Should You Rehire a Laid Off Employee?

Should You Rehire a Laid Off Employee?

Laid off workerJobs and the economy are still a very mixed bag, and the economic recovery is a halting and uncertain process.

It’s not surprising that many companies reduced staff over the last two years in order to cope with diminishing revenues.  Staffing levels are often the first place to receive cuts when times are tight, as overall compensation, which includes benefits, can constitute half of a company’s overall operating costs.

As your company’s situation starts to improve, the question often is, can you, should you, or do you have to hire back laid off workers?

  • A study by Accenture said that 54% of U.S. businesses that laid off employees in the past year want to rebuild their workforces, but many will face a challenge in finding workers with the appropriate skills and training.
  • In 2010, 45% of HR professionals polled by The Society of Human Resource Management said that they have rehired some of their laid off employees, a figure that’s up 30% from 2009.

Decide whether you want to rehire a laid off employee before you do a layoff.

It may seem backwards, but the time to consider whether you want to rehire a laid off employee is before you lay them off!

As always, this starts with your employee handbook and personnel policies.  Some companies address this situation through a layoff and recall policy.  This may or may not be necessary, depending on your company’s size and situation.

If you do create a layoff and recall policy, you will want to consider including information on:

  • How layoff and recall decisions will be made
  • Notice requirements
  • Time period for recall
  • Notice for recall
  • Credit for retirement or pension benefits
  • Impact on vacation accrual
  • Waiting period for other benefits

If you don’t have a formal policy, you will still want to consider these issues at the time that you conduct the layoff.  Although this article is not on how to conduct a layoff, it’s always very important to consider the information that is communicated to laid off employees.

You are not required to rehire laid off workers.

There are no laws requiring you to rehire laid off workers.  Absent a company policy, stated intent, or collective bargaining agreement, you do not have to rehire a laid off employee when you have a job opening.

Sometime, during the reduction in force, management has a sense of guilt about the process, which is communicated to the employees who are leaving.  Unintended promises are made, such as, “I’m sorry this is happening to you, and when things get better and we can rehire, we’ll be sure to let you know.”

If employees are promised to be recalled when jobs open up, and someone else is hired in their place, you may expose yourself to a charge of discrimination.

There are several good reasons to rehire a laid off employee!

Why would you rehire a laid off employee?  Well, there are several good reasons!

  • Your former employees already know the job: You have already invested in their training, ensuring they have the required skills.  You are familiar with how they work, and how they fit into your company’s culture.
  • It’s good for the overall morale of your company: Staff members have formed relationships, which are broken when they lose a colleague.  The team is made whole again when a worker is rehired.  Plus, it may reassure other staff that you are committed to them and their longevity.
  • It can save you money: Don’t forget to take advantage of the HIRE Act, which gives you tax benefits for hiring a worker who is on unemployment!  The HIRE Act is currently saving participating companies thousands and thousands of dollars.  Not to mention that if you rehire a laid off worker, it gets them off your unemployment insurance, which spares you an additional expense.

Be aware of the complications and drawbacks of rehiring laid off workers.

Some complications and pitfalls may lie ahead if you do decide to rehire laid off workers.  Here are some issues to take into consideration:

Being laid off can dramatically impact a worker’s attitude: You will want to consider the impact the layoff has had on the attitude and morale of the worker you’re contemplating rehiring.  Are they resentful that they were selected for layoff while their coworkers continued to be employed?  Will they feel unsure of the stability of their job, and continue to look for a new one?  Do they still feel positive towards the organization and will they represent your business well to others?

Avoid claims of discrimination: Hiring anyone can expose you to accusations of discrimination if you go about the wrong way, and the same is true for rehiring someone.

For instance, if a 40 year old woman reapplies for her former position, and you end up hiring a 25 year old man for the job, she could claim age and gender bias.  You would have to be able to prove that the hired worker was more qualified than the woman who previously held the job.

The courts have recently become more involved in these rehiring decisions, seeing them as part of a company’s overall employment policy.  It is becoming increasingly more apparent that if an employee can show they are in a protected class, qualified for the position, eligible for rehire, and the position went to someone outside of the protected class, they may have a claim.

This reinforces the need for businesses to consistently document employee performance, and maintain accurate employee performance reviews.

Another consideration when rehiring employees is how to handle employee benefits: For instance, will a reinstated employee with 10 years of service start over for vacation accrual, or will you consider their prior service?  Will they have to complete the probationary period before being eligible for benefits such as health care coverage?  If they are still receiving severance benefits, will they be allowed to double dip?  Do they come back at the same wage, or will you negotiate a lowered wage?

You can also rehire employees for short-term special projects.

Sometimes employers wish they could rehire a laid off employee to handle a special project or to help during a busy period.  Solutions to this dilemma have included bringing the former employee back on a payroll basis through a staffing company or as an independent contractor if all of the legal ramifications of that have been met.

This eliminates the benefits-related complications of the rehire, as well as the hassle of having to go through the layoff process again!

A complex economy creates complex hiring decisions.

While the economy remains in such an uncertain and even uncharted place, our hiring decisions are more complicated and critical than ever before.  We must become used to making thoughtful choices that involve weighing many different factors, and taking into account a wide array of your company’s operations.

Originally published in the Kitsap Peninsula Business Journal.