Downsizing Your Company: Continued

Company Downsizing

Downsizing a company is never an easy thing. And to add to the stress some terminated employees try to state that you or some other superior made comments about the former employee’s age, gender, race, religion, disability, etc. However, please understand that another way these disgruntled ex-employees attempt to position their wrongful termination claims (yes, I know speaking through their…. Lawyer) is through the consequential effect of the down sized company. Let me explain with a possible example. If you started with 100 employees, 40% women and 60% men; and after the down size, you have 20% women and 80% men; naturally you can see the consequential effect of the downsized company. The same analysis can be applied to the other four above cited employee discrimination topics. Thus, before you downsize employees, you must consult with your company Lawyer in an effort to avoid such claims.

  1. Unemployment Claims: As your downsized employees will not be terminated “for cause”, you will receive unemployment claims. You will want to consult your accountant, and Lawyer on how these claims may affect your unemployment insurance going forward. (Remember, unemployment insurance is NOT optional.)
  2. Employee Benefits: If your company offers benefits such as 401(K) or other qualified pension/retirement plans, you will need to closely work with your administrators to assure that the roll-overs are timely and smoothly accomplished. Do NOT let your former employees remain in the plan account. When the time comes to terminate the plan, it may be difficult, time consuming and expensive to find them.

  3. Rental Agreements: You better know this stuff. Review all of your leases; copiers, telephones, cellular services, and computers. The copier and computer people burn the best of us with their exorbitant buy-outs, jurisdictional and product return provisions. Do you know how much it may cost to ship a large copier across the country? (Yes, you may see provisions for this geographical nightmare even if you “rented” it in your locality from a “local” copier company.)

  4. Property Leases: Review your current lease to know if you can leave, reduce space and so forth. If you are moving, are you comfortable with the new lease? Have you considered some of the items that can easily escape us such as parking, zoning, Insurance? (Yes, better meet with your lawyer on these important areas.)

  5. Marketing Materials: In my earlier post about setting up my own business, I mention the timing of placing ads in the different telephone directories. This essential can be particularly important if your downsizing will necessitate different or fewer telephone numbers. Anticipation here is critical. Of course, you will want to consult your website developer ahead of time. They need advance notice and information to implement their “creativity” and adjustments. You may need to change your signs, letterhead/envelopes and any other information and promotional items that you utilize with your contact information on it.

  6. Independent/Sub-Contractor Agreements? Vendor Agreements? Customers: Before you downsize, you need to understand how or if your downsizing may affect any agreements and relationships you have with your independent and subcontractors. Will your steady customers be affected and how?

  7. Other Miscellaneous Items You Must Consider:  If you had contemplated changing your legal formation, you name or your taxation timings and related concerns before downsizing could be a good time to make these fateful decisions. As you can likely surmise, after downsizing, you will need to take more actions yourself. Have you outlined and prepared for what those will be?

Exhausting isn't it. This is just the beginning. Stay tuned on more updates to the REVIEW CHECKLIST WITH YOUR PROFESSIONALS series.