This article is for New Jersey owners of small and medium size businesses.
With the headlines full of news about the Great Resignation and employers offering prospects everything but the kitchen sink to attract new workers, it feels a bit odd to write this article that focuses on doing layoffs and other terminations properly. Still, it’s an important topic, not least because the end of the year is a common time for companies to show the door to employees they no longer want. Plus, there’s still a lot of wisdom in the time-tested mantra “hire slow, fire fast.” In an era of rapid hiring, mistakes are bound to be made and should be corrected promptly.
This is not an in-depth discussion of mistakes to avoid. Rather, it is a short checklist to help you avoid stumbling over big legal boulders. Also, we will not discuss the WARN Act for situations involving large layoffs or plant closures; that’s a topic for another day.
Mistake No. 1: Not Doing Your Homework
Laying off employees should not be an exercise in panicked damage control. Have a solid business reason for what needs to be done. Make a plan. Write it down. Include things like your intended post-layoff organizational structure, business objectives, and identify job positions (not employees!) that are unnecessary or redundant. This will create a documentary record and help avoid the legal risks posed by claims of discrimination. Next, get outside help with your homework. Make sure that you have experienced employment counsel involved to review the plan. Then make sure that the implementation of the terminations adheres to the written plan.
Mistake No. 2: Overlooking the Statistical Impact of Your Plan
Following up on Mistake No. 1, part of your homework should include a look at the real-world impact of your choices. Position eliminations that disproportionately affect older workers (age 40+), the disabled, or other protected groups may provide a basis to challenge the lawfulness of your plan. This needs to be accounted for as part of the planning process. With small employers and relatively few employees to be affected this will be simple. Larger groups complicate the process.
Mistake No. 3: Messing Up Your OWBPA Obligations
OWBPA: Old Workers Benefits Protection Act. It applies to your employees who have reached their 40th birthday; that’s probably a lot of them. This applies to nearly everyone to whom you will offer a severance package. In exchange for severance money you will want to get something in return, usually a waiver or release of rights so you have an assurance that the employee will not sue you for anything connected to his employment. I won’t bore you with a lot of legal gobbledy-gook on this subject. What you must understand is that this is not an area where you should be playing with forms downloaded from the internet. A do-it-yourself employment termination bears a strong similarity to voluntarily launching on a kamikaze mission. Don’t be a kamikaze. Get legal help from an experienced employment lawyer – that’s all you need to know.
Mistake No. 4: Hiring Replacements to Fill “Eliminated” Positions
This should be too obvious to have to say, but don’t eliminate a position and then fill it a short time later. If you do you will have handed a plaintiff lawyer a great point to argue that the job elimination was merely a pretext for discrimination. If you actually have to confront that issue, the only question is whether you will have to pay your ex-employee, your attorney, both, or maybe even the ex-employee’s attorney. If you say you’re eliminating a position, do it. After six months you can reevaluate, but not before then.
Mistake No. 5: Being Penny Wise and Pound Foolish
Firing employees can be both difficult and legally dangerous, especially in a liberal state like New Jersey. The money you spend on getting sound and experienced legal help to see you through the termination process will save you money in the long run, because in the long run mistakes can be dangerous. It’s always more cost-effective to prevent problems from happening than trying to fix legal problems if the job isn’t done right the first time.
If you want more information about the termination process, or other aspects of employment or business law, feel free to make an appointment for a complimentary analysis and strategy session with New Jersey attorney Frank Steinberg at (908)685-0600.