Layoffs: How to Guide Companies In Workforce Reductions

By Neetal Parekh on October 26, 2009 | Last updated on March 21, 2019

Letting go is hard to do.  And in an economy like the current one, layoffs have become a necessary evil--and even norm--for some companies.  Being the recipient of bad news can be devastating, but being the messenger carries its own exacting toll.  Companies are turning to in-house counsel to guide their executive and HR teams on how to conduct workforce reductions judiciously, expeditiously...and in accordance with state and federal law.

Read below on tips of how your legal department can effectively guide the company with workforce reduction and how to take preemptive steps to limit liability in the process.

1. Consider the criteria used in determining the reduction decision. 

This will be the single most important aspect of the company's initial decision to conduct a workforce reduction.  Guide the company to use objective criteria rather than make decisions on a subjective basis, which could potentially pose legal challenges in the future.  Objective criteria such as length of employment, employees in a particular department or on a specific project, contractors or part-time employees are all objective criteria in selecting sectors for workforce reductions.  More subjective considerations include making decisions based on performance (especially if performance reporting is spotty or inconsistent) or basing decisions on personal preference.

2. Now, consider it again...more carefully.   

Remember federal law such as Title VII of the Civil Rights Act of 1964 protect employees from discrimination on the basis of race, color, religion, sex, or national origin.  And there are federal provisions to protect employees for discrimination on the basis of age and disability, not to mention state law which provide further protection.   

The law should not inhibit the company from making fair layoff decisions, but be ready to grill managers and executives on their reasoning and selection criteria.  Hold up the decisions in different light and look at it through multiple lenses to better assess and scrutinize its objectivity.  Request managers to "prove" their case for workforce reduction selections with evidence such as statistics on which employees will be affected, which will not be affected, and any documents that may be implicated such as performance reviews.

3. Consult outside counsel about WARN and equivalent state law.

Certain employers are obligated to comply with The Worker Adjustment and Retraining Notification Act (WARN) which requires 60-day written notice in advance of certain plant closings and mass layoffs.  Beyond the federal act, many states have more stringent laws regarding prior notice for mass layoffs.  The federal and state laws can be complex and may be interpreted differently by different courts.  Consult outside counsel well-versed in employment law in determining how such provisions apply to your company.

4. Look at the language of a severance packages and waiver agreements.

While you have outside counsel on the line, run any severance packages by the employment law specialists.  They will be able to process any severance considerations through the filter of applicable law such as the Older Worker Benefit Protection Act and any equivalent state law.  The Act delineates criteria regarding final paycheck calculation and distribution.  If employees do elect to accept severance packages, it will be important for the company to seek a signed waiver to release company from liability for certain employment-related claims. 

5. Guide executive teams in how to conduct the layoff.

Once the workforce reduction plan have passed legal muster, the company will likely turn to you to determine how to carry out the layoff.  Take into consideration the size of the company and the extent of the layoff.  How many employees will be affected?  How can information regarding the workforce reduction selection be personally communicated and information about severance packages be appropriately relayed?

Are any of the managers concerned about safety?  Keep safety considerations for all employees as top priority in determining whether to have security present. 

Guiding a company in layoff decisions is not an enviable task of any member of in-house counsel.  However, the company will look to you for your professional advice and legal knowledge.  Look to the tips above and the Related Resources as you navigate through large and small workforce reductions.  And who knows as the economy picks up, around the corner, the company execs may be ping you about how to legally carry out a mass workforce infusion. 

Related Resources:

[Note: the title has been changed from "Layoff Liability Considerations: How to Guide Companies In Workforce Reductions" for length purposes.]
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