Layoffs can increase your liability

As the economy continues to contract, both large and small companies are facing layoffs. When downsizing, organizations face an increase in work-related injuries and claims alleging disparate treatment. Even though the employee who files the claim may no longer work for you, the claim will continue hurt your workers’ compensation loss history, sometimes for many years. Employment claims, which cost literally tens of thousands of dollars just to defend, will adversely affect your loss record, as well.

Facing layoffs, a proactive plan to prevent post-layoff injury reporting and avoid employment claims can help protect your company.

Here are steps you can take to minimize the risk of post-layoff claims.

1. Develop a lay-off plan before cuts are necessary. With a plan in place before you need it, you can prevent a great deal of workplace turmoil. Ensure that your plan doesn’t adversely impact protected groups—women, minorities or workers over 40. In larger operations, this simply cannot be done without expert assistance. With your broker’s help, you may be able to involve your insurance carrier in the process to help design and implement a pre-layoff process that protects your organization. The cost of developing the plan may be only a fraction of the cost of defending one employment claim.

2. Use a performance-based layoff plan with written criteria for termination. Don’t be afraid to eliminate slackers. This tells your star performers that you appreciate their hard work and loyalty. But before you make a subjective decision to terminate, be sure you base that conclusion on objective standards. Consistently reviewing and documenting performance before terminations makes it is easier to defend disparate treatment claims.

3. Train supervisors and managers who will make employment decisions. Managers should be well-versed in the termination process and know enough financial details to explain the layoffs. Clearly stating to employees why they are being terminated can help if you are later faced with an employment claim.

4. Conduct exit interviews with every employee who will be laid off or terminated. Ensure at least one company executive, and if possible a legal consultant such as a human resources consultant or attorney attends, as well. During the interview, ask that employees help you to complete and then ask them to sign a standardized checklist that includes administrative details such as key surrender. Ask on that questionnaire if the employee has suffered a workplace injury and the current status of that injury.

If non-English speaking employees work in your facilities, have forms available in other languages. While some experts recommend employees sign injury waivers, waivers rarely work as intended and could be perceived as a sign of bad faith. If your downsizing generates publicity, the way in which you handle the closure will be closely scrutinized by attorneys and the media.

5. Offer post-placement assistance such as skills assessments, resume assistance and job search help. The sweeter the severance packages the better. This includes extended help with health benefits and other goodwill efforts.

6. Act quickly, but be careful what you promise. Statements like “We’re through with the cuts” can backfire. Once the decision is made to cut jobs, do so quickly, because not matter how closely organizations guard their decisions, word will probably leak out and your workforce will be negatively impacted.

Eliminating positions is never easy, but the way you handle layoffs is critical. Treat employees with dignity and respect, not just because disgruntled employees can damage your reputation, but because it is the right thing to do. Remember that you may be faced with unwanted media attention and a barrage of plaintiff firms targeting your former employees. Be sure to empathize with employees’ feelings and stressors that accompany a layoff, but protect your organization in the process.