My Company is Closing. What are My Rights?


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.

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

Call our Employment Law team at (480) 464-1111 to discuss your case today.

Contact Our Employment Law Team

Call (480) 464-1111 or fill out the form to schedule your consultation and discuss your best legal options.