Downsized Work Force, Supersized Liability: The Legal Risks of Layoffs — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily
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Downsized Work Force, Supersized Liability: The Legal Risks of Layoffs

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in Firing,HR Management,Human Resources

Depending on whom you talk to, the economy is either in a slowdown—or a full-blown recession. Either way, employers may be contemplating job cuts to cope with tight credit, declining sales and rising energy prices.

But employers that downsize the wrong way may end up spending more on litigation than they save on labor costs.

Employers with 100 or more employees must comply with the Worker Adjustment and Retraining Notification (WARN) Act. The WARN Act requires employers that plan plant closings or mass layoffs to give affected employees at least 60 days' notice. Employers can provide the notice either by contacting the workers directly or through their union. Employers also must notify their state’s dislocated worker unit and affected local governments.

Failing to meet WARN notification deadlines is costly. Workers who don’t get adequate notice are eligible for back pay and benefits for up to 60 days. Noncompliant employers also face a $500 per day civil penalty.

Advice: Make sure you check state law requirements, too. Many states have their own WARN laws.

Severance pay

Should you decide to offer severance packages in exchange for employee agreements not to sue, always consult with an attorney when drafting the pacts. Employees have the right to have an attorney review the offer. The Older Workers Benefit Protection Act governs how releases and severance packages are handled.

Consistency is key

You should also have a consistent methodology for determining which workers are furloughed. While employers have a fairly wide array of methods available to them, they all must be internally consistent.

Layoffs that appear to target women, minorities or other protected classes can lead to litigation. In court, you will be asked to show how you determined which workers you kept and which you laid off. Unless you have thoroughly documented your decision-making process and criteria, employees’ lawyers may be able to make a case that your layoffs were discriminatory.

Communicate with workers

Finally, remember that while layoffs are part of business, they are very personal to the people affected. Clearly tell workers what to expect and what support you and state and local government agencies may be able to offer. Provide them with contact information to answer the inevitable questions that will arise.

Good communication can ease employees through this difficult period.

Final note: HR Specialist print, Premium and Premium Plus subscribers can learn more about complying with the WARN Act by visiting our HR Law 101 pages on There you’ll find a comprehensive description of the law, exact notification steps you must follow and a few notable exceptions to the 60-days notice requirement.

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