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Mike Benbow, Business Editor benbow@heraldnet.com

Issuing pink slips can have legal implications

By Joyce Rosenberg

It's something small- business owners dread: having to tell employees they're being laid off.

It's inescapable in a weak economy, or as a company changes the way it does business, that some workers must be let go. There's probably no way for a company owner to blunt the pain, but being honest, direct and showing some concern when breaking the news may help the employees and the co-workers they leave behind as they recover from the blow.

Before you meet with a staffer you plan to lay off, you should carefully plan what you're going to do and say. First, you need to be aware of possible legal complications.

"You should always contact an attorney," said Leigh Branham, owner of Keeping The People Inc., an Overland Park, Kan., human resources consulting firm. A lawyer will help you look out for pitfalls that could land you in litigation -- for example, if you intend to lay someone off right before the date when they would be vested for retirement benefits.

Bob Burbidge, founder of Genesis Consolidated Services Inc., a Burlington, Mass.-based provider of human resources outsourcing, warns that if you lay off a worker who is in a class protected by labor laws -- such as minorities, women, the disabled and people older than age 40 -- but you decide to fill the job soon after with someone else, you could be opening yourself up to a lawsuit for discrimination.

You should also check the calendar for some humane reasons, so you're not giving staffers the bad news or terminating them on a birthday or the anniversary of when they were hired.

Branham advises laying off workers on a Monday or a Tuesday, and definitely not on a Friday. It is simply kinder and more compassionate not to do it right before the weekend.

"If you do it on Friday, people will stew in their own poisons over the weekend, without anyone to counsel them on how to handle it," Branham said. On the other hand, if they get the news early in the week, they can start meeting with outplacement counselors, if the company is providing this service, or otherwise get some help in moving forward.

HR professionals disagree over whether a laid-off worker should be asked to leave immediately or be given time to wind up their business affairs. If the worker is angry, an owner should be concerned about the impact on fellow employees or customers. They also should consider whether their computers and other systems might be compromised.

Hurtful as the news is going to be, it should be delivered in a straightforward manner.

"You need to explain to an individual the reasons why -- if the company has financial hardship, because they lost some big client," said Patty Hilger, vice president of human resources and operations for Genesis. "You have to be really direct. I've sat in some of these meetings where the business owner wants to be so careful. At the end, the employee didn't know they didn't have a job."

At the same time, "you want to treat people as you want to be treated," Hilger said. "You want to be respectful and treat them with dignity."

Branham said, "You don't want them to go away feeling totally worthless. You hired them, recognized they had strengths. Acknowledge them when they go."

Always keep the meeting private, and try to have another manager with you as you deliver the news. Never, ever do it by e-mail.

HR professionals say you should never tell an employee they're being laid off if they really should be fired for cause. For one thing, you can end up paying for unemployment benefits. Second, if the worker is in a protected class and doesn't understand that he or she was fired, you could find yourself being sued for discrimination if you replace them.

If you can't afford outplacement services, you might refer a staffer to community services that will help them find another job. Consider offering a written recommendation that at the very least notes they were let go for reasons beyond their control.

And you should consider some kind of severance package -- the paycheck laid-off staffers get Friday shouldn't be their last. One reason for this is the highly negative impact on the rest of the staff if they find out you sent someone away without any kind of severance.

"It's a small investment in some good will," Hilger said.

Severance aside, treating a laid-off staffer well will help morale -- and in turn, productivity -- among your remaining employees. Remember that what you say to this staffer will be repeated over and over to co-workers, and they'll react as well.

Owners should "treat them (departing workers) with every modicum of respect that they can muster," Burbidge said. "It will go a long way in the healing process with those folks who, in many cases, are losing their best friend."

Meanwhile, the rest of your staff will be worrying about their own jobs.

"You need to say whatever you can to reassure people. You can't always do that -- you don't know that someone else might have to be laid off, too," Branham said.

And talk to them as soon as possible after you've met with a departing staffer, and "not have the affected employee communicate what happened," Hilger said.

Joyce Rosenberg writes about small-business issues for the Associated Press.