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Downsizing? How to sidestep discrimination claims

On Behalf of | Oct 18, 2022 | Employment Law |

Making your company smaller by eliminating positions can be a very difficult – but necessary – process. If you are at a point where you must downsize or lay off certain employees, you might already be struggling with what this means for your business.

One thing to focus on when you are reducing your workforce is making fair and lawful employment decisions to avoid allegations of discrimination.

Have a set of criteria

First and foremost, you need to make a list of criteria concerning what you’re looking for when determining which employees to let go. You might base your decisions on objective, calculable numbers like:

  • Production numbers
  • Position or department profits or losses
  • Hiring dates
  • Objective performance metrics

If you have a solid list of these factors and can show how they apply to each employee, it can help counter any discrimination claims. It can also reinforce the message to employees that the decisions were not personal.

Consider unequal impacts

Next, think carefully about how downsizing may impact different groups differently.

For example, perhaps the criteria that you’ve chosen mean that female employees are going to be laid off at a much higher rate than male employees. You may not have intended to do this, but you can see how this may be discriminatory based on your chosen criteria.

It is essential to evaluate the impact of your preliminary decisions on protected classes of employees, so if you discover disproportionate dismissal of certain workers, adjusting your criteria may be appropriate.

Explore Severance Programs

Employers sometimes consider downsizing through two or more phases.  For example, a business may identify certain groups of employees who meet established criteria who are offered the opportunity to voluntarily depart from the company.  Those employees could be offered a financial incentive to leave in exchange for signing severance agreement and release of all claims.  If the voluntary severance process does not sufficiently meet the company’s downsizing objectives additional phases may be used, either with or without severance packages.  Severance programs and packages may require compliance with various State and Federal laws.

Maintain detailed records

Whatever you decide your criteria will be for letting workers go, be sure to keep detailed records of your decision-making and notification processes. Retaining these documents can be crucial in legitimizing your choices and defending against claims of unfair treatment.

Employees may understandably be unhappy about losing their jobs through a downsizing.   But taking these steps can lower the chances of a lawsuit and protect your company.