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Are layoffs looming? Think (and plan) ahead.
As a business owner or leader, having to contemplate layoffs can be some of the hardest decisions you will ever make. Unfortunately, in anticipation of uncertain times or in the throes of financial decline—and in spite of your company’s best efforts—business leaders may have no other option than to conduct layoffs layoffs (also called a reduction in force, or RIF).
It’s never an easy decision; a layoff can introduce a difficult period for an organization. But once the decision is made, you’ll need a careful plan to carry it out.
The first step is to decide what work functions are essential to your company’s future success and which will be eliminated or reduced (and why). Consider actual duties performed by these positions, not the people in the positions or the job titles. The company should also consider alternatives to layoffs, such as transfers and salary reductions.
Once you determine the functions to be eliminated, decide which employees within those functions will be laid off as a result. Selection factors can include seniority, job performance, job classification, job knowledge, and job skills and abilities.
It’s important to ensure that the selection process for layoffs doesn’t create an avoidable liability. Avoid any rationale that focuses on life circumstances (for example, do not make leave status a criterion for selection). And be sure to document each step of this process.
Once the selections have been made, review the selections to ensure that no adverse (disparate) impact exists for a protected class of employees. Your company may want to consider retaining an attorney to conduct a statistical impact analysis.
Disparate impact is a legal term describing the disproportionately negative effect a business decision, practice or policy can have a on a protected group. This can happen even though the impact may be unintentional.
Employee layoffs should not create disparate impact for a protected class of employees. These classes include those of a certain age (over 40), race, color, ethnicity, national origin, religion, gender, gender identity, those with a disability, veteran status or genetic information. Some states have additional protected classes such as marital status and sexual orientation.
If you find a disproportionately larger percentage of employees within a protected class is affected by the layoff, your company must reevaluate the selections and make necessary adjustments.
The Worker Adjustment and Retraining (WARN) Act is a federal requirement for employers with 100 or more employees to provide at least 60 calendar days advance notice of a plant closing or mass layoff.
A plant closing is when a single site of employment experiences a temporary or permanent shutdown. This can be the entire site of employment or an operating unit within a site (for example, the entire maintenance department). The plant closing must result in employment loss for 50 or more employees, excluding part-time employees.
A mass layoff also occurs at a single site of employment but results in one of the following scenarios:
- Employment loss for 33% of active employees (excluding part-time employees) AND at least 50 employees (excluding part-time employees)
- Employment loss for at least 500 employees (excluding part-time)
Separate locations will not constitute a single site unless the sites are geographically contiguous and share staffing and equipment.
Under the WARN Act, part-time employees are those averaging fewer than 20 hours/week, as well as recent hires (regardless of hours worked) employed less than six of the 12 months preceding the date of a WARN notice. Part-time employees do not count for WARN Act calculations toward the number of employment losses or the employee population pool.
Under the WARN Act, a layoff that requires notification must exceed six months or result in a 50% reduction in hours in each month of the six-month period. The law requires the business to inform the affected employees of whether the layoff is permanent or temporary and, if temporary, how long the layoff is expected to last.
A WARN ACT notice must also include information regarding:
- Bumping rights (whether a more senior employee can bump a less senior employee to avoid being laid off);
- Recall rights (reinstatement of a laid-off employee to active status within the period as defined in the provision on seniority); and
- Reapplying with the company in the future.
Some states have additional legislation that requires similar layoff notifications for businesses with fewer than 100 employees, longer notice periods, smaller layoff thresholds and different triggering events and coverage rules. If you have unionized employees, there might be specific requirements designated by your union contract. Communication with the union’s leadership is essential.
In addition to notifying the affected employees, your company must notify the state DOL’s dislocated worker unit (or equivalent division), the chief elected official of the local government unit, and the bargaining representative of unionized employees.
Severance packages may include a continuation of salary, vacation payout, and continued employer-paid portion of benefits. Offering severance packages is generally the right thing to do and helps lessen the possibility of lawsuits. If your company chooses to offer severance packages to its laid-off employees, confirm whether your state has specific criteria required for such severance.
Older Workers Benefit Protection Act (OWBPA)
You could choose to ask older workers being laid off to sign a waiver of age discrimination claims in exchange for severance pay. If you do, you must follow the OWBPA to effectively release claims under the Age Discrimination in Employment Act (ADEA). A waiver within a severance agreement is generally valid when the employee knowingly and voluntarily consents to the waiver. The OWBPA has specific requirements for such a release, including a 45-day consideration period for the employee and a 7-day revocation period after signing the severance agreement.
Communication and Information
Adhering to employment laws is critical for your organization. Equally essential is providing accurate information to employees and communicating the information well. The people affected need to be told exactly what is happening and what options they have.
Your layoffs may include employees who have worked for the company for many years and rely on the income and benefits from the job. These impacted employees will likely be scared and have many questions, so your message should be thorough, clear and concise. It’s best to meet with each affected employee individually if at all possible.
Your company should also provide resources for employees being laid off, such as:
- COBRA information
- Employee Assistance Program benefits and access
- 401k options
- How to apply for unemployment
- Assistance with building a new resume
- Help with interview techniques
- Service letters
- Other job placement assistance.
If possible, create an online site for affected employees with links to information and resources.
Above all, be respectful. Be kind. Be understanding. Provide the gathered information. Answer any questions. And help your employees leave with dignity.
Remembering—and Retaining—Your Remaining Employees
While your focus understandably turns toward those losing their jobs, don’t forget about those who remain. They’ll likely face a mix of emotions, from relief to guilt to fear that they could be next.
Take well-developed steps to ensure that those employees who remain also understand the necessity of the layoffs. Implementing a hiring freeze at this point is highly recommended. The employer should also communicate the company’s financial position and help these employees know their job is secure. Not only will this help retain remaining essential employees, it can also mitigate any rumors that might arise.
If your organization is facing layoffs, reach out to experienced HR consultants and legal professionals who can help you navigate the challenges. Resources are available that allow both you and your organization remain resilient.
All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a James Moore professional. James Moore will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.
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