If you are a business owner in New York right now, you might face some tough decisions, which may necessitate layoffs. One of the most painful decisions you can make is to lay off your staff.
Laying off employees is not only emotionally challenging but also legally complex. You need to comply with federal and state laws to avoid potential lawsuits.
Plan ahead
Before you decide to lay off any employees, you need to have a clear and valid reason for doing so. You cannot lay off employees based on their race, color, religion, sex, national origin, pregnancy, age, disability or any other protected characteristic. You also cannot lay off employees who have reported any illegal or unethical activities within your company (whistleblowers).
Plan ahead and determine how many employees you need to lay off, which positions or departments will be affected and what criteria you will use to select the employees. You also need to consider the impact of the layoffs on your remaining staff and your business operations.
For example, if you have more than 100 employees and plan to lay off at least 50 of them within a 30-day period, you need to comply with the federal Worker Adjustment and Retraining Notification Act. The WARN Act requires you to provide at least 60 days written notice to your affected employees, their union representatives (if any), and the state and local government agencies.
Some states, such as New York, have their own mini-WARN laws that impose additional and different requirements.
Communicate with your employees
Once you have finalized your layoff plan, you need to communicate with your employees. You should inform them about the reasons for the layoffs, the criteria for selecting the affected employees, the timeline and process for the layoffs and the benefits and resources available to them.
Provide severance pay and benefits
Depending on your company policy and employment contracts, you may be required or expected to provide severance pay and benefits to your laid-off employees. Benefits may include health insurance coverage (COBRA or otherwise), retirement plan contributions, stock options, outplacement services or other perks.
Prepare a written severance agreement that outlines the terms and conditions of the severance package, such as the amount and timing of the payments, the release of claims against your company, the confidentiality clause and the non-disparagement clause.
Present the severance agreement to your laid-off employees during the termination meeting and give them enough time to review it before signing it. You should also explain the tax implications of severance pay and benefits and advise them to consult with their own lawyer or financial advisor if they have any questions.