Subscribe to The COBRA Advisor newsletter for fresh HR insights, law updates, and more.
If history has taught us anything about global economics, its that financial trends are often repeated. Every so often the US will experience an economic downturn, or as it’s better known, a recession.
. In recent history there were recessions in 1980–1982, 1990–1991, 2001, and most recently the Great Recession of 2008, which showcased the worst financial crisis in the United States since the 1929 Depression. If the past is any indicator, recessions usually happen every 10 years or so, give or take a couple years. For that reason, economic experts are not trying to determine if the US will experience another recession, but rather when it will. In October of 2019, experts at Bloomberg estimated that there’s a 26% chance of a recession happening in 2020, which is higher than the probability they placed on 2019 the year prior. All that being said, whether it happens this year, next year, or in five years, the US is almost certainly due for another recession in the foreseeable future and every company and their HR personnel needs to be prepared for it.
Here are some proactive steps that human resource professionals can take now to ensure that they are better prepared when the next recession does hit – especially if layoffs and terminations are a possibility.
As with anything in life and in business, the better prepared you are for something, the better chance you have of overcoming it. That is why your company should be having real discussions about how a recession would affect your firm and what can be done to weather the storm. Perhaps the most obvious preparation a company can do is to strategize what their essential needs are and how they can reduce spending in a pinch. Considering that we are currently experiencing the second longest recorded economic expansion since the last recession ended in June 2009, companies should be operating as if a recession could happen any day. That means taking a more long-term approach to reducing expenses and putting together a priority list as soon as possible. That are almost always expenses that can be cut before people. Take a look at programs and benefits, pay practices, and outsourced services such as office cleaners that could be eliminated without hindering your business.
After preparations for reducing non-workforce expenses have been made, companies need to prepare for the worst – which means not only discussing the possibility and ramifications of layoffs, but also developing a retention plan for certain key positions that the company can’t afford to lose. An important lesson that many companies learned from the last recession is that there was such a strong focus on identifying the workers or positions that could be eliminated to save costs, there was an obliviousness to the flight risk of their best talent. Therefore, when prepping a recession plan, companies should not only identify the positions that could be cut, but also identify the people they cannot afford to lose.
Avoid Common Downsizing Mistakes
As tough as it may be, it’s never to early to have discussions about the possibility of downsizing in an economic recession. It’s imperative that when layoffs are eminent, employers have a clear-cut, non-discriminatory reasoning in making the decisions that they do. The criteria must be consistent and fairly applied across the board. In the wake of the 2008 recession labor courts saw a number of age discrimination cases as a result of mass layoffs. Furthermore, employee personnel files should be updated or maintained. If you have not conducted annual reviews or have failed to document employee discipline or performance issues, then you run the risk of playing favorites based on any number of protected characteristics (e.g. race, age, gender, etc.). In other words, keep your company’s employee personnel files up to date so you can easily demonstrate that you had a legitimate reason for staffing decisions.
Also, for employers with 100 or more employees, a written Worker Adjustment and Retraining Notification Act (WARN) notice must be distributed at least 60 calendar days in advance of a mass layoff or plant closing affecting 50 or more employees at a single site of employment.
Prepare or Update Your Employee Handbook
If your employee handbook hasn’t been updated in recent years, or if your company doesn’t even have an employee handbook, now is the time to right that ship. In the years that have passed since the last recession there have been a number of important legal developments in employment law and practices. If your employee handbook doesn’t have update-to-date policies and guidelines it could leave your company exposed in litigation. For example, your handbook should have a well-articulated sexual harassment policy that has guidelines to prevent and promptly correct any harassment conduct to avoid liability from a plaintiff. When terminations and layoffs occur, litigation and lawsuits from former employees towards the employer naturally tend to increase and there’s few things the plaintiff’s attorney will look to first then an inadequate employee handbook.
Ensure Operative COBRA or State Continuation Procedures Are in Place
As formerly mentioned, when a recession hits and there is an increase in terminations and layoffs throughout the country, companies are at a higher risk of seeing lawsuits filed against them from employees who were let go. The last thing an organization needs is litigation or fines stemming from noncompliance of COBRA or State Continuation laws. In recent years there’s been an increase in COBRA related lawsuits that have hit the court circuit and when the economy is down and times are tough, one could only expect that trend to continue upward. For any business that goes through layoffs or terminations in the wake of a recession, it’s imperative that when it comes to COBRA, they make sure to dot their i’s and cross their t’s. There are so many different ways a company could be found noncompliant of COBRA, so whether they administer COBRA in-house or outsource it to a COBRA vendor, they better be certain that the procedures in place are of best practice.
To get a quote on COBRA administration services, contact CobraHelp today. Our experts can help get your COBRA items setup properly, so you don't have to worry.