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Why restructuring could lead to an employee lawsuit

On Behalf of | May 31, 2024 | Corporate Finance and Restructuring |

Regardless of why a company decides to restructure, massive changes typically follow this shift in approach. Restructuring may lead to an organization phasing out certain facilities or products. Companies may close down less efficient production lines or try to streamline their workforce. This last element is often crucial to controlling operational expenses and improving overall efficiency.

Unfortunately, the need to reduce staffing levels or eliminate redundant positions can lead to intense emotional reactions from the workers who lose their jobs. In some scenarios, they may even attempt to file lawsuits against their former employers. Organizations often need to approach restructuring very cautiously, especially if they intend to reduce the number of workers on their employee rosters.

Why do terminated workers sue?

Most modern employees understand that businesses primarily exist to generate profits and may make decisions, such as downsizing staff, to achieve that goal. However, some people can’t help but take such choices personally.

In some scenarios, workers might file lawsuits against businesses because the terms of their layoffs or terminations do not align with the contract they negotiated when they took the position. If the worker believes that a company violated its contract by refusing or substantially reducing the severance pay they receive, they may decide to take legal action as a result.

Other times, employees question their inclusion in a staff reduction endeavor. Workers may assert that their termination was retaliatory because they attempted to unionize or because they reported harassment. Workers as a group might also assert that terminations were discriminatory because people sharing a protected characteristic have disproportionate representation in the group of people who lost their jobs.

If a company terminates mostly workers over the age of 40 or those who belong to one religion, the terminated workers may believe that their protected characteristics, not their job performance or seniority, lead to their job loss. Organizations engaged in layoffs and other forms of staff reduction often need to very carefully review the standards for who they retain and who they terminate.

Additionally, double-checking the proposed list of workers to let go to see if there are any characteristics linking a large number of them can be a smart move. Checking the individual employment history of each of those workers can also be helpful, as doing so could reduce the likelihood of the company terminating a worker a week after they report sexual harassment.

Executives and others involved in the management of an organization often need to think carefully about how to handle staffing matters during restructuring endeavors. Proper planning can significantly reduce the likelihood of workers filing a lawsuit after they lose their jobs.

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