Employers Can Limit Negative Outcomes Tied to Cutbacks

The uncertain economy is already providing challenges for employers and many will be forced to reduce their workforce and enact other cost-cutting measures.

A combination of economy-related workplace stressors may lead to a challenging environment that includes lawsuits, demands for changes to personnel practices and even the possibility of organizational activity among employees.

The wise employer will recognize potential risks associated with cost-cutting measures and try to limit negative outcomes. Some of the issues employers will face and what they need to be aware of include:

Reductions in force - Potential reductions obligate employers to follow federal and state laws requiring advance notice of the reduction, specifically the federal Worker Adjustment and Retraining Notification Act or state “baby WARN” laws. The requirements may not be obvious, and legal advice may be necessary.

Employers should carefully determine the number of employees to be laid off and which employees will be impacted. The selection process can be seniority-based, performance-based or a combination of the two.

Employers should determine if the process seems to adversely impact one group or class of employees more than others - for example, more female employees than male employees. If so, an employer should determine whether there is a legitimate, nondiscriminatory explanation for the disparity.

Shortened workweeks - When weighing this option, an employer must consider its obligations under the Fair Labor Standards Act.

Among the potential issues to consider may be whether to reduce the weekly compensation of salaried, exempt employees.

Subject to certain narrow exceptions, if a salaried-exempt employee performs any work during a week, an employer is required to pay the employee his or her guaranteed weekly salary.

The Wage and Hour Division of the Department of Labor has issued several opinion letters stating that a bona fide workweek reduction - and a commensurate reduction in an exempt employee’s salary - is permissible if the reduction is not an attempt to evade the requirements of the Fair Labor Standards Act.

Working managers - Employers may try to do more with fewer employees. Logically, employers may consider transferring more production duties to their exempt personnel. However, too much of a good thing can lead to problems.

If the added responsibility changes the “primary function” of the employee enough, the employees exemption from overtime pay may be lost. There is some flexibility in the area, but a wise employer will review the Fair Labor Standards regulations carefully before making any such change.

Hiring policies and employment applications - With more people losing jobs, there will be more seeking employment. To help avoid discrimination claims stemming from hiring decisions, employers should review their employment applications and hiring procedures to ensure compliance with current law, including applicable equal opportunity laws.

Employee morale - When employees feel at risk, they look for assurances. It is likely that some employees may consider the possibility of union representation. The best defense to such a move is good management techniques.

Techniques can include consistent management practices, good employer-employee communication, the promotion of team concepts and, most of all, practices that promote mutual respect and trust.

A well-managed business will have a better chance to weather tough economic challenges than will employers that react without forethought.

A poorly-planned reaction to the current economic situation may, in the long run, could cost an employer more than expected.