Five Steps You Can Take to Avoid Layoff Liability

While many are now talking about recovery, recession is still very much on people’s minds these days and some employers are planning to reduce their workforce. The last thing any business owner wants to do is to lay off employees, but you need to be prepared to deal with the negative reactions a layoff can engender both within your company and in the community.

As well as playing havoc with employee morale, there are other problems caused by layoffs: According to research by the private nonprofit mutual insurance company Louisiana Workers’ Compensation Corporation, workers’ compensation claims may increase by as much as 50% during layoffs.

If you must lay off employees, how can you avoid post-layoff claims and protect your experience modification factor? Here are five steps you can take to avoid potential workers’ compensation claims during times of layoffs or restructuring.

Step 1

Ask your workers’ compensation and employment practices carriers to help you design and implement a layoff strategy to protect your organization. But don’t rely solely on your carriers. Consider hiring a consultant with expertise in this area. Even just a few workers’ compensation claims can devastate your company’s loss history.

Step 2

Conduct exit interviews with each employee who will be laid off or terminated, and ask at least one company executive and a human resources consultant to attend the interview. This should be treated like a normal exit interview in which the employee is asked for input on items that will help ease the transition as well as for feedback on improving the corporate culture.

Use a checklist to ensure that you cover the same questions with all employees. If the employee raises concerns, be sure to answer his or her questions and write down comments made by the employee and the company representative. Document the interview; you may want to ask the employee to sign the checklist receipt so it can be included in his or her personnel file.

Step 3

Think twice before you ask an employee to sign a waiver stating he or she is not injured at the time of layoff, as some experts recommend. Waivers rarely work as intended, and asking laid-off employees for waivers may damage your company’s goodwill in the community. Ask for advice from legal counsel before asking your workers to sign waivers.

Step 4

If your plant is closing, it likely will generate publicity; be prepared for the media to closely scrutinize your handling of the situation. Keep the closure as transparent as possible, and hire a media consultant ahead of the announcement if you anticipate unwanted media attention.

Step 5

Be prepared for some laid-off employees to file workers’ compensation claims after they are terminated. Ensure that your managers and your insurance carriers thoroughly investigate any incidents that occur.

If you must reduce the number of employees, it is critical that you empathize with the feelings and stress that accompany a layoff. Treat employees with the utmost respect, but also ensure that your organization is protected during the process.