Reductions in Force – How to Mitigate an Employer’s Risks
Posted on September 13, 2012 by Tori Rabun in Best Practices, Leadership
With continued economic challenges, employers have recently been faced with making difficult decisions that will allow their companies to continue to stay in business. One of the most difficult decisions an employer will ever have to make is reduce their workforce as a cost containment measure. This is not only an emotionally difficult decision to make, but it can also be a very risky legal decision to make, if it is not done with careful thought and consideration.
Before a company arrives at the decision that they must terminate employees, they may want consider if there are any other possible alternatives. Some other options that may be considered could include hiring freezes, across the board pay decreases, reductions in hours, voluntary unpaid leaves of absence, or voluntary early retirement packages. If after considering all options, a company still finds that they will need to reduce their workforce, the next important factor to consider will be how they will determine which employees will be impacted.
Determining selection criteria for a reduction in force is a critical step in this process. Using the most objective and measurable selection criteria will greatly help reduce risk and protect a company from possible litigation down the road. One objective technique would be to select the affected employees based on their seniority with the company; however, this may not be the most targeted approach to help a business retain the key employees who will be needed for the company’s future success. Employers can also evaluate all the current positions and determine which ones are not vital to the organization and eliminate those positions. Measuring the overall levels of productivity and evaluating job knowledge, skill and abilities, would be other quantifiable selection methods. Whichever technique a company uses to determine which employees will be impacted must include solid documentation to support why this employment decision was made.
Once the impacted positions have been determined, employers need to properly prepare all final paperwork. Any severance agreements should include all proper verbiage as required by law, especially for employees over the age of 40. All final wages must be paid out in compliance with applicable state laws. Commissions or bonuses should be paid out according to the company agreements. Benefit continuation options will need to be communicated to the employees as well.
Probably the most important thing for an employer to remember when conducting a reduction in force is to do everything you can to treat all employees with the utmost respect in every step of this process. This is a very difficult time for everyone involved, not only the impacted employees, but also for the managers who have to communicate this news and for the remaining employees. Executives should meet with the remaining employees to assuage their fears and concerns as much as possible and try to get them re-focused as soon as possible. If reductions in force are done with careful planning and consideration to both employee’s feelings and a company’s business needs, an organization can come out stronger and more equipped for a positive future.