Reductions-in-Force (RIFs) and Layoffs

What do I need to know before laying someone off?

There are certain guidelines that you will need to follow when considering a layoff. Specifically, you'll need to evaluate:

- The appropriate position to be impacted

- The appropriate employee to be laid off

- The legitimate reason for the reduction in force

- How long the position could remain unfilled

- What could happen if you were legally challenged for having improperly laid someone off

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How do you determine which employee should be separated? Remember, you can't arbitrarily select someone for a layoff simply because she is your weakest performer or because she happens to be in the position that's being eliminated. As a rule of thumb, you're obliged first to identify a position that is no longer necessary for some legitimate business reason; second, you must then identify the person in the department or unit who is least qualified to assume the remaining duties.

Once you have identified the position to be eliminated, how do you determine who is the person least qualified to assume the remaining responsibilities in the business unit? First, develop a list of all employees in that group with similar titles or responsibilities. For example, if you're looking to eliminate one of three secretarial positions in your marketing department, list all the secretaries (or people who handle secretarial duties) in that department on a sheet of paper.

Second, review the nature of the remaining work to be done after the position is eliminated. For example, if the secretarial position reporting to the vice president of marketing is being considered for elimination, document the responsibilities that will remain in the unit after the reduction in force. (Job descriptions are very helpful for such comparisons.) In this case, answering high-volume or important phone calls, coordinating travel arrangements, composing written correspondence, and developing PowerPoint graphics presentations may be the key tasks left to be done after the reduction in force.

Third, determine which of the three secretaries in marketing is the least qualified to assume those remaining duties. In essence, you'll be comparing all three employees' essential job responsibilities, skills, knowledge, and abilities. In addition, review the employees' annual performance reviews, tenure, and history of progressive discipline to create the appropriate written record. It would also make sense to review their work experience prior to joining your company so that tenure alone doesn't outweigh other considerations. Once that documented comparison has been made of the three employees who could potentially qualify to perform the remaining work, it's time to determine who is the least qualified individual.

If a company has a legitimate business reason to eliminate a position, it probably shouldn't have a need to re-create that position in the near future. In other words, don't eliminate a position you think might be needed in the future. If a company re-creates or reopens a position shortly after a layoff, it will be hard pressed to prove that the layoff wasn't a termination in disguise.

Can I lay off a substandard job performer rather than terminate for cause?

Managers who want to avoid the confrontation associated with progressive discipline and termination often look to the path of least resistance—a no-fault layoff. But layoffs aren't always the easy-out solution that you may be looking for, and you're typically better off pursuing a legitimate termination for cause via progressive discipline. Why? Because managing employee performance problems via progressive discipline holds employees accountable for their actions, establishes a performance improvement plan that actively involves your company in the employee's rehabilitation, and creates a defensible written record to show that you've accorded the employee with workplace due process.

Still, many managers prefer to pursue a layoff because it lacks the ongoing confrontation associated with progressive discipline and because it appears to provide a quicker solution to ending employment. Make sure, however, that you follow the guidelines for layoffs before pursuing this option.

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First, keep in mind that in a layoff you eliminate positions, not people. In other words, your written records must reflect that a position is being eliminated because of a lack of work or other financial constraints, and the individual who currently fills that position will now be impacted because there's no longer a job to report to. If removing a problem performer is your goal, eliminating that individual's job may be a big mistake. After all, you'll still need to get the work done.

If, after going through all of the considerations for a layoff, you find that the individual identified for a layoff is the person you originally targeted because of her ongoing performance problems, then you may be safe to sever her employment.

If, on the other hand, the underperforming employee is arguably not the least qualified individual (on the basis of your review of all relevant criteria, including performance evaluations and other written records), then you have to lay off one of the other two secretaries. Of course, that means that a layoff is no longer a viable alternative. Therefore, you have to revert to managing that individual's performance via documented progressive discipline.

But wait. There is another key consideration when determining whether a layoff is the appropriate employer action when dealing with underperforming employees. You've also got to keep in mind that courts and juries have certain expectations about employers' responsibilities when eliminating positions and laying off workers. The logic is simply this: If a company has a legitimate business reason to eliminate a position, it probably shouldn't have a need to recreate that position in the near future. If the company re-creates the position soon after eliminating it, a judge or jury might conclude that the company's original action was only a pretext. In other words, the court could be persuaded that the so-called layoff was really a termination for cause in disguise. This could obviously damage the company's credibility during litigation.

How long does the position need to remain unfilled? That depends on your state's statute of limitations on unlawful employment practices. In many states, an ex-employee may file a complaint up to one year from the date that the unlawful practice occurred. Therefore, it's typically safest to wait at least twelve months before filling a position that was previously eliminated.

What if you are willing to gamble and fill the position after, say, six months? Well, if the ex-employee learns that her previous position has been filled and she engages the services of a plaintiff attorney to pursue the matter, then the damages sought will be similar to those in a wrongful termination or unlawful discrimination claim. If you are held to a for-cause standard of termination, you may be burdened with providing documentation to show that you had reason to terminate the employee because of substandard job performance, inappropriate workplace conduct, or excessive absenteeism.

As is typically the case with layoffs, though, employers aren't prepared to show proof via progressive discipline that performance was a problem. As a result, an out-of-court settlement will probably need to be reached. Damages could include reimbursement for lost wages, compensation for emotional distress, plaintiff attorneys' fees, and, in egregious cases of employer misconduct, punitive damages.

Therefore, layoffs should be implemented only when position eliminations are inevitable because of a lack of work or other financial considerations. Because of their complications and limitations, they should not be used as an alternative to dealing with individual performance problems.

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