CHICAGO — It’s a dreadful responsibility, but almost every business owner and manager will eventually come face-to-face with the disagreeable task of terminating one or more employees.
“Firing people is one of the toughest, most unpleasant things you do as an employer,” says James Walsh in his book, Rightful Termination (Merritt Publishing, 1994). “Your stomach tightens and your throat gets dry as you prepare to call someone in for the meeting that begins, ‘There’s no easy way for me to do this...’”
As difficult as the task may be, fiscal reality sometimes makes employee layoffs unavoidable. When your payroll costs climb to unacceptable levels, or when an individual employee’s performance is unacceptable, it’s best to take appropriate action.
“Many owners and managers delay layoffs out of concern for their employees,” says Kerim Fidel, general counsel for SOI, Charlotte, N.C., a professional employer organization. “This may result in deferring layoffs beyond an economically rational point.”
“Some of our clients facing the troubling possibility of employee layoffs have sought our advice and guidance in how to navigate a workforce reduction while avoiding potential legal pitfalls,” says Sandra Dickerson, president of Your People Professionals, Santa Maria, Calif. “Each situation is unique, but if the employer follows some basic steps, many problems can be avoided.
“First, carefully consider whether there might be viable alternatives to a layoff. Perhaps you can find other cost-cutting measures that will let you preserve your major investment in your employees. Consider the long-term costs of replacing your talent investment when the economy picks up and satisfactory workers are again in short supply.”
Fidel agrees. “While layoffs are seen as a cost-cutting measure, there are significant costs associated with them,” he says. “These include potential increases in unemployment contribution rates, severance pay, and exposure to layoff-related legal action. Soft costs include loss of confidence among customers and remaining employees, and forcing talented employees to find work elsewhere, possibly with your competitors.”
Still, there are times when layoffs are the only practical alternative.
“When that happens,” says Dickerson, “you must follow the most objective and uniform selection criteria possible. Be careful to ensure the layoffs will not have a disproportionate effect on employees in a protected class. Protected classes include minorities, women, older workers and the disabled.”
She also cautions against using layoffs as an opportunity to eliminate difficult or disliked employees.
“That’s the wrong approach if you want to avoid legal challenges,” Dickerson says. “Remember, unlike a termination for cause, a layoff is the elimination of a position, not a particular employee. Focus on the skills you will need to keep your business viable, and be sure to document the criteria you use to decide who stays and who goes. The size of your business may also subject you to legal notice requirements. Before you make layoff announcements, seek professional advice if you have more than a few employees.
“Lastly, be sensitive and make every effort to protect employee privacy and dignity throughout the layoff process. Be prepared to address the increased stress levels of your remaining employees who may be assuming added responsibilities and facing their own uncertainties about what the future holds.”
Today, with the increasing risk of costly legal complications when discharging an employee, even for purely business reasons, it’s important that you keep yourself aware of the legal pitfalls surrounding that task.
Every year, thousands of employers, from the largest to the smallest, are being hauled into court by former employees claiming that they were fired illegally. Many of those employees are winning substantial judgments against their former bosses.
“It costs nothing for an employee to file a charge with the EEOC [Equal Employment Opportunity Commission] or state fair employment practices agency,” cautions attorney James P. McElligott Jr., McGuireWoods LLP, Richmond, Va. “State and federal agencies can investigate employers for retaliation charges based on OSHA [Occupational Safety & Health Administration], Wage and Hour, environmental, FMLA [Family and Medical Leave Act], or other violations. In addition to the expense of legal fees, employers often must spend hours trying to reconstruct and justify their actions. Moral: Do it right the first time.”
What you need to be especially sensitive to is the risk of lawsuits based on some form of discrimination.
“Every employee has a race, a gender, a religion,” says attorney Beth Schroeder, Silver & Freedman, Los Angeles. “So, every employee, even new and probationary ones, falls into at least one so-called ‘protected’ class.”
Check back Thursday for the conclusion, including five suggestions for how you can avoid the nightmare of a wrongful termination lawsuit.