In business, there are ups and downs. Sometimes the economy is good, and a business is profitable. Sometimes, however, the economy is not doing so well, and businesses begin to struggle. One possible consequence of a flagging economy and struggling business is that businesses may have to lay off workers. This is what happened in the case at hand, in the Orion-Mountainside Company. David Cannon was in charge of this decision and how to handle it. In July of 1980, the company realized that production would be shut down for awhile. Although this was typical for a week or two, it looked as if it would be much longer this time.
The major auto manufacturers were not making chassis, and therefore were not able to send them to Orion so they could make custom trucks. As the situation worsened, Cannon decided to lay off seventeen employees. He choose the employees with the lowest seniority, and kept the layoffs a secret until the day they occurred. Only foremen were given advance notice, and even then, it was only a few hours’ notice. The upper management spoke to the laid off employees, while the foremen spoke to the rest. During this procedure, Cannon did not inform any government agencies – or anyone – about the layoffs in advance.
He also told the employees that the layoff may be only temporary, but were “indefinite. ” He was very unspecific in his instructions. He also learned that it took three weeks (instead of the usual one) before any of those laid off began receiving any benefits. The situation did not improve over the next several weeks, and the employees were not told anything. Job sharing had been “considered, but rejected. ” Some of the employees found other jobs within ten weeks or so of the layoff. The primary concern is whether or not Cannon acted correctly in his handling of the layoff. Should he have laid employees off?
And if so, should he have kept it a secret until the last minute, and been vague in the terms of the layoff? These are ethical concerns to answer, because it is possible that there was a better way to handle this situation. First of all, did the economic considerations justify the lay-offs? At this time, unemployment was high throughout the country. It was even higher in this area. In fact, unemployment was so high that the state was paying extended unemployment benefits. This speaks to the fact that the economic situation was not great, and that certain tough decisions would need to be made.
Also, because the plant primarily focused on making special trucks, and because they were dependent on auto manufacturers to ship them parts before they could do their jobs, a lack of parts was a major problem. Employees could not work when they did not have anything to work with. Also, looking at what happened after the layoffs – that several weeks later, the plant still did not have the necessary parts – it seems the economic conditions did, in fact, justify the layoffs. While the necessity is regrettable, the company realistically did not have a better choice at that time.
Second, were the reasons provided by the company sufficient to justify why the lay-off was implemented as it was? The company was bent on secrecy, for fear that the employees would not work as hard at their jobs if they knew in advance that they would be laid off. They also feared that other employees would become distracted by the threat of layoffs and that productivity could be lost. The company also feared that if they told their employees the layoff was permanent when they did not know what would happen, their employees would leave to get other jobs and they would not be able to recall them.
However, these are not sufficient reasons to justify the way the layoffs were handled, especially with the fringe problems that occurred afterwards. Employees were absolutely blind-sided by the layoffs, because although they knew the plant did not have work for them, they probably were also not expecting a move so drastic. Earlier in the year, the unemployment in their area had been much higher, and their jobs had survived with no problems. For them to consider a layoff as a possibility under those circumstances would have been unusual, if not impossible.
Worse yet, not telling the employees in advance (knowing that some of them had families) did not allow them any time to plan. Perhaps those with families could have found other work, or their wives or husbands could have found work. The workers might have chosen to move, or at least to put some money away into savings. The employees were probably much worse off for not having known what would happen until minutes before it occurred. Also, while some lost productivity might have occurred had the employees known about the layoff in advance, with the slowdown in production anyway, it might not have mattered.
Once the layoffs were complete, not reporting them in advance caused a delay in benefits. This might have made the situation even worse for those with families, because they could not pay their bills. They also did not have enough seniority to have received anything from the company, so they were effectively not getting paid for nearly a month. This would have caused incredible financial hardship. Had the company opted to offer the employees job sharing, the employees may have taken them up on this.
Although Cannon said that more senior employees resent job sharing because it takes away a cut of their paycheck, there is no law saying that the job sharing needed to occur between a senior and a junior employee. Two junior employees could have shared a job. Given their lack of skills and seniority, which would make it difficult for them to get a decent job elsewhere, the junior employees may have opted to work part time rather than be laid off entirely. However, this option was never presented. The company also refused to make any definitive statement on whether the layoff was permanent, and how long it would last.
This, too, caused problems. The employees were not likely to take other jobs in the meantime, because the other jobs paid significantly less than Orion did. This delayed paychecks for families again, because they did not know how long they would have to wait to get their jobs back, or if they would get them back. While this move may have been in the company’s best interests – to hire back employees they had already trained as soon as possible – it was not in the individual employees’ best interests, who needed a decent paying job to support their families immediately, not “when it becomes available.
The company could have done more for their employees after the layoffs, beginning with telling them the truth: that they did not know if or when they could hire them back, and that it would be smart to look for another job. Then, when and if they could afford to hire people back, they could hire whoever had not found a job. Those who had found jobs would be doing better because they had realized they needed to move on in order to protect their families. The company could have also offered part time work or job sharing options if they were determined to keep the employees available to them.
The employees were stake holders in the company and had a vested interest in it, but they had more vested interest in their own survival and that of their families. Although the layoff may have been justified in terms of the business economy and satisfying stock holders, the employees should have been released or offered better terms if the company wanted to keep them interested. It is obvious that not doing so can cause problems, because Cannon mentions that some employees who were rehired after a 1975 layoff were bitter for quite some time, and he was never able to discover the reason for it.
Additionally, Cannon should have told the unemployment office of the layoff so the employees could have received benefits sooner. That way, at least they would have some money to live on immediately while they waited for rehire or looked for other work. Cannon did not seem very concerned with employees in a real sense. Yes, he followed up on them through secretive means (word of mouth), and he was interested in hiring them back, but his concern was also self-serving.
He was unhappy about having to lay anyone off, and he was worried about hiring new, untrained employees. Cannon’s actions do not show concern to his employees. They probably did not pick up on any concern, based on the secretive nature of Cannon’s plan. Instead, Cannon and his team should have been open and up front with the men and women from the beginning, and allowed them to make the best possible decision for themselves and their families, rather than doing solely what was best for the company.