Situations sometimes arise in which a company reduces its number of employees in order to improve financial conditions. However, decisions about which staff members to lay off (and when) cannot be made haphazardly. Legal considerations must be paramount.
Potential charges of discrimination
Before trimming payroll, be cautious – and highly organized – when coming up with a selection process for who gets laid off. Terminated employees can pursue legal action if they feel they were chosen for dismissal instead of their peers because of a factor such as age, disability, race, gender, religion, or sexual orientation. Prior to final lay-off decisions, companies should thoroughly analyze whether there is a disparate impact on any protected groups.
Using objective criteria such as seniority or type of position being eliminated can help minimize the risk of discrimination claims. If venturing into subjective territory, such as keeping on certain people whose skills are deemed best for the continued success of the slimmer organization, the basis for the selections should be articulated in writing and reviewed by upper management, HR, and legal counsel.
Worker Adjustment and Retraining Notification Act (WARN)
Companies with more than 100 full-time employees or that employ at least 100 workers who collectively work a total of 4,000 hours per week need to be aware of the WARN Act. Basically, this national act protects workers at large organizations from mass layoffs without notification. Your business may be obligated to provide 60 days advanced notice to affected employees.
Decision-makers should work closely with legal counsel to understand the specifics of the WARN Act, especially in times of turmoil. Statements within the WARN Act cover exceptions to the prior-notice rules, such as because of “unforeseeable business circumstances” or “government action” (like mandatory orders to close during the COVID-19 pandemic). Since some states have their own versions of the WARN Act (often dubbed “mini-WARNs”), legal professionals can ensure compliance with those regulations, too.
Layoffs create a tense environment. To reduce feelings of ill-will – and potential legal action from disgruntled laid-off workers looking to retaliate – companies may want to consider the following:
- Communicating lay-off decisions in a professional, empathetic manner
- Offering severance packages to terminated employees in exchange for a release of claims
- Helping to cover COBRA payments for a period of time to keep them on the company health insurance plan
- Providing assistance in finding a new job Demonstrating concern during this difficult time leaves a better final impression, and it paves the way to a possible employment relationship again should circumstances change.