Caution: Do Not Let Economic Stress Lead to Careless HR Practices

Several months ago I wrote about the stresses employees may face during an economic downturn. Little did we know then just how much more dire the economic news would become. During these bumpy economic times employees and managers may be faced with complex HR challenges that require careful management to ensure best HR practices are maintained.


An economic downturn may mean layoffs but employers can minimize their risk of wrongful termination claims with good HR practices. The first line of defense occurs when the employment relationship is established. Ideally all new business should have employees sign an agreement that protects the at-will employment status. If layoffs are on the horizon it is time to standardize termination procedures and train supervisors on protecting the at-will relationship. Supervisors must also be clear on the importance of consistency when layoffs occur. Companies should have objective, nondiscriminatory criteria when selecting employees for layoffs. If the layoff involves a worker with an actual or perceived disability employers should seek the advice of an experienced HR professional or legal counsel. The same advice applies if an employee has recently returned from a legally protected leave or if the employee has made harassment claims or reported safety violations.

Proper handling of the layoff process is the best possible way to avoid messy and costly discrimination and wrongful termination suits. It is very important to give an employee accurate information about why you are terminating their employment. Do not tell an employee you are laying them off for economic reasons if the termination is due to performance issues.

Wage & Hour Compliance

A Stanford Law Review article by John Donohue and Peter Siegelman (The Changing Nature of Employment Discrimination Litigation, 43 Stan. Law. Rev. 983 (1991)) has interesting information with regard to the relationship between the economy and employment litigation. Recessionary economies mean increased employment suits and damage awards also increase.

To avoid wage and hour compliance complaints you must carefully track hourly employee’s time and accurately track and pay overtime wages. It is also important to enforce meal and rest break requirements. Be certain exempt employees are properly classified as misclassification is one of the most significant areas of employment litigation.

Workplace Violence

Times of economic stress may lead to an increased incidence of workplace violence. Employees may be coping with financial stresses at home and more demands at work as businesses seek to maintain productivity with a reduced workforce. A proactive approach can reduce your risk of workplace violence which can take both a financial and human toll.

Employers need a zero-tolerance policy that addresses violent acts and intimidation in the workplace. The policy should be communicated to all employees and must include reporting procedures as well as disciplinary action up to an including termination as a remedy.

Risk Management

Be particularly aware of risk management practices during an economic downturn. Stressed and overworked employees are less likely to carefully follow safety protocols which can lead to an increase in workplace injuries. Another serious concern is the potential increase in workers compensation claims as employees facing potential layoffs seek to replace their income. An economic downturn is also not the time to reduce safety training and equipment as a cost cutting measure because the long term consequences can be even more expensive.

Serious economic times call for sound HR polices and practices. A commitment to maintaining good HR fundamentals even when the economy is unsteady can help protect your assets and the human capital you rely on to keep your business on track.

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