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Restructuring can reduce your costs but can also lead to risk

On Behalf of | Oct 25, 2021 | Business Bankruptcy

When the budget doesn’t balance anymore, your business may have to make big changes. Restructuring is a way for floundering companies to reduce their operating expenses.

By eliminating redundant positions and streamlining the workforce, companies can potentially keep themselves in business despite a reduction in revenue or an increase in operating expenses. Laying off or terminating numerous people to reduce how much it costs your company to stay in business could be the change you need to regain control over the company’s finances.

However, one common kind of mistake made during restructuring or downsizing could damage your company’s finances and ability to bounce back.

Downsizing could lead to discrimination or wrongful termination lawsuits

In theory, a struggling business can let go of some of its workers in order to balance the budget and keep the company operational. While doing so, the company must take care not to engage in discrimination when it decides who to retain and who to let go.

All too often, especially with small or medium-sized businesses under local ownership, the risk of facing discrimination allegations arises when the company reduces its workforce. If you unintentionally let go of multiple people who share a protected characteristic, like the same race, sex or religion, then you might find yourself facing allegations that you used downsizing as a means to discriminate against members of a certain group.

Your company can protect itself from such claims by carefully reviewing the suggestions made regarding which workers the company will retain and which ones they let go. Checking the pool of individuals for shared characteristics to limit the possibility of unintentionally discriminating while deciding who to retain and who to let go could protect your company from damaging claims. 

Restructuring is a process with many benefits but potential risks as well

Those who run a business currently experiencing financial difficulty may want to be proactive about keeping the company solvent. Choosing to let some workers go, for example, could protect the jobs of many other people.

Being careful and conscientious and every decision that you make during the restructuring process will help protect your company from allegations of discrimination that could result in more financial liabilities rather than a balanced budget.