Fair, Consistent Staff Layoffs

According to the February 2009 Newsday article “Layoffs Take a Toll, Even on Survivors”, not only do laid-off employees suffer from staff reductions, but survivors suffer as well. The conclusion: “Layoffs clearly have emotional and practical consequences for companies and workers.”

According to the February 2009 Newsday article “Layoffs Take a Toll, Even on Survivors”, not only do laid-off employees suffer from staff reductions, but survivors suffer as well. The conclusion: “Layoffs clearly have emotional and practical consequences for companies and workers.”

Realizing the personal and organizational disruption that layoffs can wreak, TSNE MissionWorks brought more than a dozen human resource directors, executive directors and consultants together in February 2009 to look at ways to help both nonprofit employees and organizations cope with layoffs. Lyn Freundlich, TSNE’s director of human resources and administration, facilitated the candid breakfast discussion held at the NonProfit Center. Realizing the scope of the problem across the region, TSNE engaged participants at a distance via conference call technology.

The Current Situation

Participants shared the actions that they had taken to date to minimize or avoid layoffs. To address falling revenues, one nonprofit instituted an across the board “graduated” pay cut – with those earning the most taking the biggest percentage pay decrease. Others said that their organization had furloughed staff, cutting their time by 10 or 20 percent.

But while everyone in the room and on the telephone realized that the current financial environment is precarious at best, the participants acknowledged that they are much more worried about large budget deficits in 2010 and the need for large staff cuts at that time.

“While I had intended to spend half of our time discussing what to do before layoffs are imminent and half on the actual layoff process,” explained Freundlich, “I realized that we needed to focus on preparing now for layoffs.”

Supporting Personnel, Supporting Organizations

According to Freundlich, it is important to look at current job descriptions and complete performance reviews with current staff. This is so nonprofits are clear about the actual work that is being done today versus the projected goals and outcomes from a year or more ago.  

This accomplishes two things. It allows the organization to look realistically at the range of its program activities and to cut or suspend programs and lay off staff with a clear focus on mission. Reviewing job descriptions and performance reviews – to understand a staff person’s actual workload and job responsibilities – also helps an organization to determine if those who might be laid off are able to move to another open position within the nonprofit.

One participant asked, “If you haven’t been doing performance reviews all along, should you do them now or wait?” She questioned whether it makes sense to take the time to do performance reviews and update job descriptions when budgets are tighter and staff members are already feeling pressed for time.

But Freundlich and others agreed that instituting this process now, instead of waiting for layoffs to be imminent, provides guidance to both employees and the organization. It helps to ensure that layoffs are not done arbitrarily, based on personal preferences or relationships. Staff reductions will be done instead with a focus on maintaining activities that help the organization continue to meet its mission.

As discussion participant Maxine Hart, the human resources director at Unitarian Universalist Service Committee, stated, “With layoffs you must ask, what are the activities that represent and preserve your core goals/objectives and your mission.”

Focus on Organizational Values

Looking at organizational values is another critical determinant for making fair, consistent personnel decisions during this economic downturn.

Freundlich discussed the need to review your organizational values and ensure that any staff layoffs align with those values – or to communicate why this situation may call for variance.

For example, if your other human resources systems suggest that the organization values and rewards seniority, layoffs should be done this way. However, if other considerations related to effectively meeting your mission during the economic downturn require a different way to implement staff layoffs, then clearly explain why this is the case to staff and other stakeholders.

Therefore, before layoffs are imminent, your stakeholders will want to clarify your organization’s values and relate them to personnel decision-making processes.

Other Key Determinants

Decision-making

In addition to looking at organizational activities, goals and values, a nonprofit organization needs to examine its decision-making processes for personnel issues and its internal communications practices. For example, when it comes to layoffs there needs to be a clear understanding about “who’s on first.”

“The board of directors has the final responsibility for budget, but not layoff decisions,” expressed participant Stephane Acel, program officer for grants and financial management at Partnership for Excellence in Jewish Education. “The executive director and senior staff should ‘own’ the final staffing decisions.”

Communications

As you strive to ensure that your layoffs are done fairly and consistently, look at your communication processes now. How do you share critical and sensitive and private information now? Will these serve you well in case of layoffs? How should an organization help employees prepare to leave the organization?

The executive director and board members have to weigh legal matters against organizational values, but it is paramount that a nonprofit organization decide how to help people say goodbye in a respectful way—including for the people staying.

More on This Topic

For more on this topic and for more in-depth information for planning and implementing staff layoffs, and sample materials to use in the layoff process, see the tip sheets and sample documents below:


Preparing for and Implementing Staff Layoffs

Human Resources Tip Sheet

Thinking about, let alone planning and implementing, staff layoffs is never an easy task. When layoffs are necessary though, there are a number of operational and administrative considerations, and pieces to put in place. The check list below is not a comprehensive tool but can be used to facilitate planning.

  • Before Layoffs Are Imminent 

    • Make sure that all job descriptions are current.
    • Complete outstanding performance reviews and ensure all employees have annual goals.
    • Identify any policies or previous ways of determining which positions are eliminated or which employees are laid off.
    • Review your severance policy* or past practices.
    • Clarify and communicate how decisions are made generally and in relation to layoffs.
    • Determine what information can be shared with staff and identify the appropriate venues for sharing (i.e., staff meetings, emails, individual conversations). 
  • Implementing Layoffs 
  • Create a plan and time line:
    • Determine which positions will be eliminated and which employees will be laid off.
    • Determine timing and any benefits or compensation to be made available to departing employees.
    • Get legal advice as needed.
    • Secure necessary board or other approval.
    • Identify any tasks or projects that need to be completed before employees leave, and create related plans.
    • Prepare necessary documentation and paperwork.
    • Communicate with individual affected employees.
    • Communicate with the full staff.
    • Communicate with constituents, the individuals or community you serve. 
  • Take care of the following administrative issues:
    • Draft a letter of termination, which 
      • tells each affected employee that his/her position is being cut
      • and explains the various details.
    • Prepare severance agreements as appropriate.
    • Determine health insurance policies. Are employees are covered through the last day of employment or the last day of the month?
    • Prepare COBRA documentation which explains that employees have the right to remain on an organization’s group health insurance plan, and information about other benefits like flexible spending plans and life insurance policies.
    • Make sure that employees receive their last pay check, including any unused, earned vacation time on their last day of employment.
    • Provide information about unemployment benefits.
  • Secure resources for departing employees like references and access to job search support organizations.
  • Secure resources for remaining staff like an employee assistance program.
  • Provide opportunities for remaining staff to talk about their feelings and concerns – through group and/or one-on-one conversations.
  • Communicate a plan or process for determining how to meet ongoing organizational goals and needs, and for determining what work will no longer be performed given fewer resources.

    *   Some nonprofits may be able to pay staff salaries for a few weeks after their employment has ended.

Sample Layoff Letter

February 3, 2009

Petunia Flower
Garden Lane
Boston, MA 02111

Dear Petunia,

This letter will confirm that your position with the Everything is Coming Up Roses Project has been eliminated due to lack of funding. As a result, your employment with ECURP will be terminated effective February 28, 2009. 

This letter outlines the conditions of your involuntary termination of employment. You will be paid any accrued vacation hours you have as of February 28th. Your group-sponsored health and dental insurance will end on March 31, 2009. Enclosed you will find information and an election form regarding COBRA which is available to you beginning April 1, 2009. All other benefits end on your last day of employment. 

Feel free to call me with any questions about insurance continuation. In addition, I have enclosed information and forms on "How to File for Unemployment Insurance Benefits” which includes important information on how to file a claim with the Division of Unemployment Assistance.  

Petunia, we are grateful for the role you have played at ECURP and the contribution you’ve made to this important work. 

Please feel free to call me with any questions. 

Sincerely,
Rainy Day, Directo

Sample Severance Agreement

This is a sample and should not be construed as constituting legal advice. Consultation with a legal professional before and in conjunction with the use of these materials is recommended.

Severance Agreement and General Release

This letter sets forth our agreement with respect to all matters that pertain to your employment and separation from employment by Your Organization (the “Company”).

  • Termination of Employment. You will cease to be employed by the Company on DATE.
  • Severance Payments.  The Company agrees to pay you X weeks of Severance Pay. This Severance Pay will be in addition to the payment of unused accrued vacation pay to which you are entitled. You may elect to receive this Severance Pay in the form of a lump sum payment, or spread over a number of weeks, less applicable deductions for taxes.
  • Benefits. The Company will continue to provide you with the current group medical and dental plans, as if you were still actively employed, while you are being paid through the Company’s payroll. After that date, you may continue receiving group medical insurance at your own expense as provided by state and federal laws. 
  • Unemployment Compensation. The Company will not oppose your receipt of unemployment compensation. Please understand, however, that it is the state’s Division of Unemployment Assistance that makes the determination whether you are eligible for benefits.
  • Reference. The Company agrees that it will provide you with a letter of reference upon request.
  • Return of Property. You will immediately return to Your Organization all documents, reports, files, memoranda, records, software, credit cards, door and file keys, computer access codes, disks and instructional manuals, and any and all other Third Sector property.
  • General Release. You agree that the consideration set forth above, which is in addition to anything of value to which you are or might otherwise be entitled, shall constitute a complete and final settlement of any and all causes of action or claims that you have had, now have or may have up to the date of this agreement including, without limitation, those arising out of or in connection with your employment and/or its termination by the Company at common law or pursuant to any federal, state, or local employment laws, statutes, public policies, orders or regulations, including without limitation, the Age Discrimination in Employment Act, Title VII of the Civil Rights Act, the Americans with Disabilities Act, and the Rehabilitation Act, Massachusetts General Laws c. 151B, all as the same may have been amended (hereinafter referred to as the “Claims”). It is expressly agreed and understood that the release contained herein is a GENERAL RELEASE. This means that you are releasing all any and all causes of action or claims, known or unknown, and whether or not arising out of or in connection with your employment and/or its termination or otherwise, and any reference to specific Claim arising out of or in connection with your employment and/or its termination is not intended to limit the release of Claims. 
  • I hereby freely and voluntarily assent to all the terms and conditions in this agreement, and sign the same as my own free act with the full intent of releasing the Released Parties (as defined above) from all claims including without limitation, the Age Discrimination In Employment Act, Title VII of the Civil Rights Act, the Americans with Disabilities Act, and the Rehabilitation Act, and Massachusetts General Laws c. 151B.


    This is a sample and should not be construed as constituting legal advice. Consultation with a legal professional before and in conjunction with the use of these materials is recommended.

    In consideration of the mutual benefits set forth above, you and the Company agree as follows:

    Except as otherwise set forth in this agreement, you hereby release, waive and discharge the Company, its parent, subsidiaries and affiliates and their respective predecessors and successors, and each of its and their respective past, present and future directors, trustees, officers, employees, representatives, attorneys, agents and assigns (the “Released Parties”), from the Claims; and you hereby agree that neither you nor any of your heirs or personal representatives will ever assert, in any form, any of the Claims. In addition, and not in limitation of the foregoing, you hereby forever release and discharge the Company from any liability or obligation to reinstate or reemploy you in any capacity. You acknowledge that you have not suffered any on-the-job injury for which you have not already filed a workers’ compensation claim and, except as expressly provided in this Agreement, you have been paid for all hours worked including overtime, if applicable, and all other wages and compensation due. You further agree not to institute any charge, complaint or lawsuit to challenge the validity of this General Release and Covenant Not To Sue or the circumstances surrounding its execution. The Claims expressly do not include actions to enforce the terms of this Agreement.

    You understand and agree that by entering into this Agreement, the Company does not admit any liability, including liability arising under state or federal law or under any agreement or contract.

    You and the Company will not disparage or malign one another, and will exercise reasonable efforts to keep the terms and provisions of this Agreement confidential. 

    This agreement is intended to comply with the Older Workers Benefit Protection Act of 1990. You acknowledge and agree that you specifically are waiving rights and claims under the Age Discrimination in Employment Act (“ADEA”), and that the waiver of rights and claims does not extend to any rights or claims arising after the date you execute this Agreement. You are advised to consult an attorney regarding the terms of this severance agreement. You are entitled to twenty-one (21) days within which to fully consider and sign this agreement, although you may do so at any time between now and DATE, this twenty-one (21) day period. Following the date that you sign this agreement, you shall have a period of seven (7) days, in which to revoke it, which you may do in writing. The terms of this agreement will not be enforceable until the expiration of this revocation period, which means that this agreement shall be effective and binding on the eighth day following the day on which you sign it. In the event that you revoke your acceptance of this agreement, the Company shall have no obligations hereunder.

    If the foregoing is acceptable to you and conforms to your understanding of our agreement, please sign and return the original to me and keep the enclosed copy of this letter for your files.

    Very truly yours,

    Executive Director


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