DOs & DON'Ts of Hotel Layoffs

By: Mark D. Downey
Hospitality & Mixed-Use Leader
December 2009

Even with many experts saying the recession is waning, layoffs continue. Many in the leisure and hospitality industry in particular expect to see layoffs continue, if not pick up, in the coming months. With jobs being scarce, employers in the leisure and hospitality industry need to recognize that desperate former employees may resort to the adage "with desperate times come desperate measures."

Many people are living paycheck to paycheck and with the limited availability of jobs, there may not be a more desperate time than when a person is laid off. Far too often the desperate measure is the filing of an employment related lawsuit.

The good news is employers can take steps to lower the chances of being sued and limit their exposure if a lawsuit is filed when a layoff is necessary. Hotel owners/operators need to not only plan the layoff to (a) avoid treating certain groups in a discriminatory manner and (b) avoid a disparate impact on a protected classification of employees, but they must also keep a constant eye on the business necessity for the action they are taking. Keeping in mind the impact the decision will have on not only the employees being let go, but also the ones that remain, will go a long way in keeping the hotel owner/operator out of court and limit their exposure if they end up there.

Make a Plan
Establishing a plan and reviewing the impact of the workforce reduction should be the starting point of any layoff process. The plan should enumerate clear business reasons for the action.  Those business reasons should be further analyzed to ensure they do not have a tendency to bias any particular group of people who share a protected characteristic like race, gender, age (40 and over), etc., directly or by effect. An action that either directly discriminates against a particular group or has the effect of discriminating can expose the hotel owner/operator to liability.

In addition to not being discriminatory in design or effect, the reason for action needs to be directly related to business needs that can be articulated. For instance, a layoff as a measure to reduce hotel operating costs can be based on the decision to cut back on certain services. Alternatively, a decision to rearrange work schedules that reduces the number of hotel employees needed in a particular area so the hotel can realize a cost savings may also be an appropriate business reason. No matter what the reason is, however, it must be based on the hotel business and must be done with a real intent to achieve the stated business goal.

Review the Other Issues
Once the reason for the reduction is established and the individuals subject to the layoff are identified, the hotel owner/operator needs to ensure no other impediments such as collective bargaining agreements or employment contracts prevent the employer from proceeding. The employer should further review the effect of the layoff to determine if either the federal or state form of the Worker Adjustment Retraining Notification (WARN) Act applies. Each individual subject to layoff should also be looked at individually to determine if any candidates come within the protections of anti-retaliation laws (i.e., did they make or participate in a complaint or workplace investigation).

Hotel owners/operators that have employees outside of Texas that are being impacted by the layoff should be particularly careful to ensure they are complying with the employment laws in those other states. It is easy to forget the relatively employer friendly laws of Texas don't apply everywhere, even if the hotel company has its headquarters in Texas.

Establishing the Candidates
Having overcome these initial hurdles, the hotel owner/operator then needs to determine how individuals within the larger pool of candidates should be chosen for the reduction, assuming the employer is not completely eliminating the function altogether and all the employees in a particular group are to be let go. Again, the hotel owner/operator needs to be sure to choose a methodology that does not reflect a bias toward a particular protected classification of employee and accomplishes the stated business need.

The hotel owner/operator should ask itself whether a particular skill set is needed that is only possessed by some of the candidates. Are there members of the group that are underperforming? Are there other distinguishing factors among the candidates that business needs tend to support a decision whether to retain or release those individuals?

Carrying Out the Plan
Once this specific criterion is established, the hotel owner/operator then needs to plan how the decision is going to be presented to the employees. In this planning, the owner/operator needs to be cognizant of the effect the decision will have on not only the people being let go, but also on the people staying.

For those being let go, the hotel owner/operator, if at all possible, will be well served in giving those individuals some severance pay. The significant benefit of severance pay is that the owner/operator may be in a position to secure a release for the employee in exchange for the additional pay. In crafting the release, however, hotel owners/operators should secure the advice of counsel. The Equal Employment Opportunity Commission (EEOC) and other employment agencies have all indicated an increased scrutiny of employment termination releases to ensure, among other things, that the releases are knowing and voluntary.

Hotel owners/operators need to further understand that the individuals that stay are also impacted by the decision. These employees are seeing their friends and co-workers go through a difficult time. The remaining employees will now also be called upon to take up the work of those that left, without any increase in their pay or benefits. Consequently, the layoff decisions will have an immediate and lasting impact on morale and will create a work environment with an inherent level of fear and concern about management and the viability of the company. Failure to address these issues is a certain recipe for trouble as a reduced and unmotivated workforce may further hamper the recovery of the business.

In Conclusion
While there is no foolproof way to keep from being sued, hotel owners/operators can, with planning and deliberate consideration, limit the chance that an employment related a lawsuit will be filed, or at least minimize the impact a claim will have on their business.