Restructuring can reduce costs but can also lead to big expenses
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Restructuring can reduce costs but can also lead to big expenses

| May 4, 2021 | Bankruptcy

Restructuring as part of a business bankruptcy filing can be challenging and beneficial. Your company can reduce its redundancies and operating expenses without necessarily sacrificing performance.

Laying off or terminating employees with poor performance records or whose jobs overlap with someone else’s can eliminate hundreds of thousands of dollars in annual liabilities for the business, possibly paving a path to greater financial solvency.

Unfortunately, restructuring does typically mean terminating some workers, reducing how many hours they work or lowering what you pay them. Employees negatively affected by a restructuring sometimes push back with legal claims of their own. Companies should take care with how they handle layoffs and terminations in order to reduce the risk of claims that they have discriminated against certain groups of workers.

Review all major personal decisions before taking action

Imagine that you set a specific performance benchmark that will determine which workers you let go and which ones you retain. You apply this standard, which you developed to be impartial, to all of your company’s workers and terminate 10% of your workforce.

However, it turns out that a significant number of the workers you let go belong to the same racial group, age category, religion or sex. They claim that your restructuring was a thinly veiled means of implementing discriminatory employment policies that favored certain groups over others. While that may not have been your intention, the outcome, however unintentional, would seem to support those claims.

Perhaps the best way to avoid falling into this trap is to have secondary and even tertiary reviews of all employment decisions to look at the details and examine those decisions for large-scale trends. You could spot a policy that would disproportionately impact one group over others before taking actions with lasting consequences.

Employment law claims are the last thing you need when financially vulnerable

Companies trying to regain solvency or reduce their operating costs after a merger or the acquisition of another company often can’t afford litigation or major employment law claims.

If your company already needs to restructure through bankruptcy and let go of some workers, you want to take every step possible to protect the company from liability while also maximizing the benefits of your bankruptcy filing through careful planning and compliance.

 

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