How to Lay Off Employees & Not Be Sued

Knowledge of applicable labor laws help you avoid lawsuits after layoffs.

Laying off employees refers to letting more than one worker go because of economic considerations, according to Nolo. If you intend to lay off your employees, you need to comply with federal law and those that apply in your area. Otherwise, the laid-off employees may sue you, leading to monetary expenses and maybe unfavorable publicity.

Instructions

1. Review company policies regarding layoffs and how your company handled past layoffs for consistency. If you intend to lay off unionized workers, Nolo recommends that you review the union rules regarding layoffs.

2. Create a list of objective criteria for people who will be laid off, such as productivity or achievement of sales targets. If you use subjective criteria, such as communication skills, you have to judge every worker consistently to avoid being accused of bias, according to Nolo.

3. Create a list of employees to lay off based on your criteria. Nolo recommends that you review the list to confirm that it doesn't discriminate based on race, age or gender. The list shouldn't consist of a disproportionately large number of the members of one race, age or gender group.

4. Notify the employees in your layoff list about the decision in advance if required by the laws that apply in your state, city or local authority. According to the City of Philadelphia Business Services Center, notification requirements may apply in some cases, for example if you intend to close down the business.

5. Set up a meeting with each employee you are laying off and his supervisor in a private setting. Allow at least one hour for each employee. Let the employee know that you have decided to lay him off. Explain that the layoff is necessary for the business and you may also tell him the number of layoffs. Discuss any concerns the employee has and give him the contact details of a personnel officer in case he has any questions after the meeting. According to the University of California, San Diego, you should listen to the employee but not make any promise you can't fulfill. If the employee is eligible for unemployment, health-care or other benefits, give him the forms required to apply during the meeting.

Tips & Warnings

• Offer severance pay or termination benefits to the workers you lay off as a show of good faith even if not required by company policy.

• If your business does not have a legal department, you may hire a labor attorney for advice.

References

• Nolo; Making Layoff Decisions; Lisa Guerin
• City of Philadelphia Business Services Center: Laying Off or Firing Employees
• University of California, San Diego; How to Conduct a Notification Meeting for Layoff or Reduction in Time; December 2009