Handling Employee Layoffs as a Business Owner
HOW TO IMPLEMENT A LAYOFF
Employers often think of layoffs as a cost-cutting strategy. However, business owners can frequently employ a variety of strategies—discussed in my blog on avoiding a layoff—to help them stay profitable and retain employees during difficult economic times. Nevertheless, when you exhaust all available options for keeping your workforce intact, downsizing can quickly become a complicated task. Careful planning and methodology implementation to protect both the employer and the employee is required.
To implement a layoff requires planning. While employers lay off workers because there isn’t enough work or as a cost-cutting measure, layoffs create potentially significant legal costs if carelessly handled. Knowing the difference between an illegal layoff and an unfair layoff can help your company decide how to handle a layoff in a legal and ethical manner. Being laid off is an emotional event that can leave employees feeling wronged, especially if they believe their treatment was unfair, and/or they believe management is not sharing the company’s financial pain. The company should exude empathy and fairness when alerting personnel of the layoff.
Create a Method
The best way to minimize legal exposure when implementing a reduction in force is to create a record of decision-making and implementation processes. There should be a written format, detailed methods, and a structured guideline. In the case of a mass layoff, employees must be provided with a written, dated notification. There should be a business justification for the layoff, for example, the loss of a major contract. Employers must document how the reason for the layoff affects business and why particular employees must be laid off. The layoff notice should provide employees ample time to plan and prepare for the layoff.
Consider Severance Pay
While there is no legal requirement in the Fair Labor Standards Act to provide severance pay, employees will frequently offer it based on the length of employment and employee’s contribution to the business. When and how you provide the final paycheck is an important factor that requires consideration.
Coordinate with Human Resources
Work directly with Human Resources throughout the process to help the company navigate and foresee the adverse impact of the layoff. Some employees sign a written employment agreement that guarantees employment for a certain period. If such an employee is laid off, the employer could be liable for breach of contract and resulting penalties. In addition, collective bargaining agreements may also limit an employer’s freedom to lay off employees without paying compensation.
Consult an Attorney
Every potential or planned layoff creates a number of critical, and possibly expensive, legal issues. Remedies can include job reinstatement and payment of back wages. Five major federal laws protect laid-off employees. States have specific laws addressing employment, to ensure a layoff is legal, check with a local attorney. Consult the company’s in-house counsel or other designated company attorney throughout the entire process to protect the company from costly litigation and to ensure no laws are inadvertently broken.
Follow Federal and State Laws
Employment in most states is “at will,” meaning an employee can quit, or the company can fire an employee without cause. However, companies still have to follow federal and state employment laws covering issues such as discrimination, whistleblowing, and layoff notices. The Department of Labor (DOL) administers and enforces more than 180 federal laws covering many workplace activities. For example, U.S. Equal Employment Opportunity Commission (EEOC) regulations prohibit employers who target particular groups by laying them off in disproportionate numbers. Some of the EEOC protected groups include race, gender, nationality, skin color, disability, or age (over 40). Other issues that can create legal liability for employers when planning and carrying out layoffs include retaliation, worker’s compensation claims, WARN Act, USERRA, FMLA, COBRA, poor documentation, inadequate document retention, employees protected by whistleblower laws, and poorly crafted severance agreements and waivers.
Following a specified procedure will save the company money and promote a positive image to competitors who hire your former employee. Laid-off employees are, essentially, great employees. Their future employer will see a quality, high-performing employee that your company trained. Therefore, utilizing appropriate lay off methods will have a positive effect on your company’s image.
In conclusion, the company must allow a long-term view towards the future to guide their decisions for planning and implementing a layoff. A well-planned layoff will enable your business to bounce back when it once again needs to hire skilled talent. In addition, understanding the difference between laying an employee off and terminating an employee will serve the company’s long-term view of maintaining a professional image to its competitors. To learn more about the difference between termination and a layoff, please read my blog about termination.
FILIPPOV LAW GROUP, PLLC provides sophisticated legal services and business advice to individuals and businesses of all sizes, ranging from start-ups to Fortune 500 companies. Our attorneys are experienced in negotiating, drafting and reviewing employment contracts and other commercial agreements with an eye towards the client’s best interest. If you need to consider your legal options, call us at (832) 305-5529 or email our managing member firstname.lastname@example.org. For questions concerning your businesses employee layoffs, contact a business attorney at Filippov Law Group, PLLC by calling (832) 305-5529.
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