The last thing any CFO looks forward to is laying off employees, but it’s an unfortunate reality for many folks in finance these days. Protecting the company is always priority No. 1 and often that involves letting go of people.
Just be careful: Mass layoffs can lead to discrimination lawsuits by ex-employees. All it takes is a small handful of laid-off workers who are in a protected group to file a class-action claim.
If you decide that layoffs are unavoidable, follow these guidelines to help prevent legal retaliation or having to make expensive settlements:
1) A complete and transparent blueprint. For those involved in executing layoffs, a detailed business plan is essential. Your blueprint (or business plan) should clearly explain why the layoffs are occurring, what facilities/businesses and positions will be affected, when (exactly) the layoffs will take place and how everything will happen, as well as any other relevant info.
The key here is to provide as much info as possible to affected employees and create airtight documentation of your reasoning should a dispute occur.
It’s important to ensure the reasoning makes sense to everyone — from the highest execs to A/P clerks. Many times, aspects of a downsizing decision that appear obvious to those making the decision aren’t so obvious to everyone else. Courts tend to side with laid-off employees when the downsizing decision hasn’t been sufficiently documented for justification.
2) Double-check any relevant regulations. Companies need to be extra careful their layoff decisions are in compliance with federal, state and local laws.
3) A careful selection process. While it’s true your company can downsize in any way it sees fit so long as there’s no discrimination, it’s important to tread carefully here. If possible, avoid blanket percentage layoffs such as x-percent of Finance or x-percent of A/R.
The last thing you want is for layoffs to follow a pattern like dismissing people of a certain gender, age, religion, ethnicity, etc. If 20 employees are laid off and 15 happen to be over the age of 50, for example, the chances of staffers alleging ageism goes up.
4) The right choice of words. Delivering bad news is one of the most despised aspects of an employer’s responsibilities. To compensate, some managers use poorly framed word choices, appear apologetic or even attempt to shift the blame onto themselves.
Despite noble intentions, the wrong choice of words could easily come back to haunt an employer in court. At all costs, avoid blame-shifting language, such as: “This isn’t your fault, it’s ours.”