Does Maryland have to follow its normal layoff notice and seniority rules when a state employee's position loses its funding?

Plain-English summary

Maryland's Deputy Secretary of Budget and Fiscal Planning asked the Attorney General two questions in anticipation of possible state employee layoffs from reduced revenue: does the state's layoff statute (with its seniority rules) apply when positions are cut because there simply is no money appropriated to pay the salaries, and does state or federal law require advance notice before those employees are let go?

The AG answered no to both, relying heavily on a 1940 Court of Appeals case, Hopper v. Jones. In that case the Legislature deleted a specific salary appropriation from the budget, and the Court held the affected employee lost his job "by operation of law," not through the kind of agency decision the layoff statute (Article 64A, §35) is meant to regulate. Applying that reasoning, the AG concluded the same result follows whether the Legislature or the Governor (acting under budget-cutting authority) eliminates the appropriation: if there is no money to pay a position's salary, the layoff statute and its seniority rules, along with the state regulation requiring 90 days' notice, simply do not apply. The AG separately concluded the federal WARN Act's 60-day notice requirement generally does not reach ordinary state agencies, because the statute's "employer" definition is limited to business enterprises, though it can reach an autonomous, business-like state entity with its own governing body and independent management of its assets.

Currency note

This opinion was issued in 1990. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. The opinion's own editor's note records that its conclusion was reaffirmed in 76 Opinions of the Attorney General (1991) (Opinion No. 91-041). Article 64A has since been recodified into the State Personnel and Pensions Article.

Common questions

Why doesn't Maryland's normal layoff law apply when a position loses its funding?
Because the Court of Appeals held in Hopper v. Jones that a position eliminated for lack of appropriated funds is lost "by operation of law," a different situation from the agency decisions to abolish, discontinue, or vacate a position that Article 64A, §35 was written to regulate.

Does it matter whether the Legislature or the Governor cuts the funding?
Not under this opinion. The AG applied the same reasoning whether the General Assembly deletes a budget line item, as in Hopper v. Jones, or the Governor exercises the separate statutory power under §7-213(a) of the State Finance and Procurement Article to reduce an appropriation by up to 25 percent.

Is a laid-off state employee entitled to 90 days' notice?
Not for this specific situation, according to the opinion. The state regulation requiring 90 days' advance notice implements the layoff statute, so if the statute does not apply because there is no appropriation to pay the salary, the notice regulation does not apply either.

Does the federal WARN Act require 60 days' notice for state layoffs?
Generally no. The opinion explained that the WARN Act's notice duty applies only to a "business enterprise," and federal regulations exclude ordinary government agencies from that term, though they include a public entity that is separately organized, has its own governing body, and independently manages its own personnel and assets, giving the Maryland Automobile Insurance Fund as an example.

Does this apply to layoffs made just to save money in general?
No. The opinion was careful to limit its holding to positions for which no appropriation is available at all. Layoffs made for other economizing reasons, where funding still exists, remain subject to the ordinary layoff statute and its notice and seniority requirements.

Background and statutory framework

Article 64A, §35 defines a layoff as a situation where positions are abolished, discontinued, or vacated because of a change in departmental organization or a stoppage or lack of work, and the Secretary of Personnel's implementing regulations, COMAR 06.01.01.44 and 06.01.01.44-1, require 90 days' advance notice (COMAR 06.01.01.44B-1). The opinion assumed §35 was broadly meant to cover budgetary reasons for eliminating positions generally, but held that Hopper v. Jones carved out an exception for the extraordinary situation where no appropriation exists at all to pay a given position's salary; in that circumstance the employee's job ends "by operation of law" rather than through the kind of discretionary agency action the statute addresses.

The opinion applied that exception to both routes by which an appropriation can disappear: the Legislature's power to delete a budget item (the facts of Hopper v. Jones itself) and the Governor's separate power under §7-213(a) of the State Finance and Procurement Article to reduce, with Board of Public Works approval, any appropriation the Governor considers unnecessary, by up to 25 percent, subject to the notice that §7-213(b) does not let the Governor reduce an appropriation for the salary of a classified or unclassified employee outside the Merit System Law's own procedures. Because the underlying layoff statute would not apply once the appropriation for a position disappears, the AG concluded the implementing notice regulation would not apply either, since a regulation adopted under an inapplicable statute cannot itself impose an independent notice requirement, and applying it would improperly delay budget savings the Governor is authorized to make.

On federal law, the opinion worked through the WARN Act's "employer" definition, which the federal Department of Labor's regulations, 20 C.F.R. §639.3, limit to business enterprises and public or quasi-public entities that engage in business, are separately organized from the regular government, and independently manage their own personnel and assets. An ordinary Maryland state agency does not meet that description, so a mass layoff there would not trigger the Act's 60-day notice duty, though the opinion identified the Maryland Automobile Insurance Fund as an example of the kind of autonomous entity the Act could reach.

Citations and references

Statutes:

• Article 64A, §35 of the Maryland Code (state employee layoff statute and seniority rules)
• §7-213(a)-(b), §7-209(b), §7-234 of the State Finance and Procurement Article (Governor's authority to reduce appropriations)
• COMAR 06.01.01.44, 06.01.01.44-1, 06.01.01.44B-1 (90-day layoff notice regulations)
• 29 U.S.C. §2101-2102 (federal WARN Act); 20 C.F.R. §639.3 (WARN Act "employer" definition)

Cases:

• Hopper v. Jones, 178 Md. 429 (1940) (a position eliminated for lack of appropriated funds is lost "by operation of law," not subject to the layoff statute)

Source

• Landing page: https://oag.maryland.gov/resources-info/Pages/attorney-general%E2%80%99s-opinions.aspx
• Original PDF: https://oag.maryland.gov/resources-info/Documents/pdfs/Opinions/1990/Volume75_1990.pdf (this opinion appears at printed pages 366-372 of the bound annual volume; Maryland's site does not publish a standalone PDF of this opinion)

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

PERSONNEL

Budgetary Administration -- Appropriations -- Layoff Statute and Regulations Are Inapplicable When No Appropriations Are Available to Pay Salaries

December 5, 1990

Mr. Dennis Parkinson
Deputy Secretary of Budget
and Fiscal Planning

You have posed two questions about layoffs of State employees that might be required because of reduced revenues: (1) Does Article 64A, §35 of the Maryland Code, which establishes a rule of seniority for certain layoffs, apply if employees are laid off because no appropriations are available to pay their salaries? (2) Does federal or State law require that employees who are to be laid off for this reason be provided with advance notice of the layoff?

For the reasons stated below, we conclude as follows:

1. Article 64A, §35 is inapplicable to employees released because no appropriations are available to pay salaries. In making layoffs for this reason, an appointing authority must of course avoid arbitrary or otherwise unlawful choices among similarly situated employees. However, an appointing authority is not legally required to apply Article 64A, §35 and the regulations implementing it if budgeted funds are simply no longer available to fund a position.

2. Although appointing authorities are free to give as much advance notice as they can when employees are released because of a lack of appropriations, in general neither federal nor State law mandates advance notice.

Federal law generally does not require advance notice to State employees who are to be laid off. However, 60 days' advance notice would be required of layoffs at any State entity that engages in a form of business, is separately organized from the State government, has its own governing body, and has independent authority to manage its personnel and assets.

State Personnel Regulations generally require 90 days' advance notice of a layoff. However, these regulations do not apply if an employee is instructed not to work because no appropriation to fund the employee's salary is available.[1]

I

The Layoff Statute

Article 64A, §35 defines a layoff, authorizes the Secretary of Personnel to adopt regulations governing layoffs, and prescribes certain requirements about seniority that must be in those regulations.[2] The Secretary of Personnel's layoff regulations, implementing the statute, are set out at COMAR 06.01.01.44 (classified employees) and 06.01.01.44-1 (unclassified employees).[3]

The statute describes a layoff as a situation in which "positions ... are to be abolished, discontinued, or vacated, because of change in departmental organization, or through stoppage or lack of work ...." Although §35 does not expressly identify a lack of funds as a basis for layoffs, we assume for purposes of this opinion that §35 was broadly intended to apply to an agency's decision to abolish, discontinue, or leave vacant a position for a variety of reasons, including budgetary ones.[4]

However, §35 cannot be considered in isolation. Whatever the statute's scope generally, the Court of Appeals has held that it does not apply to the extraordinary situation in which there simply is no appropriation to pay an employee's salary.

In Hopper v. Jones, 178 Md. 429, 13 A.2d 621 (1940), the General Assembly deleted from the budget bill an item that would have appropriated the salary of a particular industrial accident investigator. The agency then released him. The investigator who thus lost his job sued, contending that certain regulatory requirements flowing from the predecessor of Article 64A, §35 had not been complied with. The Court of Appeals held that the statute (and therefore the regulation implementing it) was inapplicable, because the Legislature's decision to discontinue the appropriation meant that the employee "lost his position by operation of law." 178 Md. at 433.

In our opinion, the teaching of Hopper v. Jones is this: the layoff statute and regulations simply do not address the duty of an agency to decline to pay an employee if no appropriation to do so is available. Those jobs are lost "by operation of law," rather than by the act of agency discretion that characterizes layoffs for other reasons. See Article III, §32 of the Maryland Constitution; §7-234 of the State Finance and Procurement Article ("SF" Article); 57 Opinions of the Attorney General 88 (1972).

Hopper v. Jones arose from the exercise of the General Assembly's power to cut the budget. But the Governor, too, has power to cut the budget, and the principle of the case applies as fully when the Governor acts to eliminate an appropriation. Under SF §7-213(a), the Governor, with the approval of the Board of Public Works, "may reduce, by not more than 25%, any appropriation that the Governor considers unnecessary." By this provision, "the General Assembly clearly has given the Governor extremely broad discretion to determine what... the Governor ... believes or considers should be treated as not required under the circumstances." 65 Opinions of the Attorney General 45, 51 (1980).[5] If the Governor, with Board approval, exercised this "extremely broad discretion" to eliminate the funding of a group of positions and coupled the reduction with a budget amendment under SF §7-209(b) to conform the appropriation to the reduction, those positions would be lost "by operation of law" fully as much as the position in Hopper. In the end, there would be no money to pay these employees and that, held the Court of Appeals, is a situation not addressed by Article 64A, §35.[6]

II

Notice of Layoffs

A. Federal Law

The Federal Worker Adjustment and Retraining Notification Act, Public Law No. 100-379, 102 Stat. 890, generally provides that "[a]n employer shall not order a plant closing or mass layoff until the end of a 60-day period after the employer serves written notice of such an order ... to each representative of the affected employees as of the time of the notice of, if there is no such representative at that time, to each affected employee ...." 29 U.S.C. §2102(a)(1). A "mass layoff" is a reduction in force resulting in an employment loss at a single site of employment during any 30-day period for at least one-third of the full-time employees, if at least 50 employees are involved, or for any percentage of the work force if at least 500 employees are involved. 29 U.S.C. §2101(a)(3)(B).[7]

The term "employer" is the key to the statute's applicability. In pertinent part, the term "employer" is defined "as any business enterprise that employs ... 100 or more [full-time] employees ...." 29 U.S.C. §2101(a)(1). Neither the statute itself nor its legislative history discusses whether a government agency might be a "business enterprise," within the scope of this definition.

In its regulations implementing the statute, the federal Department of Labor has resolved this issue. Focusing on the statute's use of the term "business enterprise" and its underlying purposes, the Department of Labor has drawn a distinction between "regular" government agencies, which are outside the statute, and "public and quasi-public entities which engage in business," which are within it:

    Regular Federal, State, local and federally recognized Indian tribal governments are not covered. However, the term "employer" includes public and quasi-public entities which engage in business (i.e., take part in a commercial or industrial enterprise, supply a service or a good on a mercantile basis, or provide independent management of public assets, raising revenue and making desired investments), and which are separately organized from the regular government, which have their own governing bodies and which have independent authority to manage their personnel and assets.

20 C.F.R. §639.3. See also 54 Fed. Reg. 16042, 16044 (April 20, 1989).

Hence, if a "mass layoff" were to occur at an ordinary State agency, the federal law would not apply.[8] Notice under the federal law would be required only for such layoffs at autonomous entities meeting the federal regulatory criteria.[9]

B. State Law

The layoff statute, Article 64A, §35, is silent about advance notice of layoffs. However, acting under the authority of that statute, the Secretary of Personnel has adopted regulations requiring 90 days' advance notice: "The appointing authority shall notify employees who are to be laid off at least 90 calendar days before the effective date of the layoff." COMAR 06.01.01.44B-1 (classified employees); COMAR 06.01.01.44-1B (unclassified employees).

Because the underlying statute is inapplicable to layoffs necessitated by a lack of appropriations, so would the implementing regulation be inapplicable. Hopper v. Jones, 178 Md. at 433. Moreover, notice, and the consequent delay in ending the agency's obligation to pay the salary, would pose special problems if there were no appropriation. If an agency has no money to pay an employee, either because no money was appropriated in the first place or an appropriation has been exhausted, the regulation cannot command any payment beyond the limit of the appropriation.[10]

The notice requirement of the regulation could not be applied to frustrate for 90 days the savings deemed necessary by the Governor, for then the regulation would conflict impermissibly with the exercise of the Governor's statutory prerogative. Nor is the regulation intended to have any such effect: when proposed, the 90 days' advance notice requirement was said to have "no economic impact." 16:10 Md. Reg. 1114 (May 19, 1989).

III

Conclusion

In summary, it is our opinion that:

1. Article 64A, §35 does not apply to employees released because no appropriations are available to pay their salaries.

2. In general neither federal nor State law mandates advance notice if employees are instructed not to work because no appropriation to fund their salaries is available.

                                         J. Joseph Curran, Jr.
                                         Attorney General

                                         Jack Schwartz
                                         Chief Counsel
                                           Opinions and Advice

Editor's Note:

The conclusion in this opinion was reaffirmed in 76 Opinions of the Attorney General (1991) [Opinion No. 91-041 (Sept. 5, 1991)].

[1] This opinion should not be understood to be addressing the rights of employees under a collective bargaining agreement.

[2] When the original Merit System law was enacted in 1920, §16 of the new Article 64A provided that "[a]n employee in a position that is to be abolished, discontinued, or vacated, because of change in departmental organization, or through stoppage or lack of work, shall be laid off and his name placed, in the order provided in the rules of the [State Employment] Commissioner, on the eligible list for the class of the position from which he was laid off." These rules specified the factors that would determine who would be laid off if less than all of the positions in a classification were "abolished, discontinued, or vacated." See Hopper v. Jones, 178 Md. 429, 431, 13 A.2d 621 (1940) (service ratings). The seniority standards now set out in §35(c) were added to the statute by Chapters 625 and 916 of the Laws of Maryland 1982.

[3] Although applicable to both classified and unclassified employees, the statute and regulations are inapplicable to State employees at an agency with an independent personnel system. See generally 73 Opinions of the Attorney General 285 (1988).

[4] Comparable laws in other states are more specific, however. See, e.g., Ala. Code §36-26-22 (1989); Cal. Gov't Code §19997 (Deering 1990); Ohio Rev. Code Ann. §124.321 (Baldwin 1990); and Wis. Stat. §111.90 (1987-88) (all establishing layoff procedures for "lack of funds").

[5] SF §7-213(b) sets out certain exceptions to the Governor's authority, including this one: "Except as provided in the Merit System Law, the Governor may not reduce an appropriation for the salary of an employee in the classified or unclassified service." In our view, this restriction does not address the elimination of positions. Rather, it simply preserves the procedures of Article 64A, §30 for categorical decreases in "rates of pay." See Chapter 11, Laws of Maryland 1985, Revisor's Note to SF §7-213.

[6] This analysis does not apply to layoffs when appropriations remain available to pay for the positions, even if the layoffs are a part of an agency's overall efforts to economize. The reasoning of the Court of Appeals in Hopper v. Jones applies only when there is no appropriation from which a salary could be paid to an employee in a particular position.

[7] A "plant closing" is defined as "the permanent or temporary shutdown of a single site of employment, or one or more facilities or operating units within a single site of employment, if the shutdown results in an employment loss at the single site of employment during any 30-day period for 50 or more employees excluding any part-time employees." 29 U.S.C. §2101(a)(2).

[8] Given this conclusion, we need not consider whether the federal government could constitutionally require, in effect, that a state continue to pay its employees when appropriations for that purpose have been exhausted.

[9] An example of the latter would be the Maryland Automobile Insurance Fund. See 58 Opinions of the Attorney General 88 (1973).

[10] Thus, if notice of a layoff had been given at a time when an appropriation remained available, but the appropriation was later eliminated, the notice period would be foreshortened.