Protecting your business from staff claims while reorganizing

When your business encounters a financial hardship, sometimes drastic action is necessary to save the business. Choosing to file Chapter 11 bankruptcy to reorganize your business and address its debts could help keep the company itself operational despite its current financial issues.

Business bankruptcy filings often come with an obligation to liquidate certain assets and reduce business expenses. One way that companies might limit their liabilities could be the intentional reduction of their staff.

The last thing you need is to get tangled up in expensive employment litigation while trying to regain financial balance. If your company intends to restructure or at least reduce several major departments, you will need to take great care so that you don’t wind up incurring more financial liability in your efforts to save the company money.

Careful decisions about layoffs are critical

If downsizing or reducing staff is going to play a role in your company’s restructuring, it is of the utmost importance that you carefully comply with employment laws. Decisions about terminations should be as unbiased and fair as possible.

Depending on the kind of staff your company retains and the degree to which you have to reduce your payroll, you may have to let many people go from multiple departments or even eliminate entire teams. Ensuring that you comply with employment laws, uphold your own contracts and don’t discriminate against any group is important.

When reviewing staff performance, contractual obligations and redundancy, it’s important to document what factors lead to specific firing or layoff decisions. Being able to show why you made certain employment decisions will make it easier to defend those decisions if employees challenge them.

Can employees make claims during a reorganization?

Your company’s need to streamline its workforce does not eliminate the standard labor law protections that employees have. If a worker feels that their termination violates their rights, they could potentially take action against your company.

Claims of systemic discrimination might arise if your company lays off or fires a large number of workers from a protected group. For example, if your company selects primarily workers over the age of 40, staff from a certain racial background or employees of a certain gender for layoffs and terminations, those groups of workers might be able to claim that discrimination played a role in their termination.

It is often also wise to do a careful review of planned layoffs prior to announcing decisions to make certain that no one group is inappropriately represented in the group of terminated staff.