Employee Lay-offs: What Employers Should Know during COVID-19

Mar 18, 2020

COVID-19 may obliterate a lot of businesses from the face of the earth over the next few months, or it may not. Nearly every business in the United States has been affected by this pandemic and there are going to be tough decisions made over the next few weeks as government entities are forcing non-essential businesses across America to temporarily close down.

WHAT YOU NEED TO KNOW ABOUT LAYING OFF EMPLOYEES

  • You have to have a systemic strategy of who is getting laid off and ensure it is non-discriminatory. The easiest system to implement is last in, first out (by tenure). The more difficult strategy is to decide based off of performance because this would require the company to have to prove that one employee outperforms the other and would need documentation to support it. Businesses can also choose to let go certain departments if those departments would no longer be essential to the business in current circumstances. This is also known as eliminating positions.
  • You have to be prepared to pay out all final wages including vacation, PTO, and commission owed. This is more obvious, but if a business is already experiencing a large loss in revenue, paying all of this out at once may devastate the business. Additionally, the business may not have the cash to do so.
  • You may not be able to re-hire the positions for 6 to 12 months afterwards. If the business is able to fully operate shortly afterwards, it is best practice to offer the displaced employees their positions. In a perfect world, everything is great again. Except businesses will probably use this opportunity to strategically off-load low performing individuals and would rather look elsewhere to fill the position. If this is the case, it is in the business's best interest to wait 6 to 12 months to do so which can disrupt operations.

WHAT YOU CAN DO INSTEAD

  • Reduce hours company-wide. If it is determined that a business needs to reduce payroll by 50% to stay afloat, rather than laying off 50% of the staff the business can choose to reduce everyone to 50% by implementing a furlough day(s).
  • Temporarily freeze non-essential departments or the whole company. Businesses can place the entire company on a furlough status so that when operations are up and running, the business can retain their staff and staff members can remain employees. Businesses will have to decide how employees can continue making their benefits payments so there is no disruption during this time or the business can offer to pay for them up front and then deduct from their paychecks at a later time.

TIPS TO PREPARE

  • Decide on an effective date each department's and/or employee's new status will take place.
  • Draft a detailed letter to employees making this announcement as soon as possible.
  • Create notices for each individual employee with details of their new status as well as supporting documentation they will need to file for UI.
  • Provide links and resources to state unemployment sites and encourage them to take action as soon as possible.
  • Determine a communication pulse so they can expect when they will receive updates.

 

 

*The information provided in this article does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available in this article is for general informational purposes only.

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