Adapted from a real OPS Staffing article originally posted by Mitchell Riley (Mar 2016).
In 2016, Yahoo landed in court after a former employee sued over its firing practices. The allegation: the company’s quarterly performance review system forced managers to rank employees on a curve — a stack ranking — and the bottom of the curve got cut, regardless of whether they were actually performing. Yahoo denied the claims, but the damage was done: years of headlines about a review system employees experienced as a layoff machine wearing a performance-review costume.
A decade later, the specifics are history. The lessons aren’t. Every reduction in force is a stress test of how a company treats people, and companies keep failing it the same ways. Three things the Yahoo episode — and every botched layoff since — should teach any employer.
Stack ranking didn’t start at Yahoo, and the impulse behind it is understandable: identify your strongest people, move the weakest out. The problem is what happens when the system becomes the decision-maker. When managers are required to label a fixed percentage of their team as underperformers, good employees get bad ratings to satisfy the curve — and when those ratings trigger terminations, workers correctly conclude the process was rigged from the start.
If you need to reduce headcount, do it honestly: a layoff with clear business reasons, communicated directly. Dressing a layoff up as performance management doesn’t protect you — it creates exactly the paper trail a lawsuit needs. Courts and employees can both tell the difference between “we eliminated the role” and “we rated you a 2 so we could eliminate you.”
The most corrosive part of badly handled layoffs isn’t the layoff itself — it’s the information vacuum around it. Rumors fill every gap leadership leaves. Productivity craters. Your best people, the ones with options, start interviewing — not because they’re on the list, but because nobody told them they aren’t.
You can’t always share everything; there are legal and practical reasons some details stay confidential until the day. But you can be straight about the business reality, the timeline, and what happens next for the people who remain. Employees can handle hard truths far better than they handle being managed like mushrooms.
Layoffs have compliance requirements that vary by size, location, and situation. The federal WARN Act requires 60 days’ advance notice for plant closings and mass layoffs at larger employers, and several states — California’s mini-WARN most notably — set stricter thresholds and broader coverage. Severance agreements, final-pay timing rules, and benefits continuation all have their own traps.
This is not the step to improvise. Before any reduction, run the plan past employment counsel in every state where affected employees work. The cost of an hour of legal review is trivial next to the cost of a WARN Act violation or a discrimination claim born from a sloppy selection process.
Building a team you won’t have to lay off starts with hiring right the first time. OPS Staffing places restoration professionals nationwide — call (888) 482-6019.