Layoffs: Help Avoid Employment Lawsuits

In today's economy companies in many industries are forced into massive layoffs to ensure their survival. While those cutbacks are necessary, the decision to let a significant portion of your workforce go carries potential legal, financial and public relations consequences.

When faced with downsizing, you need to minimize anxiety and disruption while maximizing the morale of those who remain. It's critical that you proceed in a professional -- and legal way.

Consult with your attorney and human resources staff and follow these steps to limit the risk of employment-related liability.

Show necessity. Demonstrating a legitimate business reason for cutbacks is a strong defense in most employment lawsuits. Of course, the reason must be substantiated. Be prepared to show financial data or other information to support your actions.

Carefully select. Be cautious evaluating the employees you choose to lay off or it could cost you significantly. For example, trimming several older, higher-salaried employees to cut costs could result in an age discrimination suit. Look carefully at the job titles and employees being affected to avoid claims of age, race or gender discrimination.

It's essential that the class of employees be related to your overall reason for the cutbacks. A good defense is to show that the laid off staff members worked in a department that is no longer viable.

Offer severance. Providing severance packages reduces the risk of lawsuits because employees authorize releases in exchange for the added benefits. Nevertheless, there are several issues to be resolved. First, to ensure that age discrimination claims are properly released, the Older Workers' Benefit Protection Act requires you to tell employees accepting the packages which colleagues got the offer, as well as their ages and positions. You must also provide 45 days for the employees to decide whether to accept the offer. Second, group severance plans are likely to be governed by additional disclosure requirements under the Employee Retirement Income Security Act (ERISA).

Meet with employees. Show courtesy and respect for the employees being let go by meeting with them. This is important in limiting claims and preserving the goodwill of people you might want to rehire. Keep the sessions small to control the process and cut the risk of negative public relations and violence. Have pairs of officials hold the meetings, one from human resources and one from management. This lets you promote safety and provide an additional witness if disputes arise. Meetings are also an opportunity to retrieve keys, pagers and other materials that belong to the company or provide access to the workplace or corporate information.

Prepare materials. In any meeting with laid off employees, a script should be carefully followed. Explain the rationale and prepare all severance information in writing (notification letters; salary continuation/severance period; benefits; outplacement, etc.). One way to create the potential for discrimination claims is to give different reasons to different employees about the need for the layoffs. Bring in an employment attorney to help with the wording of the script and answers to potential questions. Also, prepare the information you want to tell remaining employees.

Control access. Finally, limit the employees' access to the workplace and company information after the layoff. If you're concerned about employees' reactions, give them a brief and supervised amount of time to get their personal belongings. This reduces the potential for confrontations and helps protect your client or customer lists, financial materials, and other sensitive information.

Be prepared: Anticipate reactions. You can expect to experience anxiety, anger and disbelief -- and you might see violence.

You must handle a mass layoff in a professional and compassionate way that helps avoid legal liability, maintain productivity and keep your company image intact so that you can attract top talent in the future.

[NOTE: Information and guidance in this article is intended to provide interesting and helpful information on the subjects covered. It is not intended to provide a legal service for readers' individual needs. For legal guidance in your specific situations, always consult with an attorney who is familiar with employment law and labor issues.]