Personnel(ly) Speaking

A Monthly Newsletter from

Personnel Management Systems, Inc.

August 2008

RIFs, Downsizing, Layoffs, Right Sizing – Terminations!

General Background

Running a business is already difficult.  Running a business in a down economy is even more difficult.  One of the most difficult issues that business owners have to deal with is terminating good employees - reducing staff.  Unfortunately, because of the economy, this is becoming a reality for some companies.  This is never easy. 

Deep down, all we can tell ourselves and take solace in, is the fact that we are doing it for a business reason; it’s not personal.  Financially, a reduction in staff is sometimes necessary and the “right” thing to do for the sake of the business; however, because we care about our employees, we are going to do our best to proceed in a way that is both compassionate and respectful.  Losing your job, even under the best of circumstances, never qualifies as a good day.

We must also remember that the survivors, those not let go, will have strong feelings toward what happens.  There could be resentment, guilt, anger, and mistrust.  As employers, we need to pay attention to these employees and address their issues as well.

Last but not least, as employers, we need to take into account the potential legal liability that we are exposed to when terminating employees.  We want to conduct ourselves in a way that minimizes our liability.

Preparation

Like any complex problem, a well prepared and executed plan usually means the difference between success and failure.  In this situation, a well prepared plan will include the following:

• Termination Checklist.  A well thought-out checklist will help us remember to do all the things that we may forget under the inevitable stress of the moment.  We don’t want to forget the small things like getting keys, company credit cards, computer passwords, etc.
• Termination Letter.  Employees often do not “hear” anything you say once you let them know that they are being terminated.  Providing the employee with a letter or information packet can go a long way toward filling this gap.  The letter should include information about their final paycheck, returning company property, benefits (medical, dental, vacation, 401k, EAP, etc.) and how to apply for Unemployment Insurance.  If your company has a Confidentiality or a Non-Compete Agreement, it may be useful to give the employee a copy along with the Termination Letter.
• Time and Place.  There is some debate in the HR community about the best day and time to do a termination.  Some used to believe that the end of the week was the best time.  Others argued that this only meant the employee then “stewed” all weekend and that Mondays would be best so the employee could start the job search the next day.  It is unclear which argument is more valid.  Regardless, there should be a specific time and place for the meeting.  The place should be free of distractions and reasonably private.  It should go without saying that you don’t want to have a termination meeting out in the open where others can hear, and you don’t want to be distracted by a ringing cell phone or other interruptions.  Remember, this is the time to demonstrate respect and compassion.  It is probably important to note that if you think a particular termination may be volatile or overly emotional, you may want someone to sit in on the termination as a “witness” and have a box of tissues at the ready.
• Who should do the termination?  In most cases, the employee’s immediate supervisor or manager should do the termination.  Terminations should always be in person, never by email or voice mail (it sounds strange, but it has been done before).  Managers should use a script so each meeting is basically the same - controlled and structured.  As a general rule, these meetings should be short, allowing you to get right to the point.  There should not be long discussions or any negotiations during these meetings; however, if the employee wants to vent, let him.  Nod your head, ask questions, use good and attentive listening skills, and sit there until the employee is done talking.  Thank him for the feedback and end the meeting. 
• Severance.  Severance is not required unless you have a prior written agreement with the employee.  However, if the company can afford severance, it definitely makes the termination less financially painful for the employee.  Normally, two weeks’ pay is the minimum.  We ask an employee to give us two weeks’ notice when he resigns so it only seems fair that we give the employee two weeks’ pay when we terminate him.  Some say that a good guide or rule of thumb is one or two weeks’ severance for every year that the employee worked for you, up to a maximum number of weeks.

Severance Release letters can be particularly useful if there is a concern that any of the terminations may result in a lawsuit.  If that is so, release letters must follow a very strict template and be prepared by a Labor Attorney.   Do not attempt to draft a Severance Release letter on your own.  It most likely will not be enforceable.

· Health Insurance.  For many employees, the next worse thing after losing their job is losing their health insurance.  Even though your firm may be large enough to offer COBRA continuation coverage, it is expensive.  It is a nice gesture if your firm can keep the terminated employee on the plan for a month or so. 

· Compliance Issues.  Inherent to terminations is an increase in your exposure to    employment-related liability.  We always want to be careful if the employees selected for termination are part of a protected group such as those over 40, veterans, those with disabilities or perceived disabilities, minorities, pregnant women, those on leaves of absence, and employees with open workers’ compensation claims (L&I).  If employees are part of a protected class then it is essential to have clear, well documented, non-discriminatory reasons as to why these employees were chosen over others for termination.  Competent help from a Labor Attorney or Human Resource Manager is highly suggested.

· Post Staff Reduction

On some level you will be happy when it’s over, but don’t let down too quickly.  There is still some work to be done.

· Human Resources is a resource.  No matter how prepared we are, the terminated employees will have questions and/or need things.  Your HR staff needs to be well prepared and available to assist as needed with benefit, paycheck and 401(k) questions, etc.  Human Resources should be brought into the loop as soon as possible so they have time to prepare. 

· Company-wide Meeting.  Immediately following the termination meetings, you should have an all-company meeting.  It is important to tell the remaining employees what has happened and why.  It is human instinct for each person to wonder what will happen to him or her personally, so it is important that you address this issue.  You want to put people’s minds at ease.  Some may have questions that you can discuss during the meeting, but also let people know that you are available for private one-on-one meetings.   Employees will want to hear and believe that you treated the terminated employees fairly, and again, with compassion and respect.

Although we hope a Reduction in Force is not in your plans, being prepared with checklists, templates, and planning can go a long way toward reducing the stress, anxiety, and maybe even the liability associated with a Reduction in Force.  If you need further assistance on this or any other Human Resource issue, call on Personnel Management Systems.

Personnel(ly) Speaking is a monthly comment on HR issues of importance.  It is intended to provide general information and must not be construed as legal advice.  Reproductions are allowed as long as credit for this information is given to PMSI.  We welcome your comments, questions, and concerns.  © PERSONNEL MANAGEMENT SYSTEMS, INC., Corporate Office (425) 576-1900, Colorado Office (720) 497-0200, www.hrpmsi.com.