As inflation and other market indicators sound potential alarms bells on an economic downturn, employers could be navigating through an uptick in human resource challenges that they haven’t dealt with recently. When companies start to lay off workers, legal work related to HR issues and compliance tends to intensify.
Recessionary times cause stress on employees, which can impact the workplace in a range of ways, from reduced productivity and conflict among employees to more difficulty finding replacement employment and an increase in the number of lawsuits.
When former employees cannot find new work, they are more inclined to sue. The unemployment rate is still relatively low, however, so it will be interesting to see how things will play out.
Below are nine areas employers should think through amid economic uncertainty.
- The importance of employment and income becomes magnified: Depleted savings, less disposable income, and higher prices come with a recession. Discharged employees may have a harder time finding replacement employment and will be more willing to file suit as a result.
- Handle RIFs with care: A reduction in force, or RIF, should be handled carefully to avoid violating laws such as WARN, or Worker Adjustment and Retraining Notification Act, or causing a disparate impact on a particular group of employees.
- Severance packages: To save costs, employers may be less willing to offer severance packages in exchange for releases of claims, but that may create greater risk for litigation.
- Revise handbooks and work rules as needed: The Biden administration has made changes to governing administrative law, including wage and hour rules, and the U.S. Supreme Court appears willing to change or modify existing law, both of which can result in changes to the legal landscape. Employers need to stay informed.
- Great Resignation = Great Reconsideration: Former employees who were part of the Great Resignation may be rethinking their decisions to leave the workforce and subsequently reapply for employment. As a result, employers could see more applications for employment from individuals in a protected age category.
- Discrimination and continued counseling: The 2009 financial crisis led to layoffs — and employers saw an influx of discrimination suits as a result. Continued counseling helps avoid future litigation over necessary layoffs.
- Independent contractors: Employers with a need to downsize their workforce may want to consider cutting some full-time positions and utilizing independent contractors on an as-needed basis. Risks associated with independent contractors should be addressed head-on to avoid disputes that lead to delays in work or to litigation.
- Mental health and stress: FMLA and the ADA may apply in instances where an employee is experiencing stress, depression, or other mental health issues because of COVID-19 and/or a recession. Employers that have had to scale back their workforce may face unique issues when an essential employee requires leave or an accommodation as a result.
- COVID-19: COVID-19 continues to be an issue in the workplace, as employers address long haul COVID, new variants and potential disability claims arising from the pandemic.
Deborah Brouwer is managing partner of management-side labor and employment law firm Nemeth Law. This piece first appeared on Nemeth Law’s website and is reprinted here with permission.