Planning and Managing Layoffs During the COVID-19 Pandemic

As CEO of a company impacted by the COVID-19 pandemic, you may have to make the painful decision of downsizing your personnel.  What follows are considerations in both the process of planning for a layoff and how to actually conduct the layoff.

Considerations When Planning a Layoff

Consider a furlough (a leave of absence).  This gives the company time to stabilize finances and to re-open furloughed positions.  Additionally, it provides impacted employees ample time to find new jobs while dramatically reducing the costs to the employer.  Finally, the impacted employee gains the benefit of the optics of being employed while hunting for another job and get continued benefits.

When planning a furlough, keep the impacted employees’ health benefit plans in mind.  Most employees’ health benefit plans end on the last day of the month. Thus, consider designating the last day of employment for impacted employees to be the first day of the next month; this would provide impacted employees with an additional 30 days of health benefits.

It is important to be consistent with the company’s severance policy.  Additionally, a severance amount based on tenure is preferable to basing severance on seniority.  Conduct all layoffs at one time.  Furthermore, multiple rounds of layoffs demoralize those that remain and erode trust and confidence in the CEO.

The date of notification of layoff generally should be the last day that the employee has access to workplace resources (office, laptop, email, badge, etc.).  However, it is reasonable to allow employees in certain roles or seniority levels continued access for professional or business reasons.  However, when making this decision, consider the company’s culture, roles being impacted, maturity of the workforce, level of comfort with the impacted employees having access to systems, and legal implications.

Make sure to be clear that the company still owns any property being used by an employee working remotely.  Issue a communication in writing setting forth which property belongs to the company.  Require that the property be returned at a specific, future date (via mail with postage provided by the company or by drop-off at the end of a shelter-in-place).  Emphasize that a laptop may not be used by the employee after notification of layoff.  Depending on the company’s IT policy, transferring ownership of the laptop may be included as a part of the severance payment. Consider the financial, security, and IP risks of this approach.

Ensure that layoff decisions and processes are approved by the board with counsel present (whether “present” means physically at the meeting or remotely).  Make sure to go through all legal considerations concerning who and how you layoff. Examples include: 1) Individuals on visas; 2) Adverse impact reporting; 3) California and Federal Worker Adjustment and Retraining Notification Act (WARN); 4) Required forms or documentation from your state’s unemployment office; 5) Releases in exchange for severance pay (assuming the separation is permanent).  Finally, confidentiality throughout this process is of the utmost importance.  Bring the communication leader on board at the end of the process to help draft and prepare internal communications for all employees as well as potential press inquiries.

 

Considerations as Layoffs are Conducted

As the CEO, own the communications regarding the layoffs and take responsibility for what is happening.  As it pertains to layoff notifications, do not issue too many and be as private as possible.  If the company is large, leadership team members may be responsible for some of the notifications; thus, it is important to ensure that they are trained and educated to conduct layoffs in a compassionate and empathetic manner.

As soon as notifications are complete, communicate to the entire company directly so they know notifications are complete.  The communication should be previously prepared.  Even though the communication is meant for the employees who remain, assume this communication will be read by impacted employees and the general public.  Explain the change, the reasons for the change, and the appreciation of the outgoing employees’ contributions.  The communication should also announce an all-hands meeting ASAP (either later the same day or early the next day) so the go-forward team has an opportunity to hear from you.

There are several considerations to take into account when laying off an employee.  The communication with the impacted employee should include at least two representatives of the company, one of whom is a trained HR professional.  If the layoff is conducted remotely, do not provide an invitation to the remote meeting with the HR professional; it’s not subtle.  Instead, send a second and subsequent invitation to the HR professional to join the meeting.  If layoffs are conducted in an office, ensure that any room calendar showing all of the meetings is out of view.  Do not reuse a Zoom or WebEx personal meeting room in back-to-back meetings; create new meeting rooms for each conversation.  Prepare a script, rehearse that script, and do not deviate from that script.  Less is more in these situations, so avoid small talk with whomever is joining the call.  You will likely have to communicate the notification twice because many persons quickly enter a state of shock or dismay.  Make sure the room you utilize is private and quiet where there will be no distractions.  Finally, have an electronic document package with all layoff and severance related materials at the ready to either send during the call or immediately after the call.

 

Steven J. Enwright is an attorney and partner at Lippitt O’Keefe, PLLC in Birmingham, MI. Steve advises clients in a wide variety of industries on business matters including general corporate counseling, mergers and acquisitions, start-up counseling, venture capital, corporate finance, technology licensing, and a variety of contract law matters.  Contact Steve at senwright@lippittokeefe.com