Take Special Care During Staff Cutbacks

For any number of economic or financial reasons, sometimes a company must lay off a significant portion of its workforce, and it’s a decision that carries potential legal, financial and public relations consequences.

When faced with downsizing, you need to minimize anxiety and disruption while maximizing the morale of those who remain. It’s critical that you proceed in a professional, and legal way.

Consult with your attorney and human resources staff and follow these steps to limit the risk of employment-related liability.

Show necessity. Demonstrating a legitimate business reason for cutbacks is a strong defense in most employment lawsuits. Of course, the reason must be substantiated. Be prepared to show financial data or other information to support your actions.

Carefully select. Be cautious evaluating the employees you choose to lay off or it could cost you significantly. For example, trimming several older, higher-salaried employees to cut costs could result in an age discrimination suit. Look carefully at the job titles and employees being affected to avoid claims of age, race, or gender discrimination.

It’s essential that the class of employees be related to your overall reason for the cutbacks. A good defense is to show that the laid off staff members worked in a department that is not longer viable.

Offer severance. Providing severance packages reduces the risk of lawsuits because employees authorize releases in exchange for the added benefits. Nevertheless, there are a couple of other issues to be resolved.

First, to ensure that age discrimination claims are properly released, the Older Workers’ Benefit Protection Act requires you to tell employees accepting the packages which colleagues got the offer, as well as their ages and positions. You must also provide 45 days, for the employees to decide whether to accept the offer.

Second, group severance plans are likely to be governed by additional disclosure requirements under the Employee Retirement Income Security Act (ERISA).

Meet with employees. Show courtesy and respect for the employees being let go by meeting with them. This is important in limiting claims and preserving the goodwill of people you might want to rehire. Keep the sessions small to control the process and cut the risk of negative public relations and violence. Have pairs of officials hold the meetings, one from human resources and one from management. This lets you promote safety and provide an additional witness if disputes arise. Meetings are also an opportunity to retrieve keys, pagers and other materials that belong to the company or provide access to the workplace or corporate information.

Prepare materials. In any meeting with laid off employees, a script should be carefully followed. Explain the rationale and prepare all severance information in writing (notification letters; salary continuation/severance period; benefits; outplacement, etc.) A surefire way to create the potential for discrimination claims is to give different reasons to different employees about the need for the layoffs. Bring in your employment attorney to help with the wording of the script and answers to potential questions. Also, prepare the information you want to tell remaining employees.

Control access. Finally, limit the employees’ access to the workplace and company information after the layoff. If you’re concerned about employees’ reactions, give them a brief and supervised amount of time to get their personal belongings. This reduces the potential for confrontations and helps protect your client or customer lists, financial materials, and other sensitive information.

And prepare yourself: Anticipate reactions. You can expect to experience anxiety, anger and disbelief, and you might see violence.

You must handle a mass layoff in a professional and compassionate way that helps avoid legal liability, maintain productivity and keep your company image intact so that you can attract top talent in the future.

Layoffs

Do

• Invite the employee to sit down
• Get right to the point
• Explain the action and the reason
• Wait for a response and listen
• Give an overview of the separation package
• Explain the logistics for leaving the workplace
• Keep the meeting brief

Don’t

• Engage in small talk
• Use humor
• Be apologetic
• Defend, justify or argue
• Discuss other employees
• Try to minimize the situation
• Make promises