a single employment site for 500+ employees (not including employees who work less than 20 hours a week). If the laid-off employees constitute more than one-third of the employer’s active workforce, then a mass layoff may only require 50 – 499 employees losing their job.

To prevent employers from skirting notification requirements under WARN, the law also covers staged plant closings or layoffs that take place over 30 – 90 days. If an employer fails to provide adequate notice, the employees can collect wages and benefits for every day that the notice is late for up to 60 days.

There are two notable exceptions to WARN—natural disasters, and business circumstances that aren’t reasonably foreseeable 60 days in advance. In both cases the employer is expected to provide reasonable notice, but they may not be required to provide a full 60-day notice.

Continued Health Insurance Coverage

The Consolidated Omnibus Budget Reconciliation Act (COBRA) generally requires employers with 20 or more employees to offer a temporary extension of group health coverage (called continuation coverage) in certain situations where the employee’s coverage under the plan would otherwise end. Examples of qualifying circumstances include:

  • Voluntary or involuntary job loss
  • Reduction in hours scheduled or worked
  • Transitioning between jobs
  • An employee’s death
  • An employee’s divorce (the former spouse has the right to continuation coverage)

COBRA outlines how employees and their families may elect continuation coverage for up to 102% of the cost of the benefit plan for up to 18 months. Some companies offer extended benefits that are paid-for by the company for employees who are laid off, but these are matters of company policy rather than state or federal law.

Severance Compensation

While severance packages are considered good form for laid-off employees, they’re not required by law. A company is only required to offer severance compensation if it’s a company policy, or if a severance package is included in an applicable employment contract or collective bargaining agreement.

That said, the courts may interpret a regular history of paying severance packages to other employees as an informal contract or promise by the employer, in which case the company may be required to offer severance compensation to all laid-off employees.

Contract Rights

Employees who operate under an individual contract or a collective bargaining agreement are protected by the provisions of the contract. Employers who fail to follow a contract or collective bargaining agreement may be liable for breach of contract, and the wrongfully terminated employee may seek civil damages.

Seeking Assistance

If you’re being laid off or terminated and you believe the company has infringed upon your rights, you should speak with an employment attorney as soon as possible. Depending on the circumstances, you may be able to file a civil lawsuit against the employer in state and/or federal court to recoup payment for damages.

In addition to working with an attorney, you can also reach out to the following government agencies for assistance:

  • The Department of Labor (DOL) – for issues regarding the federal WARN act or COBRA
  • The Equal Employment Opportunity Commission (EEOC) – for wrongful termination due to discrimination or retaliation
  • The Arizona Department of Economic Security (DES) – for unemployment benefits and infractions of the state WARN act
  • The Industrial Commission of Arizona (ICA) – for unpaid wages

 

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Closing or selling your business?

notification to employees of closing down of business

SAMPLE LETTER

[Senders Name]
[Address line]
[State, ZIP Code]

[Letter Date]

[Recipients Name]
[Address line]
[State, ZIP Code]

[Subject: Normally bold, summarizes the intention of the letter] -Optional-


Dear [Recipients Name],

The recent merger between our mother company and Luxe International has, unfortunately, hurt our sister companies and ourselves. In this regard, I regret to announce that our office shall be closed permanently by the end of the year.

However, we have new openings for various positions in our Seattle and Los Angeles branches for those who are interested. For those who opt not to take this offer, I guarantee that the terms offered in your separation pay shall be very reasonable.

In behalf of the management, I sincerely thank each and every one of you for all the hard work you have invested in our company throughout the years. Your unwavering support and excellent work have been invaluable to us, and we from the management wish you the all best in all your future endeavors.

Sincerely,

[Senders Name]
[Senders Title] -Optional-

[Enclosures: number] - Optional -
cc: [Name of copy recipient] - Optional -

Letter informing the employees about an office closing.

Further things to consider when writing announcement letters to employees

Announcement Letters

Announcement letters are letters that notify or give information about a certain occasion, special event, or occurrence that people are required to be aware of. They could be for a concert, a special sale, or even a graduation party. Announcement letters are usually informal and state clearly and concisely what the event/occasion is and what further actions the recipient should take. Announcement letters can be used in many personal and business situations. In personal situations these letters may be used, for instance, to announce a birthday, death, wedding, or graduation. In the business world, such letters may be used to announce a new policy, change in management, financial summaries for investors, grand sale, or actions against a customer due to nonpayment.

Announcement letters should be written in a straightforward manner stating all the necessary facts. Clearly state why you feel the occasion is important. If you are delivering bad news, be optimistic for the future. Bold and highlight the points that need focus so that the content is clear to the reader. Add any information which you think your reader might want to know and do not miss out any important detail. End the letter on a positive note.

Letters to Employees

Letters to employees are letters written to individuals who work for an organization or for another person. If you are an employer or manage a group of employees, the chances are that you will have to write to the employees at some point. It could be an introduction letter to introduce a new product or service to salespersons, a rejection letter to turn down an employee's request for a promotion, or a thank-you letter to thank an employee for his/her hard work. You could also write a termination letter to fire an employee for his/her poor performance. Whatever the reason for your writing, the letter must be formal and professional.

All letters to employees must be addressed with the proper names of the recipients. But if your message is intended for all employees in general, you can address your letter as "To all employees". State the purpose of the letter. Convey your message briefly but clearly, highlighting all the important details. If the issue that you are writing about requires further explanation, make sure to offer your explanation in a way that the recipient can easily understand. Wrap it up with a positive note or a call to action.

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notification to employees of closing down of business

Sample Letter #1

Copied!

As you know, the merger of our parent company with Doe Enterprises is having a ripple effect on other smaller subsidiaries. Although we had hoped to weather the storm, I am sorry to report that we will close our office at the end of this fiscal year. We will offer positions in the Springfield office to those who are willing to move. For others, the severance package will be quite generous.

I would like to express my personal appreciation for the association we have had through the years. You have been a wonderful, supportive staff, and I wish you every success in the future.

Sample Letter #2

Copied!

We regret to inform you that we will close our Springfield office permanently on Friday, December 20. The general business decline in that area makes it impossible to justify keeping the office open. We are aware of the impact this closing will have on employees in that office. Be assured that we will make every effort to find you comparable employment within the Doe organization. To those we are unable to accommodate, we will pay one month's salary to ease the transition.

Doe is grateful for your continued service and support during this difficult time. We hope we all will benefit from this change.

Sample Letter #3

Copied!

As we have feared for some time, the large-scale development in this part of Springfield has all but destroyed our small retail market. Effective November 1, Doe's on Main will be closing. While this will mean a layoff for most of you, our severance package should give everyone time to find suitable work elsewhere.

We recognize that without the support and loyalty of this staff we could never have held out this long. It's been a great 20 years!

We thank you and wish you the best of success in your new positions, wherever they may be.

Sample Letter #4

Copied!

I am sorry to announce that Doe's downtown office will close December 31. In order to reduce our overhead, the functions of this branch will be combined with the Springfield office. Some of the employees here will be transferred to Springfield; if you in this group you will be notified. We regret that we will be unable to take all of you with us. A generous severance pay will be given to those whose employment with Doe's will end, and I would be very pleased to furnish anyone who asks with a very positive reference. I deeply appreciate our association over the years, and regret the events which have made this decision necessary. Please contact me if I can help you in any way to secure new employment.

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When a business is closed or transferred, the the employee at least 2 weeks' notice and.

notification to employees of closing down of business
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