Management: Handling Employee Layoffs

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Cutting overhead costs may not be enough to recession-proof your business. If the time has come for you to consider employee layoffs, certain precautions can ensure fair treatment and help you avoid costly litigation. Spa owners should retain documentation that supports economic hardship as the reason for an employee layoff. "Typically, employers will make the decision to cut bad performers first, which can pose problems if you suggest that the reasons for the layoff are economic," says Joel Greenwald, a partner at the New York-based law firm, Greenwald Doherty, LLP (www.workplaceattorneys.com).

Here are some general suggestions from Greenwald about how to handle economic layoffs:

Consider carefully, act swiftly
Layoffs can be difficult because they often mean getting rid of good people. Before you make the decision to reduce staff, consider temporarily cutting staff hours or lowering compensation. If layoffs are your final choice, don't postpone the inevitable. "Make sure you deliberate the decision, but once you make it, don't delay," Greenwald says.

Gather written documentation
Ask a business controller or accountant to write a file memo suggesting a cut in labor costs to meet expenses. Also, keep a balanced paper trail that documents periodic employee reviews. "Surprised and angry employees are more likely to sue," Greenwald says. "An employee should fully expect her job is in jeopardy before you meet her for the termination meeting."

Avoid litigation
A well-documented paper trail can help avoid costly legal fees. Many employment lawsuits are subject to fee shifting rules, which means the defendant must pay for the employee's legal expenses if the judge rules in the plaintiff's favor.

Parting gifts
Offering former employees a fair, even generous severance package can send a message to your remaining employees that you value their service and appreciate their loyalty. In most cases, severance packages can be tied to agreements that release the company from liability. However, severance agreements should contain specific language that covers various individual circumstances. Spa owners should consult with an attorney to draft detailed legal agreements.

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