7 Ways to Avoid Legal Pitfalls When Implementing Mass Layoffs

Economic challenges are forcing many hospitals to implement mass layoffs, and employees laid off in a down economy are more likely to claim discrimination or wrongful termination, according to Ron Chapman, Jr., a labor and employment lawyer with Ogletree, Deakins, Nash, Smoak & Stewart, P.C. Here he offers seven ways to avoid claims of wrongful termination while implementing layoffs.

1. Have a written layoff policy. Mr. Chapman says before a hospital implements a reduce in labor force, hospital administrators should create a clear written policy — if one does not already exist — to provide decision-makers with "consistent and meaningful guidance on how they select those who are going to be laid off." He says many organizations rely on old performance reviews to make decisions about layoffs. While old performance reviews seem like a sound basis for layoffs, Mr. Chapman points out the reviews are "only as valuable as the effort that went into them." If some departments have more thorough reviews than others, or some reviews were conducted by supervisors who have since left the organization, the reviews may not provide a consistent basis for judging employee performance.

Instead, the layoff policy should include a fresh rating system for staff members that supervisors conduct between 1-6 months before implementing layoffs. The rating system should include measurable performance indicators that administrators and supervisors can reference if employees question how decisions were made.

2. Place a freeze on hiring new employees. Nothing invites scrutiny of layoff decisions like hiring new employees while terminating old ones, Mr. Chapman says. "It may make business sense in a hospital to lay off in one department and hire in another, but it's going to be a lot harder to explain to the people being laid off," he says.

If it's not realistic to put a freeze on hiring, Mr. Chapman says hospitals should at least make sure every affected employee knows about the job openings and has the opportunity to apply for the positions.

3. Choose decision-makers from diverse backgrounds. When choosing a team to make decisions about layoffs, Mr. Chapman recommends choosing a group of people who reflect a diverse background of gender, age, race, seniority and departments within the hospital. "You want to have a multitude of perspectives during the decision-making process," he says. Diversifying the group will not only remove "blind spots" or unconscious prejudices that might come from a homogenous group of decision-makers, but it will also show that your hospital made an effort to implement fair, unbiased layoffs.

"You don't want just one person calling the shots," Mr. Chapman says. "If someone claims they were wrongfully selected for the layoffs, and five different people [from different backgrounds] signed off on their inclusion in the layoffs, it's a lot harder to prove discrimination."

4. Review the employees you select for layoffs. Once your layoff committee has formed a list of affected employees, review the list for disproportionate numbers of employees of a certain gender, race, age and other factors. "Are there a disproportionate number of African-Americans or workers over age 50 on the list?" Mr. Chapman says. "If there are, you need to analyze why." If you have a high number of women on the list, for example, it doesn't necessarily mean that your hospital is guilty of gender discrimination — but you need to be able to justify every single layoff.

Your committee should be able to justify the inclusion of every person on the list. "There is by no stretch of the imagination a requirement under the law that you have to meet quotas when doing a layoff," Mr. Chapman says. "But when there is a disproportionate number of one particular category, that may raise a red flag. Review the numbers before the layoff is implemented so you can double and triple check the [appropriateness] of the employees you chose."

5. Give affected employees an explanation, not a debate. As you implement layoffs, many affected employees will likely want to know why they were chosen. In this case, Mr. Chapman says, "It's best to give some explanation, but it's not advisable to get into a long, drawn-out debate about the merits of the selection process." Without getting into detail about an employee's specific performance, let affected employees know about the layoff process. Talk to them about the criteria and which factors were evaluated.

By no means should you disclose any information about other employees, Mr. Chapman says. Just give the employee a general understanding of the process used.

6. Institute an appeals process. If your hospital is implementing mass layoffs, you will most likely come across a few employees who are upset about their inclusion on the list. Mr. Chapman says a hospital can institute an appeals process whereby a selected employee can submit an appeal of the layoff decision to the people who made the decision. "That will help you consider whether that person's inclusion in the layoff was appropriate," he says. If you've carefully checked your affected employees and based your decisions on measurable data, you should be able to stand by your decision.

In addition to giving your committee the chance to review its decisions, Mr. Chapman says implementing an appeals process can alleviate some of the employee's anger. "Just giving a disappointed employee that avenue to make sure their side of the story is heard goes a long way toward avoiding a lawsuit," he says.

7. Treat affected employees humanely and remind them of their options. If an employee is upset about the downsizing process, your hospital might be in a difficult situation when it comes to escorting them out of the building. "You need to be concerned about security in that situation, so frequently [organizations] will assign someone to escort the terminated employee out of the building," he says. "I certainly understand and sympathize with that because you want to avoid sabotage or threat to company property, but you also want to make every effort not to demean the employee in the process." The people who are assigned to deal with the laid off employee should be trained to handle difficult situations and emotional staff members.

During the layoff process, employees can be notified or reminded of their option to participate in job placement programs, if the hospital offers them. They should also be informed of changes to their health insurance and any severance benefits or unemployment benefits they will receive following termination.

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