~~For many business owners, there comes a time when downsizing should be considered.
Yet, the term “downsizing” can take many forms and mean different ideas in different situations.
Let us start with the first and usually most important “downsizing” topic: Employees?
1. Your first topic involves YOUR ORGANIC DOCUMENTS! What are my organic documents?
If you carefully considered my Simple Tip Number Three (yes, please go back and read!), you should have decided to form your business under one of the optional “legal fictions” such as corporation or limited liability company. A proper formation for your legal entity should include the basic documents that must be filed with the Secretary of State and your other documents such as By Laws, Operating Agreements, shareholder agreements, and other binding contracts among the owners of your company. For limited liability companies, many lawyers (and bankers) advise having an agreement between yourself and the company. (I know, makes little sense to most of us.) You must also know your employee agreements, (including employee benefits)
Before downsizing (or expanding for that matter), review all of your organic documents to ascertain (big word for “make sure”) that your downsizing plans will not conflict with your organic documents.
2. NOW ONWARD TO EMPLOYEES (UGH!)
If you are going to “downsize” employees, you must be very careful. You may have noticed how big corporations offer severances when they downsize their work force. Must they? No. Then why would they? We know they have no loyalty to their employees that they fire. They do so simply to contractually avoid valid and invalid wrongful termination claims.
For us small folk, severance offers may be impracticable. Your protection involves understanding some of the major sources for wrongful termination claims. Typical claims involve the following:
1. Age Discrimination;
2. Gender Discrimination;
3. Race Discrimination;
4. Religious Discrimination;
5. Disability Discrimination;
There are others.
NEXT TIME! HOW TO AVOID WRONGFUL TERMINATION CLAIMS AND OTHER TOPICS YOU MUST KNOW BEFORE YOU DOWN SIZE CO