Don’t Be a Tweet: Tips for Workforce Restructuring to Keep Your Company Out of the Headlines
The last few years have seen employers face unprecedented impacts to their businesses including: mandated pandemic related shutdowns, labour and supply shortages, huge inflation, and social media scrutiny, to name just a few. As if that wasn’t enough, we are knocking at the door of a recession which will require employers to make significant changes to their businesses, including potentially reducing labour costs. If employers don’t want to see their company name alongside that of Meta, Twitter, Radio Shack and others in articles like this one, here are a few do’s and don’ts for economic based workplace changes.
1. Temporary Layoffs should be a tool of last resort and implemented only with written consent of the employee.
Many employers have struggled post pandemic with attracting and retaining employees, especially in industries hardest hit by the Covid-19 pandemic (think travel, hospitality, manufacturing/warehousing). In recessionary times, those industries are most likely to face economic difficulty. In pre-pandemic times, the ebb and flow in size of workforce was seen as a normal consequence of difficult economic times. Now, employers should think twice before interrupting the employment relationship because it’s much more likely that employees placed on a temporary layoff will not come back, causing loss of valuable knowledge and skills. Instead, employers should consider the other options I discuss below. If, however, those options won’t work for the company, the pandemic also reminded us that temporary layoffs are only permitted when they are expressly provided for in a written employment agreement or with the express consent of an employee. A layoff without either of these is really a constructive dismissal which triggers termination and severance liability.
2. Consider government funded workshare arrangements.
The Work-Sharing Program is a government funded program intended to help employers and employees avoid layoffs when there is a temporary decrease in the normal level of business activity, and the decrease is beyond the control of the employer. It is income support for employees eligible for Employment Insurance benefits who work a temporarily reduced work week while their employer recovers. To qualify for participation in the program, all employees must (i) be permanent employees of the company; (ii) experience a minimum 10% reduction to their normal weekly earnings; and (iii) they must agree to a reduced schedule and to share the work equally with other employees. The program must last for a minimum of 6 weeks and can last up to 26 weeks (with the possibility of extension in some circumstances).
In order to participate in the plan, there must be a voluntary written work-sharing agreement entered into between the employees (and it doesn’t have to be all employees – it can be a select group), the employer, the union (if applicable), and Service Canada, as well as an application submitted to Service Canada for consideration. The application documentation requires an employer to confirm the reduction in business activity is temporary and explain how the workshare would result in recalling workers from layoffs, or how the failure to grant the work-share would result in layoffs.
Of course, employees who are needed for the recovery of the business shouldn’t be included in the work-share program and instead should be working full-time.
By participating in a work-sharing arrangement, employers are able to retain skilled employees and avoid both termination costs and the costs of training new employees once the level of business activity picks back up. Employees also benefit by continuing to earn income (and benefits, as applicable) and receiving EI for the shared days they aren’t working.
3. Consider compensation deferral agreements.
In some instances, it is preferable (and may in fact be necessary) to not reduce headcount or hours worked at all. In such circumstances, employers may need to simply reduce costs for a period. This could mean reducing employee salaries or other compensation arrangements temporarily to allow the business to recover. However, a unilateral change in compensation or other unilateral changes to fundamental terms and conditions of employment could constitute a constructive dismissal. So, employers should not undertake those changes without the express consent of the employee. Often employees will be reluctant to agree to a permanent change in their compensation or other terms of employment, but a temporary change/reduction with a promise to “make up for it” at a defined point in time in the future (a compensation deferral agreement) is likely to give the employer the breathing room it requires while at the same time giving the employee the reassurance they need that, while they are currently making a sacrifice, they will later be made whole.
4. Don’t treat people so horribly that they have no choice but to leave.
Recent reports of Elon Musk telling employees that their continued employment was contingent upon “…. working long hours at high intensity. Only exceptional performance will constitute a passing grade,” meant that employees were essentially told, comply with this work mandate or get out. While he did offer them a 3-month severance package as compensation this would not be sufficient compensation for all affected employees. In Ontario, termination entitlements in the absence of a contract with enforceable termination language are based upon the common law and consideration is given to factors such as age, position and length of employment. Further an ultimatum to work long hours at high intensity ignores both hours of work limitations under employment standards legislation and human rights protections afforded to those who cannot comply. Asking employees to voluntarily roll up their sleeves and help the company out in tough economic times is permissible and can foster great loyalty and creativity. Imposing working conditions that are intended to or have the effect of making employees quit will likely land the company in litigation hot water (expensive hot water).
5. If you do have to terminate, don’t do it by e-mail and provide supports for the impact of the termination.
Unfortunately, if other labour cost savings mechanisms won’t work, then employee terminations may be the only option. In addition to considering the appropriate severance packages for the affected individuals, companies must also consider how to deliver the termination message. Termination from employment could be one of the most stressful events in an individual’s life and so it is essential that it be carried out in good faith, which generally means respectfully and privately.
Best practices include:
Not terminating individuals on a Friday;
Terminating at the end of a workday (and not at a time or in a place where other employees will hear or see the termination);
Terminating individually and not in a mass group meeting or simply in writing;
Terminating in person (and if not in person, at the very least in a video meeting where the employee on the receiving end can see the person who is delivering the message and can be seen so that any negative impact can be dealt with right away);
Providing termination supports whether the meeting is in person or via video– those include:
immediate access to an outplacement service provider and EAP, if available;
HR check-in after the termination has been conducted to make sure the employee is ok; and
a follow up to ensure that the employee got home ok from the workplace (if they weren’t at home when the video meeting was conducted).
Wish the employee well. Ending on a positive, respectful, note can often ease the messaging; and
Consider appropriate messaging to other employees about the termination which place. This communication should be done quickly to avoid the spread of incorrect and potentially damaging rumours.
We’ve all seen the headlines[1] about cold, impersonal terminations and the negative impact on employees together with the litigation that ensues.
***
The Bottom Line
Someone’s livelihood is being impacted by a company’s economic situation and decisions – being kind, thoughtful and respectful is in everyone’s best interests; and who knows, maybe it WILL land the company in the headlines – but for all the right reasons!
***
[1] https://www.lemonde.fr/en/pixels/article/2022/11/04/fired-by-e-mail-elon-musk-launches-a-wave-of-layoffs-at-twitter_6003001_13.html
https://www.cbc.ca/news/business/you-ve-got-bad-mail-radioshack-lays-off-400-via-e-mail-1.623422
