Many employers are considering layoffs or workforce reductions in today’s uncertain economy.  When planning a layoff, it’s crucial to be avoid discrimination in the selection of employees.  While changing business needs may justify eliminating positions, a layoff that disproportionately affects a number of employees in a protected class could subject the employer to liability for discrimination.

There is no single “right” way to select employees for a layoff, but several strategies can help reduce bias. Employers must ensure that the selection criteria do not unintentionally disproportionately impact one specific group.

Layoff Selection Strategies

1. Seniority – Many employers use a “last in, first out” approach in which the most recent hires are laid off first. This method can help to avoid age-discrimination claims, as the more recent hires are often younger than those slated to remain. However, it does not eliminate the risks of discrimination against other protected classes and may leave the employer with employees whose skills are outdated.
2. Selection Based on Employee Status – Employers may choose to eliminate positions that are part-time or held by contract or temporary employees. If the workforce is largely made up of these types of employees, the layoff may not impact full-time employees. But suppose there are not many employees in these categories. In that case, the employer may have to also include full-time employees and will have to plan the layoff using other selection criteria as well.
3. Merit-Based Selection – Some employers see layoffs as an opportunity to remove underperforming employees. In this case, managers must develop clear metrics to rate employees, ensuring that the criteria reflect the company’s future needs. Although popular, this method is the most fraught with the risk of discrimination. The company must rely on supervisors’ perceptions of employee performance. The selected employees’ performance should be reviewed, including past performance reviews and other documentation. When using this selection process, management must scrutinize supervisors’ ratings and input to ensure that it is free of bias.
4. Skills-Based Selection – A skills-based selection of employees allows employers to retain employees with a more advanced or versatile skill set. Similar to merit-based selection, the employer will focus on skills that the company will need in the future and objectively identify employees with those skills.  This method can give rise to a disproportionate impact on older workers, so again, the employer should be sure that the skill set of each employee is assessed in an unbiased way.

Combining Strategies

Employers may use a combination of these strategies to determine which employees will be laid off. Regardless of the method, reviewing the final group is essential to ensure that it does not disproportionately impact a particular group based on race, sex, ethnicity, or age. Even with no discriminatory intent, if the selected employees are predominantly from one protected group, defending against a discrimination claim could be challenging due to the disparate impact.

If AIM members have questions about planning a layoff or any other HR matter, they may call the AIM HR Helpline at 800-470-6277 or email helpline@aimnet.org.

You may also check out our Human Solutions podcast episode on handling layoffs.