A Stumbling Economy May Require Reductions In Force (RIF)

Written by Robert G. Brody on December 15, 2008
 
As our economy continues to stumble, reductions in force are increasingly common. A reduction in force (“RIF”) generally means 1) you are reducing your workforce by terminating some employees, 2) you have no intention of hiring them back, and 3) you have no intention of replacing them in the foreseeable future and under the present circumstances. If you are a large enough employer to be governed by the federal or state WARN laws (which require advanced notice, usually 60 days, of a plant closing or mass layoff), you need to be you’re your strategy accordingly.

If a RIF is necessary, certain steps should be taken. First, devise an objective method to pick those who will be separated without any consideration of race, gender, age, or other protected classifications. While tenure with the Company is one of the safest methods, it often is not very efficient. Merit is the best business justification but it is the riskiest. If you use the latter, be sure there is documentation to objectively support your decision.

Next, have an executive ensure the percentage of RIF’ed women (or men), people of color (or whites), older workers is relatively close to that groups general population in the Company. If it is much higher seek counsel to ensure you can justify your decision.

There are alternatives to forced reductions; you can seek voluntary resignations. This is a good solution when you have no preference as to who leaves. Any business with multiple employees doing the same job may fit this description. But note, if your workers are not homogeneous, your best workers might take the package and leave you with weak performers when you can least afford it. Assuming voluntary resignations work, you can entice them by offering severance pay and a fine recommendation. If not enough employees accept, go back to your objective criteria to satisfy the shortfall. While everyone feels tense, uncomfortable, and guilty about terminations, voluntary resignations are a great way to show you are fair, equitable, and nondiscriminatory which in turn should minimize the likelihood of a lawsuit.

Assuming you have designed a legitimate program, next consider offering affected employees some sort of severance in exchange for a release or waiver of his or her right to sue. Even in tough times, this is probably a good preventative. Also, give each employee whatever documents, if any, are required by state unemployment compensation law and state laws regarding notice of termination of employment and benefit coverages. Finally, comply with COBRA (Consolidated Omnibus Budget Reconciliation Act) or whatever health insurance continuation laws exist in your state.

Brody and Associates regularly counsels management on complying with labor and employment laws as well as provides cost-effective compliance training to all levels of management. If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.965.0560. For further articles on this general topic, please

Anna Burger, chair of the Change to Win labor federation and International Secretary-Treasurer of Service Employees International Union, said the law “strengthens the rights of women and all workers to pursue justice for wage discrimination on the basis of sex, race, color, religion, national origin, age or disability.” She is right, but she failed to concede that this will open the floodgates to wage claims stemming from employment decisions that are years or decades old.

Beyond allowing old personnel policies to be challenged under this law, it also allows a whole new segment of cases to be filed. This statute expands the scope of equal pay law beyond sex discrimination to include all major federal civil rights laws, effectively granting Equal Pay Act rights to the other federally protected classes, such as race, age, and disability. It is very likely employers will see a dramatic rise in such claims, whether filed on their own or in conjunction with other claims.

The EEOC receives more than 5,000 wage bias charges each year under all the statutes it enforces, including Title VII, the Equal Pay Act, the ADEA, and the ADA. It will be interesting to see how these numbers change with the passage of this new bill.

Brody and Associates regularly advises management on complying with state and federal employment laws including wage and hour laws. If we can be of assistance in this area, please contact us at info@brodyandassociates.com or (203) 965-0560.

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About the Authors

Robert G. Brody is the founding member of Brody and Associates, LLC. He has been quoted and published in national publications and appears as a guest T.V. commentator on contemporary Labor and Employment issues. Learn More