Human Resources News & Insights

Do’s and don’ts of a layoff


There are right ways and wrong ways to preside over a layoff. The right ways can get everyone through it with as little pain as possible. The wrong ways can get you sued.

There are four major danger zones for employers:

1. Claims of discrimination and wrongful termination
A common scenario: An employer chooses people for layoff based in clear criteria — performance ratings, years of service, etc. And an analysis of those laid off shows that many just happen to fall into a category protected by Title VII of the Civil Rights Act. The employer didn’t intend for it to work that way; it just did, by chance.

A lawyer notices the pattern, and all of a sudden the employer is in court defending the process.

The fix: Analyze who will get hit in a layoff. Are protected categories disproportionately affected? If so, that doesn’t mean you have to scrap your plan. It does mean you have to be doubly-sure to have good documentation about legitimate business reasons for choosing those affected. Have the list reviewed by HR and other managers to look at it from more than one angle.

Another scenario: If, for instance, performance ratings are the criteria used, some supervisors might choose to let affected employees down easy by saying there are other (false) reasons, such as, “We love your work, but we just don’t need someone with your skills right now.”

Then the employee learns the real reason. And the next thing you know, a judge wants to know why you did one thing and said another.

The fix: Tell the naked truth. Whatever criteria are used, that has to be communicated straight to the employee — no varnish needed.

2. Leave status
What do you do when the layoff affects an employee who’s on FMLA leave or some other form of protected leave status? First, realize there are no state or federal laws that require you to exempt such employees from a layoff list.

A prudent HR manager, however, will want to be extra careful that the company has documentation backing up the decision and that there’s no perception of a connection between the layoff and the leave.

The biggest mistake some supervisors make in this area: targeting employees on leave for layoff because, “Hey, they’re out anyway, so laying them off is no big deal.” It is a big deal, and that approach is dangerous.

3. Pay
Some states have strict time requirements for the payment of final wages upon separation. For instance, California requires that when an employer terminates an employee, all wages earned and unpaid are due immediately on termination day — and that includes bonuses, commissions, and accrued vacation.

4. Separation notices
There are various notices that must be provided to employees upon termination of employment. COBRA of course requires you to notify employees of their rights at the time of a qualifying event, including termination.

In some states, employers must provide every employee with a notice regarding the availability of continued medical, surgical, or hospital benefits available through state agencies.

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