Handling Layoffs Can Be Tricky
No employer has escaped the seemingly incessant headlines announcing layoffs, reductions in force and closings of entire businesses. In fact, to some extent, every business is looking for ways to cut corners and boost the bottom line, more so now than perhaps ever.
While the greatest cost cutting measure may be a reduction in force, decisions to layoff must be structured carefully as they are fraught with both legal and emotional peril. Because the need to cut costs often appears pressing, many employers rush to quickly make and communicate the decision to terminate employees. However, if the process is not handled properly, the cost saving may well be eroded by the cost of defending lawsuits, administrative claims or responding to the demand letters sent by plaintiff’s attorneys.
When contemplating a reduction in force, employers must ask themselves a number of questions. First and foremost, is the decision to layoff a particular employee truly intended to be simply a reduction in headcount or is it an attempt to address a festering performance issue. If it is the latter, the decision should not be called a layoff. When an employer terminates an employee, tells him that he is being laid off and then shortly thereafter hires someone else to do the job, the terminated employee often cries foul. Such actions often lead to claims that the decision was merely a pretext to hide discriminatory motives. Such claims are viable in either state or federal court and can cost the well- meaning employer hundreds of thousands to defend and resolve.
Second, the employer should make sure to investigate all potential candidates for layoff carefully. It should attempt to insure that the layoff doesn’t affect any particular protected category of employee more severely than others. For example, if the employer has a workforce which is equally divided between those who are 40 and over and those who are under 40, the employer should be wary of a layoff which only involves those 40 and over. Such a reduction might well lead to claims of age discrimination. Likewise, employers should consider carefully whether any affected employee has a disability, a pending workers’ compensation claim, is pregnant or has any other personal situation which might warrant further analysis. Such employees often claim retaliation when selected for lay off. None of these scenarios means the employee cannot be laid off. They simply mean that the employer must give the decision extra thought and should consult employment counsel before implementing the reduction in force.
Third, an employer who is laying off employees should consider offering a separation payment in exchange for a release of all potential claims against the employer. Such releases buy the employer peace of mind that it will not save money by reducing its workforce only to lose money defending against their employment claims. Because the rules about these types of agreements are complicated, no employer should attempt to use one which hasn’t been prepared by an attorney who is well versed in employment law.
While layoffs can save a company a lot of money, they should be carefully planned and orchestrated to insure that they deliver the savings they promise.
Image: KCNlaw.com
