Laying Out the Basics of the Layoff

HR Advisor feature article | September 2008

Given the uncertain economic outlook, more and more large and small-sized businesses have decided to reduce the size of their workforce.  The layoff process can be done in a way that minimizes litigation risks. 

On the other hand, if not done properly, employers can quickly increase their risks for wrongful termination lawsuits.

If you are considering engaging in a layoff process, at least, keep in mind the following five basic points:

1. Federal WARN Act. The Worker Adjustment and Retraining Notification Act (WARN) requires certain employers to give employees advance notice if a reduction-in-force constitutes a "mass layoff" or a "plant closure." The notice must be given to all affected employees, the state government and the local government.

The WARN Act applies only to the business enterprises, including public entities and nonprofit corporations, which employ:

• 100 or more employees (not including part-time); or
• 100 or more employees, including part-time employees who in the aggregate work at least 4,000 hours per week excluding overtime.

2. Business Reasons. While you should base your decision to conduct layoffs on business needs, be careful not to unfairly discriminate a protected class of employees based on race, sex, or age, for example.

3. Voluntary Offers. A voluntary program such as an early retirement incentive plan may be an ideal initial option. Since employees would choose to leave voluntarily, legal liability risks would likely diminish especially if the employees are required to sign a release.

4. Involuntary Layoffs. Consider terminating job positions in phases over a specific time period.  In exchange for individual releases to avoid litigation, you may provide severance pay and / or early retirement benefits.

5. Selection Process. Establish the criteria on which employees will be selected for termination. Look first to objective methods such as a complete analysis of job positions to solidify your position of conducting layoffs based on changing business needs.

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