Nonprofit Layoffs and Furloughs: Do Them Right
Advice for nonprofit HR departments that need to correctly perform layoffs, furloughs, and temporary shutdowns.
Article Highlights:
Layoffs and furloughs are unpleasant for everyone: How you do it matters.
Dear Rita:
It looks like we’re going to have to lay some people off in the next couple of months. But the management team is also considering furloughs, a week’s shutdown, and other choices.
The decision about what to do won’t be made by us in HR. But we will need to carry out the unpleasant acts. How can we do these legally and nicely?
— Dreading It All
Dear Dreading It All:
My sympathies are with you and although it probably won’t help you feel better, many community nonprofits are in the same boat. And your attention to the HOW is important: how people are laid off (or hear about pay cuts, etc.) makes a big difference in how the departing staff feel and how the remaining staff can move forward in a positive way.
Each group has to assess what works best on their own particular boat, but here are some things to think about:
1. Layoffs
A first question of course is who should be laid off. While this is largely a management decision based on which positions are the most important to future financial stability, an important HR component is making sure that the layoffs don’t put the organization at risk. Check the personnel handbook for policies that address layoff and/or severance pay, and check to see whether employees marked for layoff are on any kind of protected leave (such as family or medical leave, workers’ compensation leave, or pregnancy disability leave). If possible, speak with an HR or labor law attorney about employees on protected leave.
In most community nonprofits there aren’t, for example, 15 people holding the same position of Social Worker I, with an intention to lay off 3 of these employees. In such an instance, though, it will be important to clarify whether the layoffs are being made based on seniority, on merit, or on a combination of factors. Most organizations would prefer to lay off the least meritorious individuals with the least seniority. The nonprofit should check past evaluations and documentation of performance in order to avoid discrimination claims. For most community nonprofits, however, it will be clear that a position is being eliminated, rather than an individual being selected for poor performance. In all cases, document the whys of each decision you make, perhaps with business necessity as the main theme and with merit and seniority as considerations.
A few specific tips:
- Determine whether your organization is subject to either federal or state Worker Adjustment and Retraining Notification (WARN) regulations. Generally applicable if you have 100 or more employees, and for layoffs of 50 or more employees or 1/3 of your workforce, WARN requires 60-day layoff notices and other steps.
- It’s generally better to do a deeper layoff once than to lay off a few people at a time in dribs and drabs: the staff who remain need to feel confident that they will stay on their jobs.
- Most professionals recommend that individuals finish the day or the week after hearing about being laid off, but not longer than that. It’s usually difficult for the laid off employee to feel positive about work, and others may feel awkward around them. (See Layoff Stories from Blue Avocado Readers for examples.) But it will be key to discuss how the employee’s clients or projects will be managed after his or her departure.
- Letting people know on a Friday will give them the weekend to absorb the news.
- Have a FAQ (frequently asked questions) sheet for people who will be giving layoff news, such as what references can be given, how long the employee will have access to his organizational email account, how will her clients be notified of a change in organizational contact, and so forth.
- Give layoff information face-to-face. Don’t tell the employee how hard this is on you. Give the employee a chance to ask questions. Let them know how long their insurance benefits will continue, that they will be receiving the required COBRA (option to continue their health insurance), and unemployment insurance information. Tell them what other support the organization can provide them (such as employment references, severence pay and so on). Employees should also receive most of this information in a formal letter. (We’ve posted a sample layoff letter as a guide.)
- After layoffs have been announced, managers may be tempted to retreat to their offices and look buried in work, but encourage them to circulate with the staff, ask and answer questions, and demonstrate confidence.
Temporary layoffs, furloughs, and temporary shutdowns
Nonprofits tend to consider only permanent layoffs. Sometimes short-term layoffs can be effective ways to save jobs while protecting the organization’s financial status. For example, there may be an unexpected two-month gap between the completion of one government contract and its renewal. In the past, your organization may have been able to keep paying the individuals on that contract during the gap, but this time you may need to lay them off, letting them know that if the renewal comes through they may be called back within several weeks. However, check your state laws to see if you are required to pay out all accrued vacation if you close down for a week or more. We know of at least one nonprofit charged with violating such a requirement that had to pay substantial fines and penalties before it reopened its doors two weeks later.
A furlough is specified unpaid leave, such as workweeks reduced by one day, or months reduced by two full days each. Typically employees request the days they would like to use for their furloughs. In effect, furloughs change full-time positions into slightly part-time positions for non-exempt staff.
Some furlough tips:
- Exempt employees cannot be paid for less than a full week if they have worked any day that week (remember that obscure definition of the workweek in your personnel handbook?), so furloughs don’t reduce payroll costs for exempt staff. What you can do, however, if you are furloughing exempt staff for one day per week, is to reduce their full-time salaries by 20%.
- Be clear whether employees will continue accruing vacation and receiving benefits at their full-time levels (typically yes), and whether an employee taking a furlough on a holiday will still be paid for the holiday (typically no).
- Keep in mind that some international staff on H1-B visas may need to work a certain number of hours a week to be eligible to work in the United States.
- Remind employees whose wages are being garnished or who have deductions for child support that these amounts may be affected.
Some nonprofits pick a slow week (perhaps Fourth of July week, school spring vacation, etc.) to close down. Closing for a full week allows the organization to save on both exempt and non-exempt payroll (remind exempt employees that they cannot do any work that week — even checking their work email — lest they trigger a legal requirement to pay them for the full week). Some employees may find this a relatively easy cut to accept, but for others, even a one-week closure may result in a loss of pay that is untenable. Give employees the option of using their accrued vacation pay during the shutdown or taking the week off as unpaid leave, otherwise you may be required to pay out all accrued but unused vacation.
Finally, remember that many, many nonprofits (and for-profits) are feeling the pinch. Reach out to contacts in other nonprofits to see how they’re handling things, and to identify local resources for people losing their jobs. And post a Comment below to let Blue Avocado readers know your ideas and tips.
See also:
- Sample Layoff Letter
- The Nonprofit Board’s Role in HR
- Downsizing from Employees to Independent Contractors?
You might also like:
- A Nonprofit Partnership: How One Board Member Connected Two Organizations and Boosted Both
- Innovative Leadership — Culture Doesn’t Have to Eat Strategy: Tending to Human Factors During Strategic Planning
- Insider Newsletters: An Easy Way to Keep Your Board in the Loop and Engaged
- Five Years and Growing: How One Nonprofit Built a Sustainable, Collaborative Mission
- Measure What You Value: Designing a Values-based Performance Appraisal System
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About the Author
Pamela Fyfe is an Employment Risk Manager for the Nonprofits Insurance Alliance. In her position she helps nonprofits avoid potential employment claims and reduce the possibility of future claims. Before joining the Nonprofits Insurance Alliance Group, she practiced employment law for more than 25 years — representing management in wrongful termination, discrimination and sexual harassment cases. She admits to possibly having sneaked online at work to see her first grandchild — Mara Adeline — who lives in London.
Articles on Blue Avocado do not provide legal representation or legal advice and should not be used as a substitute for advice or legal counsel. Blue Avocado provides space for the nonprofit sector to express new ideas. The opinions and views expressed in this article are solely those of the authors. They do not purport to reflect or imply the opinions or views of Blue Avocado, its publisher, or affiliated organizations. Blue Avocado, its publisher, and affiliated organizations are not liable for website visitors’ use of the content on Blue Avocado nor for visitors’ decisions about using the Blue Avocado website.
We announced the need for a layoff and asked if anyone wanted to volunteer – we offered a month of severance pay. Several people volunteered because they wanted to go back to school or travel and the one month pay was quite attractive to them. Almost all of the cutbacks, therefore were voluntary. 🙂 Elenor (elenor1@rcn.com)
Our Board also announced the need for layoffs and I know that we just don’t have enough to cover payroll. However, We’re still expected to perform as if the money will be there at the end of the month – and, it might if are fundraising efforts work. But, is this practice ethically (and legally) right?
I have the same issue–sometimes we stagger pay for our small staff so that the person who needs it the worst gets it first and others are willing to wait a day or two. This feels like walking on a tightrope sometimes and is not good for my spirit, so I have spoken honestly about this at staff meetings. Folks understand and we have been pretty transparent about the budget crunch, so there are not any surprises.
I agree with Rita’s checklist on layoffs, with one exception. I never, never, never terminate someone on a Friday and never at the end of the day. You don’t want to be sending someone home to an empty house or apartment, to be alone, perhaps. Even if you know they have family members at home, you can’t be sure they will be around or whether your employee will want to disclose this information right away. You also want them to know, if they have additional questions, they can see or call you the next day.
I generally do terminations on a Tuesday or Wednesday, and unless there is a risk of danger in keeping the person at work, I allow them to finish the week (their choice). That way they have a chance to say good-bye to co-workers and to have all of their termination questions answered before they leave the premises.
In addition, if you have multiple offices, I would not recommend calling someone to your office (if it’s in a different city from where they are located). Putting someone back on a plane or train after this conversation is the worst thing you can do. When I need to do long-distance terminations, I travel to their home turf.
Dear Poster Above,
Thank you for being such a thoughtful employer! I have had to lay staff off myself; it is unpleasant and sad to do, but sometimes necessary. I used a process very similar to what you’ve described, and that made a real difference for these employees and my relationship with them. Some of them later referred clients/donors to me, as they still had such great regard for the organization. And some I was much later able to hired back!
It is especially important, I think, to foreshadow the possibility of impending layoffs (and the reasons why) as far in advance as possible, so that folks can plan ahead, adjust their spending and start looking for a new position.
Rita,
I work as a consultant to nonprofits and a number of my clients are looking for creative ways to keep staff without blowing their budgets. This article was very inspiring, but I’m struggling to put it to use in California. I’ve been trying to find resources online about California’s employment law, but have not found much. The recent state furloughs have inspired a lot of discussion. I was particularly troubled by this article:
http://www.facebook.com/ext/share.php?sid=50988337198&h=I8-xo&u=ebCes
Do you have suggestions for where I can find more information? I searched these websites but didn’t find much:
http://www.dir.ca.gov
http://www.edd.ca.gov
Any advice you can give me would be much appreciated!
We at Public Counsel’s Community Development Project provide free legal assistance to nonprofits that serve low income clients in Los Angeles. Last year we put together a number of resources for nonprofits forced to deal with the economic crisis through lay-offs, furloughs, lease negotiation and loan negotiation. This information can be accessed through http://www.publiccounsel.org/ec/nonprofit.pdf The employment law information sheet is for California employers. Sarah Stegemoeller Senior Staff Attorney Community Development Project Public Counsel
Thank you Sarah! Jan
Can anyone tell me what is typical in terms of severance packages when a layoff occurs? My non-profit is about to let a number of people go and we would like to do as much as we can for our employees who leave, so some sort of benchmark would be helpful.
As a former employee of a large non-profit museum in a major city I was laid off on a Thursday at 4:15 and was only allowed to pack up my personal items after a lengthy and very negative (via HR) request to do so. I was told not to come back the following day. I’d worked faithfully for this institution for 30 years (been promoted 5 times!) and was pushed out the door after my ID/Security badge were taken off my neck and keys taken away. I was in shock and went back to my desk to finish up my work including my computer work and found I was locked out. I wasn’t even given the opportunity to say good by to anyone, nor was I given any kind of recognition other than shown the door. It’s been a year now and I still can’t find a job and I’m still crushed by such a cold end to a wonderful career. Being laid off in such a nasty way when you are 60 years old, and a single woman is devastating. Those comments above show me how it should have been done. My seniority was ignored; my dedication and experience ignored, and no one of all those I worked with call me or keep in touch. They are all scared because of what happened to me.
As a former employee of a large non-profit museum in a major city I was laid off on a Thursday at 4:15 and was only allowed to pack up my personal items after a lengthy and very negative (via HR) request to do so. I was told not to come back the following day. I’d worked faithfully for this institution for 30 years (been promoted 5 times!) and was pushed out the door after my ID/Security badge were taken off my neck and keys taken away. I was in shock and went back to my desk to finish up my work including my computer work and found I was locked out. I wasn’t even given the opportunity to say good by to anyone, nor was I given any kind of recognition other than shown the door. It’s been a year now and I still can’t find a job and I’m still crushed by such a cold end to a wonderful career. Being laid off in such a nasty way when you are 60 years old, and a single woman is devastating. Those comments above show me how it should have been done. My seniority was ignored; my dedication and experience ignored, and no one of all those I worked with call me or keep in touch. They are all scared because of what happened to me.
To Anonymous who was laid off from the museum: this story breaks my heart. I suspect that some corporate board member or HR consultant/lawyer scared the management into handling things the way they do at a big bank. Thank you for writing and hopefully some people who read your story will make sure it never happens when they are in charge.
I must unsubscribe. Any of this stuff makes me nauseated. I don’t know what the statute of limitations is on an improper termination – don’t know what to call it – but I’d sure say that this was due to age – just for the reason that workplace abuse is NOT a federally-sanctioned workplace behavior. I’d still contact your Human Rights Commission if only to feel like you had a chance to fight back – even just a little.
Any reason not to name the #@$@#!!! museum? PLEASE tell us.
I am appalled – but not surprised – that this happened to you and so many others. But DO do something.
Dear anonymous,
Your story is almost a year old and I hope you are doing well by now. Your story is so similar to mine that it brought tears to my eyes. I also worked for a well known NY non-profit organization. After 23 years I was also sent home with nothing, not even a “thank you for ur awesome work”. And it was “awesome” by my performance evaluation and all company standards. I was promoted 5 times, all the way to the highest possition before the CEO. During my tenure I endured some of the worse working conditions u can imagine that can sometimes take place in non-profit (i.e. weeks w/o pay due to contract delays, office w/o supplies, or lack of services such as; no drinking water, no AC, no heat in the winter…just to name a few) None of these made me want to quit. I was loyal to my company but my company had no loyalty to me.
Today and 2 years later I have not found meaningful permanent employment. The so call colleagues dont call anymore (after the first year).
The worse insult came after my first 2 months of termination. I was invited by the COO to his home for dinner. He stated several ex-staff members will be there. At this meeting each one of the staff members were given a $25 gift card for Bed Bath n Beyond!!!! A DOLLAR AND SOME CENTS PER EVERY YEAR I WAS EMPLOYED!!!! It hurt!!!
I’m so fed up with npo abuse of staff that I am paranoic and wonder if “Ask Rita” isn’t just compiling information to be used against staff. It does state that the real people who are “Rita” defend company HR policy, correct? I AM going to unsubscribe to this newsletter.
I wouldn’t get so upset. These posts only tell one side of any story. Sometimes managers abuse staff, and sometimes staff members can be completely unproductive, unethical, incompetent, etc. Over 30 years of work as staff and ED I’ve experienced both bosses and employees who are mentally ill, fighting addictions, or criminals. It’s hard to tell from a short post if we are hearing both sides of the story.
When it comes to executive directors there is a very high standard: if the ED is not advancing the organization to the satisfaction of the Board, the Board may replace her or him (subject to employment law and contracts). EDs are kinda like coaches or military generals. If you are not successful you may be replaced regardless of trying hard. In my current organization it’s not about fairness to the ED or staff as much as it is about “fairness” to the severely needy clients we struggle to serve (within reason). When a staff person or ED is ineffective our clients suffer and so the problem must be solved or better able people must be brought in if solutions have not worked.
BRAVO!
An employer has announced a furlough which would start next month, giving people the option to take their two weeks furlough whenever they wish between February and April. The monies will be deducted as one week from their first paycheck of the month and one week from their second paycheck of the month of February. They have now received a notice telling them that if anyone resigns before the furlough (in the month of January), these monies will still be deducted from their pay. Is this legal?