In today’s down economy, nearly every termination and layoff is fraught with risk. With little to lose, more and more employees are taking their chances by filing discrimination claims. They hope to score big settlements or judgments to cushion the blow of losing their jobs.
To underscore this point, take a look at the box below, which shows the EEOC’s caseload numbers for fiscal years 2007 and 2008. The dramatic increase from 2007 to 2008—15.2% for all kinds of charges—illustrates the risk employers are taking with every layoff decision.
You’re asking to be sued if you lay off an employee without getting your employment law attorney involved before the termination.
Layoffs are supposed to be blind on issues of race, sex, age, etc. But, if you are making these decisions in the dark, you are making a big mistake that could prove very costly. Before implementing a layoff, it’s crucial to review the demographics of who is staying and who is leaving.
The following is a five-step action plan any company gearing up for a layoff should consider.
1. Anticipate trouble spots
Layoffs are accidents waiting to happen. They are often put together quickly under tremendous time constraints. You need to decide whom to layoff, how and when to communicate the layoff, whether the layoff appears discriminatory by the demographics of the included employees and whether to pay severance, and if so, how much.
Layoffs are also paperwork intensive. If releases are sought, they must be drafted. You must draft Older Workers Benefit Protection Act disclosures if any of the affected workers are 40 or older.
Take the time to make sure you properly handle every aspect. It is much easier to do a layoff correctly than undo it when a mistake is made.
2. Plan whom to lay off
It’s important to have some structure for the reduction in force, whether it’s written criteria (objective or subjective), past performance, employee rankings or some other standard.
You must have a justifiable rationale for letting one employee go instead of another. Review layoffs and to confirm that the decisions are lawful and nondiscriminatory.
Ensure that protected groups are not disproportionally represented in group layoffs. Use neutral selection criteria that do not have a disparate impact on a particular protected group.
3. Prepare severance agreements
Hedge liability risks by offering severance packages in exchange for releases signed by departing employees. That’s the only insurance policy against a laid-off employee filing suit.
The key to getting an employee’s signature on that agreement is treating the employee with dignity. Don’t let an employee find out through the grapevine that he or she is going to be included in a layoff.
As difficult as it will be, have a face-to-face conversation with each employee you will lay off.
4. Spot risky personnel
Identify employees who may need some additional incentive to sign off on a severance agreement and release. Some laid-off employees pose significantly greater legal liability—e.g., new mothers on and employees with a history of taking . Consider sweetening the pot for those employees.
5. Plan your communication
It’s important to handle layoffs delicately. How you deliver the news to the employees goes a long way in determining whether they will sign a release—or go talk to a lawyer instead.
Script out what you plan to say to the about-to-be-laid-off employee. The message should be clear yet compassionate.
Assume that any comments will come back to haunt you in later litigation if they can in any way be twisted to appear discriminatory or retaliatory. Someone from HR or another witness should be present in the room, just in case the employee later disputes what was said.
Keep the lines of communication open—both for laid-off former employees and those you retained. Both groups will likely have questions. Being available to answer them is crucial.
No employment decision is immune from lawsuits. There are, however, employees who are more likely to sue, and claims that are more likely to succeed.
Taking the time to do a layoff properly goes a long way toward determining how many employees in the group will pursue claims, and how many will do so successfully.
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