Layoffs done piecemeal enable companies to skirt the law
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With the economy weakening, chief executives want Wall Street to see them as tough cost-cutters who are not afraid to lay off workers. But plenty of job cuts are not trumpeted in news releases.

Big companies also routinely carry out scattered layoffs that are small enough to stay under the radar, contributing to an unemployment rate that keeps climbing, but that is not always truly reflected in jobs reports.

IBM is one such company. It reported surprisingly strong quarterly profits earlier this year, and in an e-mail message to employees, CEO Samuel Palmisano said that although other companies were cutting back, his would not. "Most importantly, we will invest in our people," he wrote.

But the next day, more than 1,400 employees in IBM's sales and distribution division in the United States and Canada were told their jobs would be eliminated in a month. More cuts followed, and overall, IBM has told about 4,600 North American employees in recent weeks that their jobs are vanishing.

J. Randall MacDonald, IBM's senior vice president for human resources, said it was routine for the company to lay off some employees while hiring elsewhere. "This business is in a constant state of transformation," he said. "I think of this as business as usual for us."

These unannounced cuts, labor experts say, raise issues of disclosure and the treatment of workers. They argue that the federal law requiring warning of certain kinds of layoffs should be overhauled to cover smaller job cuts. That would give people more time to seek new jobs, career counseling and retraining.

"The twin goals are transparency and decency," said Harley Shaiken, a labor economist at the University of California, Berkeley.

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 factories. 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.

In interviews, IBM workers whose jobs are being eliminated were mainly chagrined that the undisclosed cuts, and the timing, seemed to contradict the company's public statements.

Rick Clark, 50, an engineer in East Fishkill, N.Y., had worked for IBM for 11 years. He said he was disappointed in IBM this time because the job cuts were deep and spread across so many businesses and came at a time when IBM has been proclaiming its success. "I do think IBM, like other companies, has used this recession as an excuse to lay people off," he said.

Economy » Some businesses mete out cutbacks to lessen the pain or to preserve their images.
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