Nine Things Managers and Employees Need to Know About Layoffs
Whether you're showing employees to the door or being shown the door, you must avoid legal trouble. Veteran employment attorney Jay Warren shares the top layoff mistakes that companies make and outlines employee rights at pink-slip time.
Tue, March 18, 2008
CIO — Layoffs, downsizing and reorganizations have become dog-eared pages in the management playbook. No longer reserved solely for recessions, staff cuts seem to be called upon nearly any time a company misses its earnings. Can't make your numbers? Cut payroll.
Downsizing sounds simple, but executing a layoff is far more complicated than just shedding jobs. It requires serious planning, says Jay Warren, a litigator with Bryan Cave LLP. Companies risk taking unlawful measures that may come back to haunt them if they don't take the time to assess the goals of a layoff and determine the criteria for making cuts, then communicate those criteria to the managers involved and review the plan with corporate counsel, he says.
Warren, who has represented unions, employers and employees during his 30-year career in law, spoke with CIO.com about the top mistakes that companies make when conducting layoffs and the necessary steps for a legal layoff. He also shared advice about the rights that employees have during a downsizing.
CIO: What mistakes do companies make when conducting layoffs?
Jay Warren: A layoff, like any other kind of important decision, requires people to think things through. It requires an agreement about your goals for the layoff, your criteria for achieving those goals, a process that clearly defines who's going to be making decisions and a review of the process to make sure it's been conducted lawfully and in the way you wanted. Sometimes, when companies are under a lot of economic pressure, they don't feel they have the time to think through how to conduct a layoff and to review it with their [corporate] counsel before finalizing it. When economic pressures are great, people try to take shortcuts, which can then get them into problems.
What kinds of problems?
A layoff may have an adverse effect on some protected group, like people over a certain age or minority employees. If the [personnel] decisions that have been made are not well supported, there could be an inference that those decisions were intentional discrimination, rather than simply a cost cutting effort.
I've read cases where lower-level managers have used layoffs as an opportunity to get rid of certain staff for unlawful reasons: The manager doesn't like working with minority employees; the manager is 35 and feels he has too many people over age 50 working for him and he wants a younger workforce; or there's someone on the manager's staff who has a disability and has taken a lot of time off from work to accommodate his disability and the manager doesn't like that. This can happen if the manager doesn't get sufficient guidance in the decision-making, or if there isn't a sufficient review of the manager's decisions.
The consequence, then, is that the company could find itself in hot water?
The company could be sued. The company could be subject to EEOC [Equal Employment Opportunity Commission], state or federal investigations and lawsuits.
What's your advice to companies contemplating a downsizing? What measures should they take?
Take the time to do it right. Companies need to first figure out what their goals are. It could be to cut employee costs by 10 percent in certain divisions. Then they have to establish what criteria they're going to use to decide who to cut, and what their decision-making process is going to be. Who is going to be making the decision? What information should those people be using to make those decisions? Then they have to decide who in HR is going to review all of this and at what stage in the proceeding is the company going to obtain advice from its attorneys about the selection process it's using.
Those are the steps. It includes clearly communicating to the people actually making [personnel] decisions what information they should use and what the criteria are.
Is it important to have all these steps documented?
Yes. If the process or decisions are challenged in the future, you have documentation to show that the decisions were made in accordance with the company's policies and under lawful criteria.