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5 Reminders for GCs When Mulling Mass Layoffs

By Mark Wilson, Esq. on August 15, 2014 | Last updated on March 21, 2019

Cisco Systems -- the company that makes all the networking equipment -- announced plans this week to lay off 6,000 employees, Fortune reports. This comes a scant month after Microsoft announced it would lay off 18,000 employees over the next year.

Companies lay off employees all the time, but mass layoffs at once carry with them both legal and PR challenges. All of these recommendations amount to something in-house counsel already know: Do your homework and plan ahead.

Here are five things to remember when your company considers mass layoffs:

1. Duty to WARN.

The WARN Act is a federal law that governs when employees need to be provided notice about layoffs. Generally, a single employee doesn't need notice before being laid off. But the WARN Act requires 60 days' prior notice of layoffs that affect more than 500 workers (or one-third of the workforce if the company has between 50 and 499 workers). Violations of the WARN Act can subject employers to penalties of $500 per day per violation.

2. Don't Be Tacky.

When the website Patch was purchased by Hale Global in January, it laid off two-thirds of its workforce -- via conference call. Microsoft began its 18,000 layoffs in July through a multiparagraph email memo full of corporatespeak that waits until the 11th paragraph to let the recipient knows he's been axed. This kind of stuff leads to bad press, which Ars Technica's Lee Hutchinson provided plenty of: "Put another way, the offensive part here is not that Microsoft has to lay off 18,000 people -- that kind of thing happens in business, and sometimes companies have to cut employees. That's not the problem. The problem is that this is an inhumane, inhuman way to let those 18,000 people go."

3. Security Concerns.

Employees who are suddenly told they're fired sometimes react poorly, stealing things on the way out, destroying data, or sabotaging relationships with clients. David Lewis, CEO of a human resources firm, told Fast Company about an occasion where he fired five employees at once: "One in particular downloaded all of his contacts, wiped his hard drive, and then sent a nasty-gram to all employees and those clients he supported."

Sam Ashe-Edmunds of Demand Media recommends preparing beforehand by securing valuable items, terminating employees' computer access, and calling vendors and clients to let them know so-and-so doesn't work for the company anymore.

4. Document Everything.

As you know, you can't fire people for being members of a protected class. You can lay people off for any number of other reasons; however, that doesn't mean an employee can't file a complaint for employment discrimination. While you can't prevent such a lawsuit, you can work to ensure that it will be over quickly by documenting everything about employees' individual performance as well as the performance of the departments they work in. That way, you'll have information at the ready to prove that the layoffs were for business reasons, not discrimination.

5. Lock Down Your Severance Agreement.

The law doesn't require severance agreements or severance packages, but if you provide one, make sure there are no problems with it. What do problems look like? Overly broad non-compete agreements and clauses that purport to prohibit activities that can't be prohibited (like participating in an EEOC investigation). There's also the Older Workers Benefits Protection Act, which spells out requirements for severance agreements if the employee is over 40.

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