It is now safe to say that the COVID-19 pandemic has infiltrated just about every part of life. Employers have also felt this related pain as businesses have shuttered, industries have eroded, and overall economic uncertainty grows. Thus, layoffs have become a common, necessary evil for many companies, and knowing how to engage in this arena is essential. Whether you’re temporarily or permanently laying off employees, you need to take action to prevent lawsuits, communicate with staff, and collaborate with your team.
We’ve provided you with a downloadable separation letter to help you communicate the details of your layoff.
Preparing for and Executing Layoffs
Doing your homework before laying employees off is exceedingly wise. You not only want to ensure you take all of the needed steps for your company, but you should be prepared to position the employee for success as you say your goodbyes.
First, we suggest you discuss your plan ahead of time with an employment attorney or HR professional so all of the details, potential liabilities, and opportunities are covered.
1: Gather your leadership team
Your first step is to ensure, if possible, you do not endure this process alone. If you have another executive in the organization, sit down together and openly discuss the challenges that the business is facing which is leading to your layoffs.
2: Determine course of action
As we will dive into later in this article, consider if furloughing (a temporary interruption from work for employees) or laying off (a more permanent work reduction) employees is better for your company right now? It is different for every organization and every circumstance; you will also need to determine which is the proportional move that is right for you.
3: Identify the impacted positions and/or employees
Contrary to popular belief, layoffs are not determined by the employee; most of the time, they are determined by the position. Let’s consider an example: Company XYZ has two IT engineers. The database engineer position is not considered as essential as the software engineer position due to an upcoming ERP transition. The company chooses to select the database engineer for layoff.
4: Develop a timeline
There are two things to consider here. First, will your layoffs need to happen all at once, or will you stagger them (if there are multiple layoffs)? Second, will your layoffs be announced to take effect immediately or over a period of time (such as, “over the following two weeks,” etc.)?
5: Act right away
When the decision is made to lay off employees, announce the layoffs to the impacted people right away. The longer you wait the greater the risk of workers’ compensation or other employment actions being initiated that could complicate the layoff process.
6: Have the discussion (with a co-supervisor)
We strongly recommend having a co-supervisor present during all layoff conversations. Having a co-supervisor or HR professional witness the conversation helps confirm details shared, or not shared, and the employee’s reactions and statements that might be helpful to document. Further, it avoids false accusations and further challenges that can occur with employees when they part ways with the company.
7: Communicate with your team — immediately
Once you have first notified the employee or employees who are being laid off, it is essential that leadership, preferably the president or CEO, announces the news to the entire organization. It is important to get the facts out there quickly. Offer an open door policy and share updates daily if it is needed.
Note, if the CEO is not a good communicator when it comes time to deliver tough news, then turf the responsibility to an executive team member who can speak concisely and clearly.
8 Follow up with laid-off people (as needed)
Follow up won’t always be needed or recommended, so play this one by ear. It is important to be available for a short time for laid-off team members, especially if there is an HR department or team member who can assist laid-off employees during their first days of unemployment.
Also, note that third-party providers can support small businesses going through layoffs. Providers like Bambee offer employment termination support and human resource compliance solutions for businesses in any industry. They provide HR support, payroll, and guidance with federal and state labor regulation compliance.
Safeguards to Take Before and During the Layoff Process
There are several laws and risks to be aware of as you plan your layoffs. When determining the position or positions that you need to temporarily eliminate, you need to be certain that you are not intentionally or unintentionally crossing legal boundaries in the process.
Protect Against Wrongful Employment Termination/Layoff Lawsuits
There are reasons for employment termination (or layoff) that are illegal in nature. For example, it is illegal to use previous acts as a whistleblower, previous or current workers’ compensation claims, any Family Medical Leave Act (FMLA) protected leaves, sexual orientation, disabilities which are acknowledged by the Americans with Disabilities Act (ADA), religious, national origin, or other protected classes or actions for reasons to lay off someone. This includes an action referred to as “disparate treatment.” The Society for Human Resources Management (SHRM) outlines disparate impact in addition to disparate treatment as discriminatory employment practices.
- Disparate impact is often referred to as “unintentional” discrimination.
- Disparate treatment is considered “intentional” discrimination.
Note that the terms “adverse impact” and “adverse treatment” are at times used as an alternative.
Utilize Proper Terminology for the Layoff
Do not lay off an employee because they are a poor performer or a toxic team member. If you have performance-related issues with an employee, deal with them head-on. Do not think that laying off a difficult or challenging employee will solve your problem. Others have attempted this and have found themselves in more trouble, legally speaking, than the hassle of working through performance or behavioral issues with the employee.
Follow Best Practice for Refilling a Laid Off or Reduced Position
This is a general rule, but employment attorneys will typically counsel you to not “refill” a position for which you laid an employee off, for at least six months. Again, there is no legal rule for this, but generally speaking, this space of time allows you to argue that employment, business, or revenue related circumstances have changed and you’re again ready to make use of the position you rendered dormant when you conducted your layoff.
Check COBRA Requirements
Continued access to healthcare benefits after job loss is managed through the Consolidated Omnibus Budget Reconciliation Act (COBRA). COBRA generally requires that group health plans sponsored by employers with 20 or more employees in the prior calendar year offer employees the right to choose to continue group health benefits after termination.
This “continuation of benefits” is provided by the employee’s former employer’s group health plan for limited periods of time under certain circumstances such as voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, divorce, and other life events (referred to as “qualifying events”).
Note that COBRA is a delivery vehicle to continue healthcare benefits, but the employer does not pay for the former employee’s continued benefits, the employee does. Further, employers may charge qualified individuals the entire premium for coverage up to 102% of the cost to the plan (the 2% in the 102% rate is for administrative- related costs).
Consult Legal Counsel
Again, when companies lay off employees, they generally don’t look for ways to spend money. Having said that, we recommend at least one follow up with an employment attorney who can assess your plan of action, as well as offer guidance and advice on what immediately follows (from company-wide communication to planning additional employment actions that may be necessary).
Preparing for the Layoff Conversation
Although it is not required, we strongly suggest you have a letter written out ahead of the meeting that the employees will receive (with details of the layoff and resulting severance benefits). We encourage you to provide Employee Assistance Program (EAP) resources and any state unemployment materials that can help fast track them.
Your separation letter will simply address the layoff process specifically so the employee understands exactly why they are losing their job and how it will impact them.
As modeled in our sample separation letter, the letter should be concise, specific, helpful, and brief. Although having legal counsel review all of your template letters is a good idea, do not fill the separation letter with legal jargon that your employee will not fully understand.
This letter has two purposes: (1) to provide legal clarity and protection for the company and (2) to provide a clear understanding for the laid-off employee what is happening when it is effective, and why it is happening to them (or their position). There is nothing worse than a legally fortified letter that the laid-off employee cannot possibly understand due to legal terminology that does not have a commonplace in your employee’s vernacular.
Note: We suggest paying to have the separation letter translated as needed. The cost is typically minimal, and if you are laying off several employees, the changes from one letter to the next are often not significant.
Typically, if the employee’s last day is the day of the announcement, you should have the employee’s final paycheck prepared along with the separation letter. State laws often define how much time the employer has to deliver the employee’s last paycheck. Having the final paycheck ready to go right away again points to your intent to support the laid-off employee in any way you can.
We cover separation benefits shortly but suffice it to say that anything you can do to support the employee upon layoff is welcome (and further shows that you care for them even as they depart from the organization). Also, make note that separation benefits should always require benefits to the employer as well (as we will address).
Materials on unemployment benefits, easy to navigate COBRA processes, a severance package, cashed out vacation, and so on should be delivered timely. Whatever you are prepared and able to provide your laid-off employees should be ready to go, along with the layoff letter.
Employee Exit Strategy
Preparing the exit strategy ahead of time, both logistically and with how the employee leaves your place of employment is essential. Do not leave the employee alone to wander out the door on their own (this is both unprofessional and presents potential safety and communication-related risks). Typically, the layoff will become effective immediately, but not in all cases. Once again, this depends greatly on your business needs, the dynamics of your team, how many layoffs are being executed, and the employee(s) being laid off.
If the layoffs are delayed one or two weeks, you should include the guidelines and requirements of the employee’s continued employment over that time period within the separation letter; for example, confidentiality, sensitive documents, equipment, etc. should all be protected throughout the duration of their employment and beyond. Employee exits, whether they are layoffs or employment terminations for cause, should be carefully planned out and methodically orchestrated.
Conducting a Layoff Remotely
As if laying off an employee was not miserable enough, laying an employee off over Zoom (or remotely) can add even more complexity and discomfort, for both sides. Typically, when you are face to face with the employee you are laying off, you can at least offer kindness and professional platitudes that are much more transferable in person than over the phone or Zoom screen.
For example, your body language coupled with your tone of voice and the words that you use should collectively merge together to offer the employee your empathy and concern. When this discussion is performed remotely, body language is missing, at least in part, thus limiting how your employee experiences the interaction.
All of your preparation steps also apply to remote layoffs. Be sure to also complete the following steps:
- Announce the purpose of the call right at the outset of the conversation.
- Always use screen share (or show yourself during the call). It is essential that the employee sees and understands your state of mind as much as possible.
- Alert the employee to the witness who is also on the line (if possible, ensure that the employee can also see the selected witness, who should be a supervisor).
- Arrange for a follow-up call, as needed. Leaving the employee alone in their “home office” after a call like this is a lot to ask of an employee. Offering to follow up with them is a kind and professional gesture.
- Note that employees in other states may have unique details to their benefits. At times, there could be rules about how soon the employee should receive their final paycheck and how vacation time can be cashed out.
Employee Assistance Upon Layoff
Although the assistance companies tend to offer their laid-off employees differs greatly, some are required, such as unemployment insurance and COBRA (depending on company size), and should be clearly presented upon employment termination. Separation pay, for example, is not typically required unless specified via an employment contract. What you choose to offer your laid-off employee(s) will set them up for a smooth transition.
Unemployment Insurance Benefits
Providing easy to understand unemployment benefit resources is important for your laid-off employee. Although they will have to access this information themselves, encourage them to do so and perhaps even direct them, so they can locate these resources in their area easily.
Each state operates unemployment insurance differently. Your state, or the employee’s state, will have their own process for signup and implementation. The Department of Labor (DOL) offers a very helpful resource for this purpose. Visit the DOL’s Unemployment Benefits Finder webpage to find state-specific information.
Severance Pay (or Severance Package)
Severance pay, or the severance package, is generally a two-party agreement between the employer and the departing employee. The employer receives sureties in certain areas (on how confidential information is guarded and the freedom from wrongful employment termination lawsuits, etc.), and the employee receives compensation which helps in their transition.
In general, offering severance compensation is one of the best ways to support your laid-off employees. After all, money buys time, which is what everyone needs when looking for their next job opportunity. Although this is not required most of the time, we strongly suggest some sort of support when possible (we know that layoffs typically mean the company needs to tighten its belt). There are several ways to go about supporting your laid-off employee through severance support.
- Typically, during layoffs, a severance package is offered in one lump sum; a standard amount of one or two weeks’ severance.
- Another option is to structure your severance package amounts to two weeks for every year on the job, which, at times, maxes out at around 10 weeks’ salary.
- Also, a commonly utilized option is giving wages along with paid, extended healthcare benefits for the employee and their dependents (this helps the laid-off employee pay for COBRA).
- Compensation can also be in the form of extended healthcare benefits for the employee and dependents, with no pay.
- Lastly, any version of the above offered along with outplacement services.
PTO or Vacation Time Cash Out
Paying earned, unused vacation, or paid time off (PTO) is different from offering separation pay. It is important to understand that vacation time payout upon termination may be a requirement in your or the employee’s state (although there are no federal requirements to do so). These requirements differ from state to state.
State-specific drop-down menu (payout regulations)
Lastly, it is not uncommon for employers to pay laid-off employees their earned vacation time plus a severance package that helps position them for success during transition. We recommend having vacation payout ready to go along with the final paycheck.
Do not underestimate the value of offering outplacement, or re-employment guidance, to your laid-off employees. This can be a really helpful tool for people who are not savvy at finding jobs. Consequently, there are a number of value-added benefits for employers who offer affordable outplacement benefits for laid-off employees.
- Eases employees’ “survivor’s guilt”: For employees remaining with the company, often it is a relief to see their friends and former colleagues being helped as they enter their job search.
- Authentic support and guidance: The tools and counsel that are offered through these services not only help prepare employees for the job hunt but also support employees emotionally and psychologically.
- Timely employment solutions: Positive outplacement experiences often lead to shorter job transitions. Although there are never guarantees of this, the tools you can offer (such as resume writing tips and interview preparation) can really help kick-start the transition process.
- Helps reduce lawsuit claims: Honestly, this truly matters. Every time you terminate someone’s employment, the risk of litigation always is there. Any attempts to mitigate that risk is wise.
- Sustains company reputation: Both internally and externally, sustaining your company brand and its reputation are essential. This can be difficult to do when your business is hurting. Consumers want to see that your heart is in your business. How you say goodbye to team members matters.
As we noted earlier, COBRA is sometimes a required benefit you must offer laid-off employees. Knowing how COBRA works is important, so be sure that if your company offers healthcare benefits, you know what your requirements are under COBRA.
Helping your employee navigate COBRA paperwork and its process can also be a nice way to help them process their paperwork under this benefit. One resource to offer your laid-off employee, along with your letter of separation, is a FAQ sheet, called the “FAQs on COBRA Continuation Health Coverage for Workers” that the DOL provides to those who have lost their job.
Employee Assistance Programs (EAPs) are a wonderful resource to offer laid-off employees as many EAPs provide introductory job searching guidance, access to mental health providers, and many financial related resources (such as family budget creation and so on) that help laid-off employees transition successfully.
EAPs are generally accessible to laid-off employees during the time that their benefits are still active. Additionally, the continued benefits coverage employees may choose upon job loss, through COBRA, also commonly include access to EAP resources.
COVID-19 Related Resources for Laid-Off Employees
On March 12, 2020, the DOL issued guidance highlighting that although there are federal guidelines for benefits developed to combat the COVID-19 economic crisis, states, too, have the freedom to administer their unemployment insurance programs as they see fit. Commonly, the following are included in events that qualify:
- An employer temporarily ceases operations due to the economic downturn related to COVID-19, during which time employees may not return to work.
- An employee is quarantined for the required amount of time with the expectation of returning to work after being released.
- An employee leaves or quits, their employment due to a reasonable risk of exposure or to care for a family member.
Presently, federal law does not require that an employee quit their employment to become eligible for some of these benefits, depending on how they have been vocationally impacted by COVID-19. For example, the COVID-19 economic stimulus relief checks did not and do not get issued to unemployed people only. Employed people also received the first round of stimulus relief checks.
Communication With Staff
This may seem obvious, but you would be surprised how many get this very wrong. Successfully implementing layoffs, even if it is just one, is only half of the journey here. It is essential that you communicate with your employees throughout the entire company about the layoffs that are being planned or taking place.
The news of layoffs does crazy things to people. Employees who remain employed often feel survivors’ guilt (for getting to keep their job) or continue on with heightened anxiety (in fear that additional layoffs may impact their job) and so on. The energy around layoffs is unsettling and fear-based. We encourage the following approach to company-wide communication before, during, and after layoffs.
Much of the time, but not always, layoffs are announced right after the employees directly impacted by the layoffs have been notified. We recommend same-day notification to the entire company. General news, rumors, and misinformation about layoffs travel at light speed.
In this initial communication to your company, share the reasons for the layoff (is this related to COVID-19 and the downturn of business?), how many positions or employees it will impact, whether or not they should anticipate more layoffs, and when you will give your next update.
Open Door Policy
Once the news is shared, employees will have questions (we promise). Allowing employees to drop in and ask questions, whether through HR or with trusted supervisors, is wise. You may find that people need to hear the same information repeatedly in order to gain a little calm. For others, just talking through the company’s economic realities of the time is cathartic. Everyone deals with the news of layoffs differently.
Leadership Team Meetings
We encourage you to meet with your supervisors and managers regularly, which could mean daily, for a while. The fact is, not all questions from your employees will be asked of appointed leadership team members. Supervisors will be stopped in the hallway, at the water cooler, right outside the door to the restrooms, before and after meetings, and so one.
Prepare your leadership team for success by training them and giving them daily updates of the latest news as it develops. It is OK to say ”I don’t know” or admit that you cannot guarantee anything. Your employees will appreciate honesty, directness, and compassion.
Permanent vs Temporary Layoffs: The Difference Between “Furloughs” and “Layoffs”
Understanding what types of work loss options exist is essential. Most employers we talk to want to make the most minimal impact to their workforce as possible (both for the business’ health and the betterment of their employees). The two common ways employers can handle job terminations outside of firing (that’s usually for performance or other related issues) is through furloughs and standard layoffs.
Furloughs are often used when employers do not want to lay off or permanently reduce their workforce, however, they must make cuts to their overhead costs for a certain period of time. Furloughs are also considered a “temporary layoff from work.” People who get furloughed typically are allowed to return to their job after a predetermined set of time. Note that at times, employees are furloughed for an extended period that is not always known initially.
In summary, furloughs usually involve the following:
- People are generally not paid during furlough.
- Often, but not always, employees may retain healthcare insurance benefits during their furlough.*
- Employees may not “volunteer” when they are furloughed; they may not do any work-related activities.
- Generally speaking, employees eventually return to their job after the furlough ends, but there is no guarantee of job security (and employers should not promise, verbally or in writing, employee job security).
(* Note: A group health plan will commonly have written plan documents that outline the eligibility rules for that particular plan. Within these rules, you will see a definition of “eligible employees,” including how long an employee can be absent from work before the employee will lose eligibility for insurance coverage).
Layoffs tend to be permanent job losses for employees. When a typical layoff takes place, an employee is notified that, although their job loss is not performance-related, that the company no longer requires or can no longer sustain the position at the time. As we have shared, utilizing the “layoff” process to get rid of low performing or “bad” employees is not a good practice and could get employers into trouble if mismanaged (that is to say, it is a better practice to terminate the employment of a poor performer after progressive correction or coaching has been attempted). Keep in mind, you need to wait approximately six months before refilling the same position you removed the laid-off employee from.
Layoffs can affect one employee at a time or several hundred; they can also be staggered over a selected period of time. There is a lot of flexibility based on what your needs may be. The critical aspects of executing any and all layoff strategies is to have your leadership team in sync and constant and open communication channels with your organization.
In summary, layoffs usually involve the following:
- Layoffs can be as small as one or in the hundreds of employees at a single time or through cascading job losses.
- Layoffs are commonly considered permanent job loss.
- Generally, a separation package of some kind is offered, although not always (this helps support the employee during their job search).
- The general rule in refilling a laid-off employee due to a reduced position is to wait six months before filling that position again (some union rules speak to this in their employer-union agreement).
Reduction in Force (RIF) and the WARN Act
At times, particularly with large organizations, layoffs can get to be significant in size employment events. When this is the case, employers may need to understand how the Worker Adjustment and Retraining Notification (WARN) Act operates. This is what we dive into next; if your layoff planning is only resulting in a few layoffs, then the WARN Act will not apply to you. However, if you do not know anything about the WARN Act, we encourage you to carefully review this next section, as it is a thorough introduction.
Reduction in Force (RIF)
RIFs are generally a large number of layoffs occurring within a narrow time frame. Although you can execute a large number of layoffs while not triggering WARN Act requirements, you must be cautious when planning multiple layoffs at once that impact a large part of your organization. There is no federal legal definition of a reduction in force (RIF), rather, the WARN Act provides guidance on when your layoffs do trigger legal requirements and protocols you must follow during your layoff action.
WARN Layoff Regulations
In 1988, Congress passed the Worker Adjustment and Retraining Notification (WARN) Act to provide workers with sufficient time to prepare for the transition between the jobs they currently hold and new jobs. WARN helps ensure advance notice is given to employees and other internal parties (union representatives, employees in other locations, etc.) in cases of qualified plant closings and mass layoffs.
A WARN notice is required when a business with 100 or more full-time workers (not counting workers who have less than six months on the job and workers who work fewer than 20 hours per week) is laying off at least 50 people at a single site of employment. Businesses that employ 100 or more workers who work at least a combined 4,000 hours per week and are a private for-profit business, private nonprofit organization, or quasi-public entity separately organized from regular government are also included.
Employees Protected by WARN
Affected employees are those who experience an employment loss. They may be hourly and salaried workers, including managerial and supervisory employees and non-strikers (note that striking is more common in union-represented workplaces than non-union workplaces).
Affected employees include:
- Employees who are terminated or laid off for more than six months or who have their hours reduced 50% or more in any six-month period as a result of the plant closing or mass layoff.
- Employees who may reasonably be expected to experience an employment loss as a result of a proposed plant closing or mass layoff. If the employer has a seniority system that involves bumping rights, they should use their best efforts to give notice to the workers who will actually lose their jobs as a result of the system.
- Workers who are on temporary layoff but have a reasonable expectation of recall; this includes workers on workers’ compensation, medical, maternity, or other leave.
- Part-time workers. These workers do not count when determining whether there has been a plant closing or mass layoff, but they are entitled to receive WARN notice if there is one.
Employees Not Protected by WARN
The following employees are not protected under WARN, which means that although layoffs can occur in this group, notifications are not required in the same way they are in place for WARN-protected employees.
- Strikers, or workers who have been locked out in a labor dispute.
- Employees working on temporary projects or facilities of the business who clearly understand the temporary nature of the work when hired.
- Business partners, consultants, or contract employees assigned to the business but who have a separate employment relationship with another employer and are paid by that other employer, or who are self-employed.
- Regular federal, state, and local government employees.
The DOL has compliance assistance materials to help workers and employers understand their rights and responsibilities under the provisions of WARN. To be sure, some of the resources are not as user-friendly as they could be. For example, there is a 30-page guide to the DOL’s WARN manual and several different websites that retain different materials.
Understanding what your obligations are when you are preparing for a layoff event that is covered under WARN is critical. The drop-down menu offered here will quickly educate you on the state-specific requirements under WARN. Many states do not have additional requirements other than ensuring that your company follows the federal Worker Adjustment and Retraining Notification requirements.
WARN Requirements by State
Re-Hiring After Layoffs
Life after layoffs does exist, both for the employer and former employees. Although rare, there are times when employers re-employ previously laid-off workers after business conditions change. We’ll concede that this is rarely the case and what is more common, once business strengthens, is for employers to launch job recruitments for these re-opened positions that lead to hiring the most qualified candidates who apply.
If you do choose to re-employ former workers, we suggest that you conduct job recruitments regardless of who you want to hire, just to ensure that you are offering employment to the most qualified candidates out there (regardless of if they’ve been employed by your company). You can encourage former employees to apply and interview, but we recommend reviewing all resumes that come your way.
Whether you are executing a single layoff or a reduction-in-force, layoffs can be emotionally exhausting, stressful, and uncertain for everyone involved. Every company manages the decision for and the actual layoff process, differently.
Knowing how to successfully implement your layoffs will bring confidence to your leadership team and relative calm to your staff while helping you provide any and all available resources to parting team members. COVID-19 will not have a stranglehold on companies forever, and although layoffs are a necessary evil, they can also lead to temporary reprieve and assist in organization solvency until the economy recovers fully.