Don’t be Penny-Wise and Dollar Foolish

Let’s face it, layoffs are inevitable in these hard economic times. We are constantly bombarded with media reports of massive layoffs. While laying off employees may be necessary for your company to survive in this economic climate, the lawsuits that may follow from a poorly executed layoff plan can financially cripple your company. Even worse, the costs of the lawsuit can be greater than the laid-off employee’s salary and benefits.

Some employment laws permit the employee to recover punitive damages—among other things—against your company, and impose personal liability against management. Some laws may require your company to pay not only your own legal fees, but the legal fees of the employee as well. Here are some measures you can take to help avoid this from happening to you and your company:

1. Don’t lie to your employees.

If you are laying off employees because of financial reasons (as opposed to their job performance), tell them so. It is best to admit the company has been hit by hard economic times and, as a result, the company must lay off one or more employees.

2. Obtain a waiver or release from the employees.

Always ask the employees who are being laid off to sign a waiver or release form. A waiver or release is a written agreement from the employee stating that the employee will not sue you or

your company. Without a release or waiver, upset employees may sue you, your company and management for employment discrimination, contending the real reason for termination was related to their age, gender, religion or race. Even taking the least painful approach to layoffs, such as terminating someone who is very close to retirement or a woman who you know is not the primary breadwinner in the family, can lead to lawsuits for age and sex discrimination, respectively.