Wednesday, November 9, 2022

How to conduct a layoff

Elon Musk did everything wrong with his employees upon his acquisition of Twitter, including laying off half of them via email. With the economy turning sour, more businesses will be facing the stark reality of having to shed headcount. If you need to layoff some of your employees, do you know what to do? Here are four tips (excluding bonus tip number 5 — call your employment lawyer).

/1/ Demographics. Before you pull the trigger, ask yourself, "Is this employee going to perceive that the decision was fair." What do the demographics look like? Does the layoff skew older, darker, more female, more disabled? If so, consider whether it makes sense to reconfigure the layoff to maintain some diversity across groups, or whether your selection criteria are objective enough to survive scrutiny. If it's the latter, be prepared to pay more in severance (see no. 4, below).

/2/ WARN Act. Is this a "mass layoff" that's covered by the WARN Act? For employers with 100 or more employees, that means a loss over a 30-day period at any employment site of 500 or more employees, or for 50-499 employees if they make up at least 33% of the employer's active workforce. If so, you owe the impacted employees 60 days' notice or 60 days' pay in lieu of notice. If you're not doing either, you're buying yourself a lawsuit. And don't forget to check state law for their own more restrictive WARN Act.

/3/ Respect and Dignity. Do not mistreat the impacted employees at the time of termination. Terminated employees deserve a face-to-face discussion. At all costs, avoid firing by a letter, phone call (or, worse, voice mail), email, text message, Facebook post, Tweet, or any other not-in-person communication. Also, do not "perp walk" a laid-off employee; they're not criminals. If you don't want them sticking around during the work day, communicate the layoff at the end of the day, or otherwise allow them to walk out on their own terms unless significant circumstances dictate otherwise.

/4/ Severance. Offer a soft landing through a severance package … but only in exchange for a release of claims by the employee. While you are not under any legal obligation to provide severance to any employee (unless you have a plan or policy that says otherwise), there is a lot of value in getting their signature on an agreement in which they promise not to sue you. It's closure, for both you and the employee, and helps create that little bit of good will at the end of the relationship.

The bottom line? Laying off the wrong way— with text message or email, a perp walk, and zero dignity—leads to bad feelings, which leads to expensive and time-consuming lawsuits. It can also go viral, costing the company significant reputational harm. Never forget that losing a job is one of the worst things that can happen to someone. A little compassion (and a severance agreement) goes a long way.