Is Rehiring Laid-Off Employees a Good Idea?

It’s no secret that small businesses are in uncharted waters in this post-pandemic economy. Businesses tried all sorts of things to stay afloat after the shutdown—pivoting online, going virtual, cutting back, as well as layoffs, hiring new workers, and more.

As things slowly start to get back to normal (or at least a new normal) and with businesses fully reopening, a question many have is, what now? This is especially true with regard to the possibility of reintroducing former employees back into your office. Is it a good idea or a bad one? And if you do decide to hire back former staff members, how do you do so smartly, legally, and prudently? 

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To answer the first part of that query: Yes, for a variety of reasons, bringing back old employees (as opposed to hiring new employees) can be a great idea if you do it right. And that’s the important second part of the answer.

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We'll go over exactly how to do it right, so to speak, and the pluses and minuses of rehiring employees. Let's dive in!

Pros and Cons of Bringing Back Laid-Off Employees

Indeed, intrinsically, reinstalling an old employee can seem like a great idea. You will be bringing back a team member that you liked and reluctantly let go (otherwise, you would not be thinking of bringing them back, right?) They know the program, what business days at your shop should look like and so on.

While that is all true, there are other considerations to be aware of, both positive and negative. 

Benefits of Rehiring Employees

Here are some of the biggest perks of bringing back former employees:

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1. They do, in fact, know the program: One of the real benefits of reintroducing previous staffers is that you have worked with them and they have worked with you already. They know your policies, procedures, and way of doing business, and as such, there should be less training and handholding involved. They can hit the ground running.
2. It’s good for morale: Needless to say, morale among small business employees took a hit when the coronavirus showed up. Watching friends and co-workers lose their jobs and working from home with no colleagues around to chat with, all made for a difficult transition. Renewing your relationship with, and reintroducing, those former employees can fix a lot of that. Restocking the coffers with friends and old colleagues is likely great news for your employees.
3. Increased loyalty, all the way around: There are no two ways about it: Whether you are a business owner or a manager, firing people is difficult for many reasons, and one is that it makes everyone nervous. “If Stephan can be let go, none of us are safe!” That said, however, the opposite is also true: Reinstating laid-off or furloughed employees has the tendency to make everyone feel not only safer, but more loyal. One thing I have seen over the years is that one reason the best small businesses are, in fact, the best is because they take care of their employees. In return, those employees take care of the boss and the business. Well, by re-hiring people, you are doing just that. If you are loyal, they will be too. This is especially true for the specific person or people you revive. While all of these ‘pros’ are not insignificant, indeed they likely trump the ‘cons’ below, the negatives must nevertheless be part of your analysis.

Downsides of Rehiring Employees

These issues are not insignificant:

1. Employee may have old habits that don’t jive with your business: While new hires require time, money, and training to get up to speed, they are often a wise investment because they'll learn how to meet your business's current needs. That can be more difficult with a re-hired staffer who is used to doing things how you used to do them.
2. Re-training may be necessary: If your small business really did change in the past two years, a lack of qualifications might actually be what you are dealing with when it comes to old staffers. Will they require a lot of additional training? If so, that may take just as much—or more—work to get them up to speed compared to a new hire who has the qualifications your business needs now. 
3. Bad attitudes are possible: Yes, sure, it might be true that the re-hired employee will be grateful that they were re-hired. But it could also be true that they might be resentful that they were let go in the first place, and in that case, you are re-hiring a problem, not a solution.

The Legalities of Rehiring Former Employees

For starters, it is important to understand that you are not required to hire again employees you previously laid off. In California, for example, Governor Gavin Newsom vetoed a potential new law that would have required the mandatory reinstatement of laid-off workers. The same is true in New York, Arizona, and every other state; an ex-employee’s rights do not extend that far.

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That said, employment law is nevertheless rife with the potential for liability. Between federal, state, and local rules and regulations, Human Resource departments have their hands full. All of which is to say, be careful. If, after considering all of the above, you do decide to bring back a former staff member, you need to make sure to do it right and not willy-nilly.

Watch for Discrimination when Choosing Who to Bring Back

The first consideration is whether you could be liable for wrongful hiring upon the re-introduction of a former worker. The scenario would look like this: Say that you previously laid off two employees with the same length of service and decide to hire one back, and the one you do not hire back is, say, Mexican or African American or Jewish or some other legally protected class. That person might think your reason for not hiring them back was discriminatory and decides to sue you.

While that is a reinstatement nightmare scenario, the solution is simple: Do not let discrimination in any form be part of your hiring or firing process, i.e., race, color, religion, or sex, cannot be why you did or did not hire someone. The only issue is their ability to do the job, regardless of other factors. For the record, federally protected classes are:

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• Race
• Religion
• National Origin
• Age (those over 40)
• Sex  
• Pregnancy
• Familial Status
• Disability
• Military or Veteran

Follow Your Standard Policies and Procedures

The next consideration is that a small business needs to be sure to follow its standard policies and procedures when re-hiring and reinstating a former team member (because, if you don’t, a disgruntled employee can try to use that against you.) Be sure to review your termination and hiring policies before re-hiring anyone and follow them to a T.

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Opening the position and having the employee apply, just as any external candidate would, is an easy way to ensure a clear, unbiased approach.

Get Clear on Benefits

Finally, bringing a former employee back needs to be done with benefits in mind. Specifically, you need to know, and be clear with the staff member, on how their benefits have been affected. Will they come in at the same level and pay as before? What about any accrued bonuses, time off, or retirement funds? Do those all come back at the same level? For example, in Washington D.C, the law is that employees who are reintroduced within 12 months must have their accrued sick leave time restored.

Such matters were likely not considered during the craziness at the height of the pandemic, but they need to be reviewed now.

Three Simple Steps for Rehiring Laid-Off Employees

While you might be tempted to simply review your open job positions, call up the person you want to reintegrate, and share the good news with them—a better course of action would be to do it right. But, what exactly, does that mean? Here are three simple steps for bringing back former employees:

Step 1. Interview Them

Even if the employee whom you previously had to lay off is being hired to the same or similar position, it’s important to get them up to speed and discuss changes and expectations. Logistical things may matter to the old hire, so cover as much ground as you can. For example, does your company now require the COVID-19 vaccination? Do you have a different work schedule in place? Or a different pay schedule?

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You should also gauge whether they’re ready to return to your company. Ask some questions like: 

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• Why do you want to come back? 
• Why do you want to leave your current employment? 
• What do you want out of the change? 
• Do you have new skills or expertise that could benefit our business? 
• Are there any frustrations you had previously that we should try to address?

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Additionally, apropos of the benefits discussion above, you need to discuss pay and benefits.

Step 2. Formally Offer Them the Position

If you decide to hire a team member back, you'll need to formally offer the position to this person, just as you would offer a job to any new hire. Ideally, you would send them a written notice of your offer of employment containing the following:

• Their eligibility to take the job again
• Key terms agreed to, such as salary and benefits (i.e., healthcare, retirement plans, etc.)
• Changes to previous status, hours, etc.
• Any relevant NDAs, non-competes, disclaimers, and so forth

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As part of this formal process, have them fill out the right paperwork:

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• Tax status and tax forms (W4, I9)
• Signing of acceptance letter, if applicable
• Emergency contact
• Receipt of employee handbook
• Contract, NDAs, etc., if applicable

To the extent these are reaffirmations, having the new/old employee sign and do all of this again is smart.

Step 3. Reintegrate Them into Your Team

This final step has two parts. You want both the employee, as well as your team, to be comfortable with the change. And that requires some thought.

As far as the new person is concerned, there are a couple of things to keep in mind.

• Make them feel welcome: First, of course, you want them to feel at home. This person was let go and might have some insecurities around that. Extra care should be made to make them feel welcome; they should know that they were missed. Especially during the first few days back, make an extra effort to include them.
• Onboard the employee: By the same token, don’t assume that they remember everything from their previous stint. Indeed, some regular onboarding may be necessary and helpful to the reintegration process. This may include, for instance, a review of sick leave policies or how PTO works in your post-Covid office. 
• Check in with your current team: It is also true that your team needs to be made comfortable with the change. After all, they have gotten used to working without this person. How will the person fit in? Will his or her duties impinge on a longtime staffer? There is a lot to consider from a team morale and company culture perspective. The key, as always, is open and honest communication. Explain why you are bringing this person back, what you expect to achieve with the move, and ask your team if it presents any issues you should know about.

Bringing Back Old Employees Should be Great

If you do it right, there is so much to be said for rehiring previous employees. That they want to return is a great sign that you have been doing something right, and that you want them to return is correspondingly a great sign that they made a positive impression on you. Cross your i’s, dot your t’s, and welcome them back with open arms.

You will both likely be very happy that you did.