Layoff Strategies

The tension in retail is palpable. Word on the streets, in the board-rooms and at store level is that cash register rings will continue to be spare in the coming months. And, so, retailers are left wondering whether temporary layoffs are in order, or is it time to make more permanent work-force reductions?

Whether labor cuts are temporary or for the long haul, and whether they’re en masse reductions or spotty layoffs, legal experts warn that precautions must be taken. Chain Store Age talked with labor and employment attorney Wendy Lane, with the Los Angeles law firm of Rutter Hobbs & Davidoff, about the risks that retailers face when letting staff members go, and ways to avoid a post-termination flurry of lawsuits.

“While there are greater risks for larger retail chains because plaintiff lawyers perceive them as having deeper pockets, in reality the risk of a lawsuit exists for any employer that lets people go,” said Lane. “And then there’s the risk of whether the lawsuit is going to impact them.” A retailer like Wal-Mart, she said, is going to ride the legal waves with greater ease than a mom-and-pop store. “But at the same time,” she added, “a plaintiff lawyer isn’t going to be as eager to invest a lot of time pursuing a mom-and-pop because it is not perceived as having as many assets to go after in the first place.”

Lane offered five tips—for retailers of all sizes—toward avoiding lawsuits amid layoffs and other adverse employment actions:

• Provide outplacement services. Employers can go a long way toward increasing good will with just-released employees by offering to help them find alternative work, said Lane. Providing some type of outplacement assistance can keep things amicable among former employees and minimize the risk of future litigation.

• Know the law when it comes to mass layoffs. According to Lane, many employers aren’t familiar with the federal Worker Adjustment and Retraining Notification Act (WARN), which requires covered employers to give 60 days advance notice before ordering a plant closing or mass layoff that will affect a substantial number of workers. Covered employers generally include those with at least 100 full-time employees. There are severe monetary sanctions for failing to comply with the requirements of WARN.

• Prevent discriminatory layoffs. It is important to review decisions about who will be laid off, and who will be retained, to avoid claims of discrimination in the layoff selection process. This includes a review of the impact of the layoff on employees in certain age, gender, racial, ethnic and other protected categories, as well as making sure that the company has a cogent business justification for its determinations as to who will be included in the layoff, and who will not.

• Analyze potential for retaliation and other claims. A careful review by your human-resources department and legal counsel will help to ensure that any decision to lay off staff will be supported by legitimate business reasons, closing the door on potential lawsuits stemming from claims of retaliation. There is also a risk with a layoff that the employees will be prompted to pursue other claims such as class actions for wage and hour violations seeking, for example, payment of unpaid overtime or compensation for meal and rest-period violations.

• Review specific requirements for agreements involving older workers. The federal Older Workers’ Benefit Protection Act places certain important restrictions on separation agreements or severance packages involving employees who are 40 or more years old, including those involved in group layoffs (defined broadly to include layoffs of two or more employees at one time). To ensure that a layoff does not violate this act, employers should consult with an employment-law attorney to make sure they have the proper language for any agreements with laid-off employees over 40.

“The time to consult an employment attorney isn’t after you’re sued,” said Lane. “The best advice I could give any retailer is not to make a move without consulting counsel.”