VIEWPOINTS : Plant Closures on Short Notice Are Bad Business

Should corporate management be allowed to shut down a plant with little or no notice to workers? A majority of the Senate doesn’t think so and has voted to require 60 days’ notice of plant closings or substantial layoffs. Not surprisingly, business generally opposes such a requirement, and President Reagan has threatened to veto the bill if it reaches his desk.

At first blush, this bill would seem to be an unwarranted intrusion on management’s right to operate with a free hand. The U.S. Chamber of Commerce, for instance, objects to the proposed legislation even though it supports the concept of advance notice for closings.

But there’s a strong case to be made that the proposal, if enacted, would do corporate America far more good than harm. Even if it doesn’t become law, corporate directors should adopt a policy similar to that contained in the bill.

As one who has been involved in or witnessed many plant closings and mass layoffs, I can attest to the fact that, in most instances, the handwriting is on the wall for those actions long before they are taken. Plants are closed because of high costs, slim or non-existent profit, lack of demand, competition from foreign manufacturers and the like. These factors don’t crop up overnight.

But all too often, management refuses to bite the bullet and close a money-losing factory until directors demand action or a corporate takeover is threatened. Then, like a driver who slams on the brakes to make a desperation stop, management announces that the plant will be closed next Friday or at the end of the month. No planning, no job counseling, no thought to the repercussions and ramifications of the closing.

But if there were a law or a corporate policy requiring at least 60 days’ notice of a plant closing--a policy followed locally by Vidal Sassoon and Columbia Pictures and by a growing number of large concerns nationally--a company could turn what is usually a big negative into a strong plus. Here’s why:

First, it would force management to plan further into the future, to accept reality and act accordingly. Now I can hear some executives saying: “But there are instances in which a company would need just one more month or two to turn things around.”

Maybe so, but such situations are the exception rather than the rule. If chief executives were forced to act sooner rather than later, a lot of corporate resources would be saved for more productive use.

Second, it would spare the company the black eye that is usually suffered in a short-notice plant closing. Every corporate executive is or should be aware of the attention paid by the media to a plant shutdown.

Despite protestations that the facility was unprofitable, the company that closes a plant with little notice almost always winds up the villain in the glare of newspaper, television and radio publicity that inevitably follows the announcement.

Then there are the long-term negative effects that a short-notice plant closing can cause. The ill will that usually results can make it difficult for a company to hire again when its outlook brightens.

Widespread boycotts of company products, while not common, can’t be ruled out. And there’s always a chance that the laid-off employees or their union will bring pressure that could oust management.

In contrast, by giving its workers 60 days’ or so notice, a company can adopt a statesmanlike position that is far more likely to meet with a sympathetic reaction from the media and the community. Eight or nine weeks of warning gives a company’s workers an opportunity to look for other employment and make the adjustments that will be necessary when their jobs are gone.

It also allows the company’s human resources or personnel director a chance to develop and implement a career-counseling program that will assist laid-off workers in finding new jobs.

Third, a law or corporate policy requiring 60 days’ notice would head off many, perhaps most, of the lawsuits that almost invariably result from a plant closing.

As every executive in American business is well aware, our society is extremely litigious and is growing more so every year. The courts are taking a dimmer and dimmer view of dismissals made out of hand. By giving 60 days’ notice of a closure, a company would have a strong defense against wrongful dismissal suits.

Fourth, by giving 60 days’ notice, most companies would sharply reduce the drain on their unemployment insurance accounts. The reason, of course, is that by the time the plant closes many workers will have found other jobs.

This may seem obvious. But in their haste to shut down a plant, chief executives and their lieutenants too often don’t factor this consideration into their planning. And that failure can be very costly to the company.

Whether it’s achieved by federal law or company policy, corporate America needs the discipline that would be imposed by requiring 60 days’ notice of plant closings. Perhaps within the next decade such notification will become standard practice in this country. All of us will be better off if it does.