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The Lowdown on Layoffs

In market areas that have softened some, associations are reducing costs, which for some means staff cuts.

Even though your largest operating expense—staff—may seem like the best place to start trimming, there are many strategies for cutting your budget before turning to layoffs.

Also, know that you can downsize your payroll and keep all of your employees by instituting creative staffing solutions, such as four-day workweeks, job sharing and part-time positions, or even unpaid vacations for months at a time. You may be surprised by how many staffers would like to work less or take six months to travel or pursue an educational opportunity (knowing their job would still be there after they returned from leave). In addition, when a staff person resigns voluntarily, determine whether you can eliminate his or her position by delegating duties.

Should you find yourself in the unenviable position of handing out the proverbial pink slips, here are some guidelines to help you through the process.

Develop Criteria for Termination

Define termination criteria up front to limit your liability regarding age and other types of discrimination. For example, will you consider job functions, seniority, poor performance, or a combination thereof? If you decide to lay off the poorest performers, be sure to base your decisions on current documentation of the employee’s performance. Ultimately, the decision should rest with the AE and his or her senior staff, not elected leaders.
Before selecting employees to lay off, review your list of candidates to determine whether there is disparate impact. For example, will more minorities be impacted than nonminorities? Does your list consist of mostly employees who are age 40 or older? If so, ensure that you could justify to a court that your decisions were based on business necessity, rather than race or age.

Determine Benefits

Identify what type of benefits you will provide to terminated employees, such as severance, outplacement assistance, or continuation of medical coverage. Check your retirement plan and health insurance coverage provisions to determine what type of benefit continuation is allowed and for how long.

Use Legal Counsel

Prior to any terminations, seek outside counsel that specializes in employee relations—in particular, reductions in force. Your lawyer can help you assess whether your criteria are valid, determine whether your termination selections may disparate impact, and develop the proper employment releases.

Get an Employment Release Form

Your association attorney is your best resource for knowing your state employment laws and developing your employee release. At a minimum, the release informs the employee of the financial considerations he or she will receive, confirms that the employee will not disclose proprietary association information, and identifies what type of benefits you will provide and when they will end. Most important, a valid release can significantly reduce claims of discrimination. If the terminated employee is age 40 or older, the release must also comply with the provisions of the Older Workers Benefit Protection Act (more info at Keep in mind that a valid release does not preclude an employee from filing a lawsuit, for which an employer will incur attorneys’ fees even if the case is dismissed.

Be Honest, Consistent, and Compassionate

The best thing you can do for the employees affected is to provide them with all the information they need to move forward. Although you don’t want to be inconsiderate, try to be as brief as possible. Before meeting with these employees, develop a script or checklist of items so you can ensure that each employee receives the same information. For example, you can tell them the reason for the layoff and what benefits you will provide. Check your state’s unemployment compensation laws to inform your employees when they will be eligible to file for benefits.

Let the employee know what your policy is on reference checks. Typically, employers will verify only titles and dates of employment. Salary information should be disclosed only if you receive signed authorization from the former employee to release such information.

Finally, you’ll need to obtain any company property in the employee’s possession. Regardless of your feelings toward an employee, resist the temptation to promise to rehire when conditions permit.

What Do I Tell My Staff after the Layoffs?

Open communication with the remaining staff is critical not only to your association’s success, but also to its reputation. Inform them that every effort will be made to continue operations at current capacity. Share with everyone your operational plan, including other reductions that were made, expenses that were saved, etc., so they can understand that every effort was made to save their jobs.

Also, should you decide to create new positions soon after the layoffs, be sure that they are substantially different from the positions you recently eliminated. Otherwise, former employees may think that there were discriminatory, rather than business, reasons for their termination.

Although reductions in force can be very difficult, they can be less painful for you, your laid-off employees, and your remaining staff if planned, executed, and communicated properly.

Other Ways to Save on Staff Expenses

Check your retirement plan provisions -(contributions to employees’ 401(K), SEP, -pension plans). Are they written with the -option to reduce employer contributions due to financial hardship? If not, this is one pro-vision you might want to add. Contact your legal counsel to prepare the proper documentation and to ensure that the plan documents are filed with the IRS. Certain time frames must be met for plan amendments to be filed properly. Associations may also consider introducing or increasing employee contributions
to their insurance plans, such as copays, deductibles, or out-of-pocket limits.

Donna Garcia is director of Human Resource Services for the National Association of Realtors® in Chicago. She can be reached at 312/329-8311 or

Be sure to submit your comments, suggestions, and questions for future column topics to

This column is not intended to provide legal advice. Contact your association counsel for information related to employment issues.The

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