Need to lay off employees? Be honest -- and work out details first

Layoffs can scar a medical practice long after the dust has settled, but they don't have to.

Developing rational strategies and having honest communication with those who leave, as well as those who remain, is crucial to avoid bad blood and discrimination lawsuits that can occur after such events, experts say. When poorly carried out, disgruntled employees, laid off or not, may badmouth the practice, negatively affecting its reputation either by talking to patients they run into in the community or going to the media.

"A lot of people don't realize the impact on remaining employees. There can be huge morale problems for the employees who want to stay. ... And I think there's a greater impact on doctors' offices where people are working so closely. The communication strategy is really critical," said Heather Gatley, executive vice president of HR services and general counsel of AlphaStaff Group Inc. The company provides human resource services for many small businesses, including some medical practices.

Layoffs are becoming more common. The national unemployment rate hit 8.9% in April. It was last this high in 1983. Data on layoffs at small to mid-size medical practices are not available, but there are some for large facilities, suggesting that the health sector is not immune from the need to tighten belts in this downturn.

According to the U.S. Dept. of Labor's Bureau of Labor Statistics, 4,650 people working at ambulatory care centers were part of layoffs involving at least 50 people in 2008. Another 2,252 have been part of mass layoffs in January and February of this year.

But experts say it's possible to minimize the possible negative impact from layoffs.

The first step is to gather the staff and discuss the possibility. This may allow a medical practice to avoid layoffs, because employees can have their own ideas about how to cut costs, ranging from reducing their hours to cutting pay across the board. Some also may be willing to switch from full-time to part-time.

"A lot of the time it may be possible to figure out another way," said Stephen Blattner, MD, founding principal of exagoMD. The consulting company based in Portland, Maine, works with physicians to develop their leadership skills.

If layoffs are needed, the first step is to develop a rationale for deciding who goes and who stays. Some employers use seniority, an employee's role in the practice, added skills, the problems in replacing a particular person once re-hiring is necessary, status as part-time or full-time, or a combination of some or all of these factors.

"Determine that criteria first, and, once they are established, apply them fairly and consistently," said Sally Scott, a partner in the Chicago-based labor law firm Franczek Radelet.

The key is to avoid eliminating positions in a way that is discriminatory to certain protected groups, such as those older than 40, women or racial minorities. The perception that this is a possibility also should be avoided, and any layoff plan should be assessed on this basis. For example, if a plan to lay off people based on seniority eliminates all who are older than 40, or if cutting a particular type of position means that only African-Americans are affected, it may be necessary to re-evaluate. This can minimize the risk of a lawsuit.

In a small office, it may be wise to gather together those who are being laid off and tell them all at once. This is to ensure that all employees hear the same message and reduce the risk of some hearing about it through office gossip.

Those being laid off should be told why they are losing their jobs and the process used to reach that decision, and be informed of their options. Exit interviews with each employee can go through the details specific to an individual. Questions that need to be answered include: Are you providing any sort of severance? What about health insurance? Those covered by group plans through companies employing at least 20 people are eligible for COBRA. How will they be able to access that program? Will they be given a reference or any preference when jobs become available again? What other assistance will be provided?

"It's a very difficult meeting, but it helps the employee to know that there was a rationale and rules that were followed," Scott said. "And it's important to take the time to answer employees' questions. The mistake employers make is they don't want to explain the decision and don't want to spend time with the employee. That can leave the employee frustrated and feeling they weren't treated fairly."

Employees then should be given the opportunity to clean out their desks, say their goodbyes and exit. Security or police should be involved only if there are signs that a now-former employee may become violent.

"Don't have security waiting to escort them out. They have not done anything wrong. Don't treat them like they have," Scott said.

Experts also advised talking to those who remain about their concerns and acknowledging the loss of their co-workers. Pretending that nothing has happened tends to create more fear and havoc. Also, prepare answers to questions from patients about why some employees are no longer there.

"Whatever you do, don't make it a ghost event and act as if they were never there," Dr. Blattner said. "The more you act as if nothing happened, the more people feel as if it could happen to them tomorrow and nobody would care."

If an employee to be laid off is out on medical or disability leave, experts suggest consulting a lawyer before proceeding.