Last week, entertainment powerhouse and former talk-show host Oprah Winfrey announced that Harpo Studios in Chicago will be closing its doors by the end of the year, resulting in the loss of nearly 200 jobs. In typical Oprah fashion, she delivered the bad news to her employees in person, probably ambling around the room, microphone-in-hand, and breaking into her famous “ugly cry” for good measure. Handling employee layoffs are never easy, even if you’re Oprah, but here are three steps to follow if your business ever needs to downsize:
1. Develop a Plan.
A reduction in force can open up a Pandora’s Box of potential liability if not handled appropriately, so before you start handing out pink slips, you’ve got to have a plan in place. To navigate the murky waters of employee layoffs, companies should obtain experienced employment law counsel to draw up severance agreements, review layoff criteria for potential disparate impact, and ensure compliance with the myriad of laws implicated by employee terminations. One such law, the Older Workers Benefit Protection Act (OWBPA), requires an employer to make specific disclosures to an employee over 40 years of age and to provide the employee with additional time to review, and revoke, an agreement to waive federal age discrimination claims. Many states impose additional requirements, above and beyond OWBPA’s protections, and there are a multitude of other state laws that govern issues such as when an employee must receive his or her last paycheck and whether the employee must be paid for accrued but unused vacation time.
Of course, the first question you will need to answer when planning a reduction in force is what criteria you will use to determine who will be selected for layoff. Across-the-board reductions based on lack of seniority, while easy to administer, usually are not the most effective business solution. Instead, in a large workforce comprised of different departments and job functions, layoffs should generally be based on employees’ particular skill sets, with an eye toward maintaining those departmental functions that will improve the organization’s overall efficiency. For example, if Oprah wants to focus her business operations on hard medicine rather than psychological counseling, it makes sense for her to retain Dr. Oz over Dr. Phil, even though Dr. Phil’s been around longer. Whatever the criteria used, it is crucial for the company to articulate clearly its reasons for selecting a particular employee, or group of employees, for layoff and be able to explain how the layoffs served the company’s legitimate business needs.
2. Comply with the WARN Act.
For large lay-offs, companies also will need to comply with the Worker Adjustment and Retraining Notification Act (WARN Act). The WARN Act requires covered employers to provide employees 60 calendar days’ advance written notice of a plant closing or mass layoff. To be covered under the WARN Act, an employer must have either (a) at least 100 employees, excluding part-time employees, or (b) 100 or more employees who, in the aggregate, work at least 4,000 hours per week. The employer also must provide notice to the state and the chief elected official of the local government where the layoff or plant closing will occur. In addition to the federal WARN Act, many states have so-called “mini-WARN” statutes that employers must follow during a reduction in workforce. WARN laws are complicated because they contain many eligibility and notice requirements that differ across jurisdictions. As a result, it bears repeating that companies should seek the assistance of experienced employment law counsel before downsizing their operations to ensure they are in compliance with all applicable laws.
3. Treat Your Employees with Dignity and Respect.
Perhaps the most important tip for handling employee layoffs is also the simplest: Treat your employees with dignity and respect throughout the termination process. While you may not be able to dole out cars to your departing employees or surprise them with a giant check like Oprah, providing employees with open communication, sufficient notice, and emotional support will go a long way toward helping them through a difficult situation. Besides, nothing will kill the morale and loyalty of a remaining employee more quickly than cramming his buddy’s cubicle contents into a banker’s box and subjecting him to a humiliating walk-of-shame to the nearest exit.
Hopefully, employee layoffs are not in your company’s future, but if and when that time comes, you will be ready as long as you develop a plan with the assistance of experienced counsel, follow the law, and treat your employees with the dignity and respect they deserve. As Oprah would say, that’s what I know for sure.