There may be no more stressful time than realizing that downsizing and eliminating positions is the best -- or only -- way to save your business. Don’t worsen an already difficult situation; eliminate positions fairly and in full compliance with federal labor laws. Fair procedures and treating employees with respect following notification -- a concept known as procedural justice -- combined with knowledge of applicable labor laws is critically important to avoid potential wrongful termination lawsuits.

State-Mandated Rights and Responsibilities

You have a legal right -- in every state except Montana -- to eliminate positions according to an “at-will presumption.” At-will employment means both you and an employee share a right to end an employment relationship, with or without notice, for any reason or for no reason at all. Despite this, a number of exceptions under common law can modify an at-will employment definition. The major exceptions are public policy, implied contract, and implied covenant of good faith. Check your state laws to learn how your state defines these exceptions and whether they apply.

Federal Labor Laws

The Equal Employment Opportunity Commission enforces a number of anti-discrimination labor laws. Among these are Title VII of the Civil Rights Act of 1964 -- including the Pregnancy Discrimination Act amendment -- the Age Discrimination in Employment Act of 1967, and Title I of the Americans with Disabilities Act. These laws work in combination to disallow workplace discrimination based on non-job-related factors, such as national origin, race, gender, disabilities or religion. Use objective criteria when choosing positions to eliminate, because if a wrongful termination claim arises, the burden of proof to show that a decision to eliminate a position was non-discriminatory lies with you.

The Family and Medical Leave Act

If your business must comply with U.S. Department of Labor’s Family and Medical Leave rules, eligible employees are entitled to up to 12 weeks of unpaid, job-protected leave for certain family and medical reasons. When the employee returns, you must return the employee to the same or a similar role. Unless you discuss a possible position elimination due to economic conditions or the business’s financial state before the employee goes on leave, you can’t eliminate an employee's job while the employee is on leave without also expecting a possible retaliation claim.

Notification Obligations

Sufficient notification of position elimination is a moral and potential legal obligation. If you have a minimum of 100 employees who have been with you for six or more months, review the Worker Adjustment and Retraining Notification Act to find out if a mandatory 60-day written notice requirement applies to your business. Failure to give the required notification creates a potential benefits and back-pay liability as well as a potential fine of $500 for each day of the violation.