Handling Layoffs Properly Can Save Businesses From Legal and Financial Headaches
By Mary Massad

Perhaps the worst part of any human resources manager's job is informing employees that they've been laid off. Dismissed workers are suddenly faced with a traumatic, potentially life-changing event and as a result emotions can boil over. Although layoffs are a fact of business life (especially during difficult economic times), laid off employees often think otherwise and, worse yet, take the news as a personal bashing.

HR managers must therefore take special care to thoroughly explain the business reasons for the layoff. Doing so validates to the employee that the process -- painful as it might be -- was conducted in an ethical, thorough manner. 

From a business perspective, companies that know how to properly manage job reductions can save money and frustration by avoiding discrimination or adverse-impact lawsuits. The latter involves a group of protected employees such as women, minorities or older people who claim they've been laid off in larger numbers compared to other groups.

To help ensure legal compliance, companies must document the economic basis for the layoffs. This is considered a legitimate nondiscriminatory reason for termination under existing employment laws. Then, management should decide on a "big picture" level which positions to eliminate - without reference to any particular employees so arguments cannot be made that the positions were chosen based on race, age or gender. An essential part of this process is the establishment of selection criteria that will serve as an economic basis for the elimination of specific positions. The next step, and perhaps the most harrowing, is to identify individual employees in the positions that were selected for elimination. As part of this step, it is important to conduct a mathematical analysis of the remaining employees to determine whether the layoffs may have an adverse impact on a protected group.

Employers may still run the risk of employee lawsuits. Consequently, companies must document specific reasons for laying off individuals, even if doing so requires informing terminated employees that poor performance contributed to their dismissal.

Alternatively, certain individuals may be identified during the layoff process as essential to providing management continuity, a smooth transition, critical knowledge about the business to remaining employees or continued customer service. Offering these employees special retention bonuses is an effective way to secure their participation while curbing tendencies to "jump ship." Typically retention bonuses are tied to the meeting of specific operational goals or the transfer of proprietary information, and should be paid once the objectives are accomplished. They should also be considered on a case-by-case basis and may differ based on an employee's experience, position and organizational influence.

It is plain to see how precarious handling layoffs can be. As a result, leading organizations will go the extra mile by offering laid off workers resources for getting their lives back on track. The government has several online guides that are especially helpful. Among the most useful is an Internet link to the Department of Labor's Employment & Training Administration , which provides detailed information to help businesses properly handle layoffs or business closings. The Web site also contains a link to America's Career Kit, which provides access for Americans needing job search assistance, career guidance, salary data, and training and education resources.

Mary Massad is the director of human resource development for Administaff. Administaff is a leading personnel management company that serves as a full-service human resources department for small and medium-sized businesses throughout the United States. For additional human resources relief, visit  HRPowerHouse - a Web site powered by Administaff and designed to provide relevant, practical information for business owners, executives and administrators who have to deal with day-to-day human resources responsibilities.