Bay Street's new layoff tactic: You’re fired. See you tomorrow

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To ease the pain of being laid off, Bay Street's biggest brokerages and law firms are adopting a much more friendly dismissal: the long goodbye.

The standard approach to layoffs is rather gruesome. On dismissal days masses of people are called into boardrooms one-by-one, where their bosses sit beside someone from human resources and read from a script. When the speeches end, they are handed an envelope with the company's opening offer for a severance package.

These nasty culls still happen, but more companies are taking a kinder, gentler approach. Instead of losing a door pass on the spot, the employee is invited to keep working for three months or longer, with full access to email, an office and a phone.

The rationale: "it's better to be employed and looking than unemployed and looking," said Salima Alibhai at ZSA Legal Recruitment. Even though the employees have been laid off, they appear to be desired by their firms and that makes them more attractive to prospective hirers.

It's an increasingly common tactic as brokerages and law firms trim staff nearly five years after the worst of the financial crisis. In some cases they do it because they like the laid off employees but simply had to cut because new business dried up; in others, it's driven by severance costs. If an employee is given time to find a new job and resigns on his or her own, a severance package is no longer needed.

The strategy is an especially friendly way for firms to lay off partners and managing directors, who in many cases are forced into early retirement when they are let go. These senior players are sometimes given up to a year before they must leave, and their former employers allow them to market their exit however they want to their long-standing clients.

Legal recruiter Steven Rapkin at Marsden International chalks it up to law firms "showing their more human side." Before becoming a recruiter, he was a partner at McCarthy Tetrault LLP where he managed more than 60 associates, and he knows just now nasty firms can be. Today, that strategy isn't necessary, he said, because many strong workers are laid off when there simply isn't enough work to keep everyone busy. "It isn't because the people are bad performers," he said.

To show sympathy, he said firms will go so far as to provide perks such as paying for three sessions with a recruiter.

Ms. Alibhai said she's even seen bosses who just laid off someone in their group help them find a job. She's heard stories of partners calling their friends who work as in-house counsel at corporations and asked if they're looking for someone -- conveniently leaving out that it's an employee he or she recently laid off.

Law firms and brokerages that are scaling back also benefit from this arrangement. Someone who resigns on their own terms because they have found a new job isn't entitled to severance payments, which as a rule of thumb can cost employers a month's pay for each year of service. At brokerages that figure is often amplified by expected bonuses.

"It's usually in the employer's best interest to help the employee find a new job," said Stuart Rudner, who specializes in employment law at Miller Thomson LLP. Taking that to heart, he's even advised clients to write reference letters for the affected employees.

Friendly dismissals also make the company look better to prospective candidates when the market turns favourable. New hires like to know that their firm won't cut them loose and leave them stranded at the first sign of trouble.

However, the "deceptive" practice, as Ms. Alibhai dubbed it, isn't very fair to the company that hires a laid off employee. It can also be troubling for recruiters because at times their clients are sheepish to tell them the truth as to why they're looking for a new job.

(Tim Kiladze is a Globe and Mail Capital Markets Reporter.)