Because job losses are an inevitable part of any economic downturn, it is wise to plan ahead, whether you believe your company will be able to weather the storm or you expect to face the painful task of cutting jobs. This difficult task for employers comes with risks both in terms of potential legal costs and with respect to morale, productivity, and loyalty of the remaining workers. Planning is crucial to minimize your legal risks and to be aware of what issues must be addressed.
Outside of the legal aspects, how do you choose who stays and who goes? Have you planned who will get the extra work when those employees are gone? What if key players leave for fear of loosing their position, or other reasons? These are just a few of the issues facing employers when contemplating a reduction in force.
The use of objective criteria may be the best legal protection, but it isn't always an effective means of preserving the most productive employees. Subjective criteria can leave you vulnerable to claims of favoritism and discrimination, so careful planning is a must.
Start with an open mind and do a thorough business analysis. This is the time to determine how much expense you need to trim. Don't jump right to the solution and say you need to cut five jobs. Instead, determine a dollar amount or percentage you need to cut from the budget to survive.
Prioritize from the most-important to least-important jobs (not people) and include equipment, tools, skills and knowledge that are critical to running your business. Be strategic. Do you really need three people to do that job? Do you really need that job function at all? Think about the most important thing the business needs, followed by the second, third and so on. Do not list employee names, instead focus on the skills and knowledge needed to do the job.
Are there time-consuming activities that produce little or no revenues? What activities can you combine, modify or stop altogether? Can you eliminate positions by reducing products or services that are not profitable? If some functions can't be eliminated, can fulltime staff functions be outsourced cost effectively to professional firms such as a certified public accountant, attorney or human resources outsourcing firm?
A number of key legal issues will still loom on the horizon. Address the following before making your final cut list:
* Worker Adjustment and Retraining Notification Act (WARN Act). WARN is a federal law requiring employers of more than 100 employees to give written notice at least 60 days before any plant closing or "mass layoff."
* Discrimination statutes. Federal and state discrimination laws, such as the Age Discrimination in Employment Act, protect against reductions in force having an unlawfully differential impact on members of protected classifications.
* Family and Medical Leave Act (FMLA). Employees on FMLA leave may be protected against a reduction in force unless it can be shown that they would have lost their positions even if the leave hadn't been taken.
* Uniformed Services Employment and Reemployment Rights Act. This law requires employers to reinstate returning members of military services to the jobs they would have held had they not been serving.
* COBRA. This federal law requires most employers that sponsor group health plans for their employees to allow certain employees and their dependents who would otherwise lose coverage under the plan due to termination of employment or certain other events such as a layoff to pay to continue that coverage for a specified period of time.
Once you've addressed these issues and determined the jobs and functions to be eliminated you can better identify individuals that will be affected. Telling someone that they don't have a job any more isn't something they teach you in business school, and it's not pleasant for either party. If you have never done this before, you may want to consult those who have or a human resources- professional before you start.
Steve Conine is owner of Talent Framework and the Reno office of AccuStaff. Contact him at 322-5004 or conine@accustaff-reno.com.
