Dilemma of the Month: How to Lay Off an Employee

Back Q&A Mar 9, 2017 By Suzanne Lucas
We are reorganizing and will be eliminating one position. We will have to lay this person off, and I have a few questions about how to handle it: Who needs to be in the room when we tell her? How much severance should we offer? What else do I need to do?

Welcome to one of the most difficult tasks of managing other people: laying them off. Firing people for cause is difficult, but at least then you have the underlying knowledge that the employee brought this upon herself. When you lay someone off, you are yanking their income out from under them when they’ve done nothing wrong. I don’t say this to induce guilt — layoffs are sometimes necessary for a healthy business — but to emphasize the serious nature of a layoff.

Because it is so serious, you need to prepare everything properly. Let’s start with what you should do before you tell your employee.

Get legal documents together

You need to make sure all your i’s are dotted and t’s are crossed. You should hire an employment attorney to put all these documents together. This isn’t something you Google or hobble together from old documents.

Because you’re offering severance, you need what’s called a “general release.” This is essentially a document that says “in exchange for the severance you agree not to sue.” Never give severance without one. An employment lawyer needs to write this release because the language needs to be very specific: Some things can be waived and some things cannot — and the law is constantly changing.

If you’re laying off a group of people, some additional disclosures are needed so make sure you consult your attorney before every layoff. I know it’s expensive, but it’s cheaper to pay an attorney upfront than to pay an attorney to fight your lawsuit.

Get all other documents together

If the employee had health insurance through your business, she’s eligible for COBRA, which continues the insurance on her dime but through your company. Get that information ready. She’ll be eligible for unemployment, so gather information on how she can apply for unemployment. If she has a 401K loan that will become due, get that information ready. Basically, you want to do everything in your power to get her the information she needs.

Related: Dilemma of the Month: Holding Exempt Employee Accountable

In California, you have to provide a final paycheck as well — have it ready to hand to the employee. It’s not a good idea to do this via direct deposit as the last thing you want is for the deposit to go through and the termination to be canceled.

Get the severance ready

With rare exceptions, severance isn’t required by law, but you should absolutely offer it. First of all, it’s nice. Second, this gesture reduces your chances of being sued. Third, receiving a severance helps the employee move on, which is what you want. Severance varies by industry, geography and company budget. However, a good guideline is two weeks of severance per year of service, with a minimum number of weeks. My preference is 12 weeks, but four or six weeks are also common.

Get the right people in the room

There needs to be two people in addition to the employee: the direct manager and a witness. The witness needs to be either someone from human resources or another member of the management team. It should never, ever, not in a million years, be a peer of the employee.

Why do you need a witness? Because this is a traumatic experience for the employee (and often is quite traumatic for the manager), she might remember things differently than how they actually occurred. You need a witness to verify that you didn’t scream, yell or call the employee a jerk. Document how the termination went down.

How should the notification proceed?

Here are the rules for laying someone off. (I say rules, but there’s no law requiring this — but violate these rules at your own peril.)

The direct manager tells the employee:

This is not a task for the HR person or the VP or, heaven forbid, an outside consultant. The manager does the talking.

The conversation is short and direct:

Here’s a sample dialogue: “Jane, as you know, there have been some changes in the organization and as a result your position is eliminated. Today is your last day. Here is some information on your severance and other necessary things.” Don’t get into long explanations of why she was chosen or the company’s problems. Keep it straight-forward and direct. That’s actually less painful for everyone.

The employee is offered the option to gather her things and go, or come back later:

Even if the last day at work won’t be for a few weeks, she gets the rest of that day off. You don’t hang over her while she packs up her things. You trusted her this morning; trust her now.

If the employee has been a good employee, make sure you tell her you’ll provide a reference and help her network. Your goal should be to do everything in your power to help her find a new job. Never oppose unemployment, and never blame the employee for a business decision.

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