The oil and gas industry is full of ups and downs, and with history, at least the last 40 years, has shown itself to be cyclical. When the boom times arrive, times are very good. And, when the busts arrive, times are undoubtedly challenging. The years from 2011 through mid-2014 witnessed the price of oil holding in the $100 to $120/bbl range. As of the date of this article, the price of oil is hovering around $40/bbl. The significantly lower price of oil has led many oil and gas companies to delay or cancel exploration, development and production programs. This has had a ripple effect throughout the oil patch, impacting all levels of the supply chain.

As companies deal with the many implications of low oil prices on their revenues, they will invariably consider employee cuts as a way to deal with decreasing budgets. The various legal issues that should be taken into account in the United States are examined below. (If the impact is global, counsel will have to be familiar with the rules in those other jurisdictions, too.) Consider carefully federal, state, and local laws and rules. Employers also must know, review and analyze outstanding employment agreements and collective bargaining agreements before taking any action. It is always recommended to consider a voluntary package as a preliminary option. Enhanced severance packages entice some employees to consider voluntary separation and ease the burden of determining who will be forced to leave the company. It’s recommended that decision makers work with an employment lawyer and an employee benefits lawyer to ensure compliance with an employee benefit plan’s requirements and other legal constraints.

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