Covering the costs of worker wages and benefits is a major source of financial strain for many midsize businesses. They may have dozens or even hundreds of employees, and those workers can be a source of financial pressure when the company isn’t in the black.
Organizations facing financial pressure due to declining revenue or unsustainable costs sometimes have to take drastic steps to keep the company afloat. Restructuring the business may mean eliminating certain departments and even entire facilities. The business may need to reduce its staff as part of that process.
Unfortunately, some organizations rush through the downsizing process and may end up facing legal challenges brought by the workers terminated or laid off during restructuring. Employee litigation can potentially undermine the financial benefits derived from restructuring.
How can businesses avoid costly litigation brought by workers who lose their jobs?
Develop standards before proceeding
The organization needs to have a very clear and consistent approach to employment decisions to avoid claims of discrimination. In some cases, factors like seniority or productivity may be the main considerations when determining who stays on with the company and who faces termination. Other times, the simplest solution might be to eliminate those working at a facility the company intends to close and keep those working at the spaces that remain in operation after restructuring.
Document factors that contribute to decisions
Having internal records that affirm the job performance of individual workers or other factors that contributed to decision-making is crucial for the protection of the business. If workers attempt to fight their inclusion in the layoff or mass termination, internal documentation can go a long way toward convincing the courts that the company did not retaliate against certain workers or discriminate against those who have certain protected characteristics.
Prepare agreements for the workers leaving
Workers who lose their jobs during a layoff or staffing reduction may be less likely to sue if they feel like the company treated them with decency. The company may need to find ways to soften the blow of job loss, such as offering a small severance package to those who sign an agreement related to the termination. Even a bonus of one- or two-days’ worth of pay can be enough to convince workers to sign an agreement that can limit the likelihood of litigation in the future.
Having the right support before making any major decisions while restructuring can limit a company’s exposure and legal risk. Angry former workers can do real damage to a company’s budget and reputation if the company mismanages staff reductions.