In my prior post, I wondered aloud whether there were some rough waters ahead for employers.  Apple recently announced that it would not meet it’s earnings estimates in the first quarter of 2019, in part because of soft demand from China. Other companies are expected to announce some similar issues.

Honestly, I’ve had enough conversations in the last few years with HR professionals who just haven’t lived through a major downturn.

Think about this way: For anyone who joined the workforce since 2010 or so, the era of massive layoffs in the financial and automobile sectors had just passed.

But fortunately, there are still a few of us around who remember.

So here are four things to think about:

  • Performance Reviews.   Why? Because when a downturn hits, your company will need to start a selection process as to who stays and who goes.  Inevitably, you will start looking at performance reviews to see about ranking employees.  You know what you might find? They all start looking alike. Everyone is slightly above average.   While I’m not suggesting everyone convert to a forced ranking system, your performance reviews should be honest indicators of how an employee is doing. Take a look at the ones you are doing this quarter.
  • WARN.  The Workers Adjustment and Retraining Notification Act  is one of those federal laws that you might not have even heard about. But if your company has 100 or more employees, you should. It requires that 60 days notice be given in instances of a mass layoff or plant closing. Before you go down the road of layoffs, you may have obligations to notify your workers and the government of the potential for layoffs. Be sure to comply.  Here’s a brief recap.  
  • Consider a Statistical Analysis.  I know — you didn’t like math in high school. But trust me: There is an entire profession of statistical experts available to help you figure out if the proposed layoff may have a disparate impact on a protected class of workers.  How is this done? You look at the class of workers that may be impacted by the proposed reduction in force and have an analysis done to see whether your neutral criteria may not be so neutral after all. Sometimes there are explanations for the disparate impact; but sometimes, the analysis can force employers to take a second look. Regardless, this can be an important step.  Just make sure to use an attorney to help give guidance here.
  • Understand the OWBPA.  It stands for the Older Workers Benefit Protection Act and it’s part of the federal law on age discrimination.  And if you want your employees to sign separation agreements (as I think you should) when you do your layoffs, your agreements better comply with this act.  I did a recap in 2008 that still holds up today.  

Before you have a crisis on your hands, talk internally about what the reasonable expectations for 2019 are going to be. If a possible cutback to personnel is even being discussed, now is the time to get ahead of things.

You do a blog long enough and everything comes full circle.  Back in January 2008, I took out my crystal ball and suggested that reductions in force (RIFs) and lawsuits would soon follow.

We all know what happened next. The economy crashed and discrimination claims at the EEOC peaked at their highest levels in more than 20 years.  

So here we are 11 years later.  A whole generation of HR professionals have never experienced a significant downturn.  Are we headed there again in 2019?

I’ll leave that to the economists and politicians.  Two weeks ago, the stock market was topsy-turvy. Now, we seem pre-occupied with the partial government shutdown.  And at least in Connecticut, new Governor Ned Lamont has a plan for growth, growth, growth.

But it’s worth considering whether your company is even prepared for a downturn, even if it still is many months away.

Again, we can first look to history. As I said back in 2008:

What is a reduction in force? Really, just a lawyerly way of saying “layoff”. Back in the early to mid 1990s, lots of companies went through them.  And the number of lawsuits arising from those reductions went through a major peak in 1995 or so.

But these types of lawsuits rise and fall with the economy.  When the economy is good, lawsuits go down. When it’s not so good, they go up. One reason is that when people can find another job quickly (i.e. the unemployment rate is low), then tend not to sue as much.

And even back in 2008, I noted that things might be different for employers and indeed they were.  The rise of the internet-fueled lawsuits have been a reality. Here was my prediction back then:

One more factor suggests to me that more lawsuits are on the horizon — it’s much easier for a few employees to band together than in the past. Previously, people would have to use their existing networks to find laid off employees to hear their stories (indeed, outplacement firms were a good source for employees looking to talk with other laid off workers). But now, with the rise of social networking sites, it seems only a matter of time before a group of employees will form a Facebook or MySpace page to compare experiences.  Employees from around the country can share information instantly, making it much easier to figure out if there are trends associated with the layoff that may give rise to a lawsuit.

Just as Uber or the employers in Connecticut facing class action lawsuits that one firm puts on their website have found out.

What’s an employer to do? I’ll tackle that in my next post.

In the last few months, I’ve had some inquiries from employers asking about resources for layoffs.

Yawn.

Everyone remembers the layoffs of the recession, right?

Actually no, as it turns out.

In the ten years since the last great round of layoffs, there is a big group of new managers, directors, human resource personnel, lawyers etc that have joined the workforce.  And, as it turns out, they really DON’T remember the layoffs.  Unemployment is low. “Why would I need to worry about a Reduction in Force?

The stock market’s drop yesterday should remind all of us that good times aren’t always going to last.

What’s ironic about this is that back in 2008 — when the unemployment rate was skyrocketing — programs about reductions in force were just taking off and I noted the same concerns about whether employers were sufficiently aware of the issues.

History may repeat itself. Back then, I highlighted a few items that employers had to think about:

  • The WARN Act – If you’re doing a mass layoff, you need to notice affected workers in advance and provide notices to local and state officials.
  • Separation Agreements – If you want employees to sign a separation agreement (and you probably should), you need to give employees who are terminated in a layoff 45 days to consider an agreement and provide additional background information about the layoff itself.
  • Disparate Impact Analysis – With computers, checking your layoff data to ensure that it doesn’t have a disproportionate impact on protected groups (or, if it does, a legitimate business reason why it might) remains important.

Much of this remains valuable advice today.  And for employers who don’t remember this, now would be a good time to start your refresher courses.

Layoffs may not be right around the corner. But employers that are looking ahead in their business plans for 2019, would be wise to ensure that their staff are aware of the obligations that attach if the economy turns cold.

At a CBIA seminar yesterday where I spoke, several speakers discussed the challenges that exist for companies in these economic times. One CBIA economist projected that the current recession will not bottom out in Connecticut until late summer or fall 2009.

But the times also present opportunities, as well, the speakers said. Indeed, now may be the time for companies to find and recruit terrific talent that may be available in the labor market through no fault of their own.

Indeed, an article in today’s BusinessWeek suggests that for small companies, now may be a great time to make such an investment.

Still, despite the overall gloomy forecasts, the downturn also presents hiring opportunities for small businesses. For starters, there is a huge wealth of talented applicants in search of work at the moment. "If you want to hire someone today, it is like buying a car or house," says [one economist]. "Employees are cheap, good, and readily available. Nobody is complaining about the quality of applicants. The choices you have now are much improved." … "If you are a buyer of labor, this is a buyer’s market."

The major job cuts at large corporations also translates into a boon for small business owners who have the resources to hire workers who were perhaps unattainable previously. In November, the Computing Technology Industry Assn., an information technology trade group based in Oakbrook Terrace, Ill., published a survey that showed that 85% of the 772 small- and medium-size businesses in the U.S., Canada, and Britain that it questioned planned to hire new employees within the next 12 months. And in a slight shift away from the deluge of dreary numbers, SurePayroll, the Glenview (Ill.) payroll administrator that tracks small-business hiring trends, reported in November that 214 small businesses that participated in its survey increased their hiring by 0.26% to 3.3%, year-to-date.

Of course, there is a word of caution as well.  If employers are laying off staff for "financial reasons" and then hiring new staff to fill those positions, it will have some explaining to do. On the other hand, if the company wants to shed some of its poorest performers (and tells them that their employment is terminated for performance-related reasons) and cherry-pick from the talent available, now may be a good time to do so.

Continuing an occasional series of interviews with notable locals, today we sit down (virtually) with John Madigan, President and CEO of Executive Talent Services in West Hartford, CT.   ETS offers a wide range of HR-related consulting services for organizations, from improving performance of individual key talent to developing and integrating an organizational talent management strategy.  ETS also provides a "Career Concierge" service for busy executives who want some targeted help with their career.   ETS also provides outplacement services for employees laid off as part of a reduction in force.  

John started ETS in 2007 after extensive experience in corporate HR, specifically in the insurance and financial services sector. Most recently, he served as vice president of corporate staffing for The Hartford Financial Services Group. In that role, he led executive and professional recruiting for the enterprise, including field staffing for Property Casualty and Life businesses, college relations, assessment consulting and diversity staffing.  His full bio is here

In this time of turmoil at many businesses, John was kind enough to share his insights into the current recession and its effect on human resources at local companies.  I want to thank John for taking a few minutes to respond to some questions.  Feel free to check out his website here.

1. When employers are dealing with economic stresses, what can a company like ETS offer?

An employer should consider using a company like mine when they have needs in the outplacement, executive coaching or talent management space. Relative to outplacement, they should consider us when they are thinking through a reduction in force. It’s best for us to be brought in early to explore the options of how people are notified, what process to follow, etc. Too often, companies leave this to the last minute and it’s a scramble to organize it well

A smaller company such as ours can also provide a more high-touch service, personalized in nature especially for sensitive situations and senior level people. They should consider our coaching service for executives who are newly hired and need to ramp up quickly, or those being groomed for succession roles. For consulting services, they should think of us as they consider a reorganization and need to align HR practices with the goals and needs behind the desire to reorganize.

They should also think of us when they have specific pains like their staffing process is broken and they need help making it more effective, or they are losing too many of a particular kind of employee and need help with retention strategies.

2. What trends have you seen among employers who use your services?

Employers who use our services are generally more focused on their people and value employee development. They tend to have either energy or organization around leadership development and are willing to invest in that direction (put their money where their mouths are). Most of them are larger firms but many small to mid-sized companies are equally progressive and employee friendly, or more so.

3. What issues should an employer think about BEFORE contacting an HR consultant like yourself?

They should think about what exactly are they trying to accomplish, which could be in “need” form e.g. we need to stop the mass exit of…versus we need a training class on how to motivate employees. And, if they can, they should think about what would constitute success. They should also think about the type of firm, and the people in it, who might fit their culture and style. It’s not always best to pick a big name firm with a prescribed methodology (you know, the answer in search of any problem). Often, smaller firms like mine are more flexible and can “personalize” a strategy or approach to the organization so that “stickiness” in maximized.

4. In this time of recession, is developing leadership still important for companies?

Most companies are still very focused on leadership development. They know that the quality of their leaders translates into productivity, morale and even valuation (firms are increasingly valued by Wall Street with an eye toward the quality of their leaders). And, when development dollars become scarce, they tend to get focused on or channeled toward leadership development. Developing leaders has a multiplier effect.

5. Now’s the time that many companies are thinking about annual performance reviews. Is there something that companies may want to focus on when preparing these reviews?

Annual performance reviews are often cumbersome affairs that do little to really help either side. However, their effectiveness can certainly be maximized if clear goals are set early in the process, those goals are re-evaluated and refined as business conditions change so that both parties understand what’s being committed to and its realistic given the current environment. If ongoing dialogue has occurred throughout the year, the annual review should be pretty painless and not a surprise at all. The annual review can also trigger a follow up discussion of development objectives that would enhance the employee’s performance and/or add to longer term potential.

 

The headlines this week, particularly to those in Connecticut, sound an ominous tone.  Foxwoods announces layoffs of 700. And this morning, a new government report came out showing that employers shed nearly 160,000 jobs

Where will this all lead? That’s the $1 trillion dollar question that is on everyone’s mind. But in the meantime, there are several laws and issues that employers can familiarize themselves with now to deal with whatever the economy throws at it.

  1. WARN Act – Number one is the Worker Adjustment and Retraining Notification Act. I’ve covered this before, but the key aspect of this law is that employers need to provide laid off employees with prior notice of an upcoming reduction in force. BUT, there are exceptions including for economic distress. So employers who are facing a deep credit crunch may want to look to that statute to understand their rights and obligations.
     
  2. Unemployment Rules – Employers in Connecticut who have to layoff employees need to comply with rules about providing layoff notices to employees to allow them to receive unemployment compensation from the state.  The Connecticut Department of Labor has a detailed website on the subject including a guide for employers. 
     
  3. Establishing and Developing a Legitimate Non-Discriminatory Rationale for Layoff – As I’ve indicated before, employers who layoff employees and who are subject to a lawsuit later on will need to establish a legitimate non-discriminator reason for the layoff. Is the economic downturn enough? Maybe. But employers should show how the economic downturn is affecting the business.  Are factory orders down? Are accounts receivables at unacceptable levels? Figure out the link between the downturn and business to provide the support for the decision.
     
  4. Establishing Layoff Criteria – As the Pennsylvania Labor & Employment Law Blog recently highlighted, developing layoff criteria will also be important:

…It is advisable to develop selection criteria that support the business reasons for selecting one employee over another. Unless dictated by union contract, employers have discretion in developing the selection criteria which can include factors like, seniority, relative skills, performance, and/or disciplinary record.  More than one factor may be used.

Forced Ranking Systems are sometimes utilized to rank employees against one another from the top down based on performance criteria. The subjectivity in forced ranking can be challenged as discriminatory unless uniformly and rationally applied.

5. Severance Agreements – But the best way to reduce liability for employers is to offer severance benefits in exchange for a release of claims from employees. I’ve discussed this at length before, but if you’re not familiar with the Older Worker Benefit Protection Act, now’s the time to catch up on this important federal law.