When markets shrink and revenue predictions drop, layoffs may become necessary for businesses. Still, if not handled properly, layoffs can lead to legal issues that last longer than the financial benefits. Employers who are unaware of potential legal problems might end up facing unexpected claims.
Here are five critical mistakes to avoid when your business encounters the difficult decision to reduce staff.
1. No clear and objective selection criteria
Companies must select employees for layoff based on clear, job-related reasons. Employers must not choose employees based on age, race, gender or other protected characteristics. Courts consider such actions as discriminatory practices and are illegal.
2. Failing to document the reasons for layoffs
It is best to keep records of why you selected certain positions or individuals for layoff. This paperwork will support your decision if someone claims the layoff was discriminatory or unfair.
3. Failing to provide proper notice
The WARN Act requires employers with 100+ employees to give 60-day advance notice for mass layoffs. Texas courts strictly enforce these requirements.
4. Releasing employees without severance packages
Severance packages help laid-off employees adjust to job loss. Though not always required by law, these packages typically include salary, benefits and job search help. Offering severance can help avoid lawsuits and maintain your company’s good standing.
5. Inconsistent communication
During layoffs, make sure to communicate with employees clearly and honestly. Inconsistent or unclear communication can create confusion, mistrust and anxiety, which may even lead to lawsuits.
Protect your business
Employment law presents many traps for unwary business owners. Often, the best strategy involves preparation and legal guidance.
Before implementing staff reductions, consult with an employment attorney who understands Texas law. An attorney can help structure your layoff plan, review documentation and minimize litigation risk.