Tis the Season for Holiday Cheer, . . . and Layoffs

Calm GoodbyeAh, the holidays!  Like most people, this is my favorite time of the year.  A time when we think of others, spend time with family and friends, and probably eat too much.  For many, it’s also a time when they might even get a decent bonus at work! What’s not to like about the holidays?  Well, layoffs, for one!

For the purposes of this post I use the term “layoffs” loosely because I include run of the mill terminations in the definition, despite the fact that layoffs typically are forced due to economic reasons or a shift in business strategy, while terminations are not.

Layoffs tend to spike at this time of the year (except in retail), probably due in large part to year end considerations, including bonuses, and planning for the New Year (See Here for a deeper look at this issue).   So, for employment lawyers like me, this is the time of year when we see an increase in demand for our services in advising businesses and employees on how to navigate layoffs.  Why some businesses don’t conduct these layoffs earlier, say in September or October, is not clear to me.

There’s no disputing that December layoffs suck worse than perhaps any other, second only to maybe a birthday layoff, or one occurring during or shortly after a medical procedure.   The person laid off will unquestionably hate the company for the rest of their life, and the morale of the remaining employees  will be rock bottom.  You can see it in their faces during that “inspirational” CEO speech at the holiday party.  It will not matter what the CEO says in his speech.  He will appear to the employees as Ebenezer Scrooge, or the Grinch.

But I digress.  Assuming that the layoffs are actually a business necessity, they simply have to be done.  So, here are a few tips to help you anticipate issues that may arise during the severance negotiations.  The list is good for both businesses and employees.  Of course, each person’s situation is different, and factors such as years of service, job function, performance history, company finances, etc., may be weighed differently from case to case.  The list is meant only to stimulate thought and discussion on items typically addressed in severance and/or separation agreements.

Of course, I do not recommend that you go it alone.  Businesses and employees should consult with experienced employment counsel prior to engaging in severance discussions.  A proper analysis of potential exposure under labor and employment laws should be done as relates to the particular employee being considered for layoff/termination, and for the big shots out there be sure to comply with Section 409A of the Internal Revenue Code.  *It should also be noted that not all layoffs or terminations result in a severance payment to the former employee.

Severance Negotiations Prep Checklist

A.  Consider Commitments Made in the Following Documents:

Hire/Promotion Documents

  • Offer Letter
  • Welcome Package
  • Employee Handbook
  • E-mails
  • Stock Option Grants, Plan Documents

Company Policies

  • Vacation Pay
  • Sick Pay
  • Personal Days
  • Bonuses
  • Commissions
  • Expenses
  • Company Equipment

B.  Anticipate Separation Agreement Language on:

  • Non-compete/Solicitation
  • Non-Disparagement
  • Non-Admission
  • Reference Letters/phone calls
  • Description of the termination

C.  Know Company Severance Precedent

  • Seniority
  • Average time between jobs
  • Lump sum
  • Insurance
  • Voicemail

DISCLAIMER: This site and any information contained herein, including this Blog entry, are intended for informational purposes only and should not be construed as legal advice. Seek competent counsel for advice on any legal matter.

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