With unemployment high and the economic outlook uncertain, the last thing a manager wants to roll out to his or her workforce is a reduction in force (RIF). However, if available work has created a personnel imbalance and payroll savings cannot be achieved otherwise, such as through transfers to other positions, reductions in hours, pay freezes or cuts, hiring freezes, worksharing agreements, flexible schedules, contract buyouts, early retirement incentives, or temporary shutdowns, a RIF may be the only alternative.
If a RIF is under consideration, the first task should be to assemble the decision-making team. The team should consist of a diverse and respected, but small group of skilled financial, business, and human resource managers and a legal advisor. Any one who has been a target of a bias complaint or who may be perceived to be a biased decision-maker should not be on the team. The team should do its work on a confidential basis, and only those with a need to know should be privy to its work.
The team should document its consideration of alternatives to the RIF and identify clearly and precisely the goal of the RIF. Sometimes the goal is stated as the dollar amount or a percentage of cost saving. Sometimes it is stated in terms of a shift in production or the elimination of a product or line of products or certain facilities. All decisions made by the team should serve the documented RIF goal.
RIF issues are driven by the RIF goal. Compliance with applicable law is an example. After the number of affected employees and employee locations are identified, the team can determine whether the federal and state WARN Act will apply. The various notice obligations under those laws will then be analyzed. The team must also identify whether any employment agreements or collective bargaining agreements are affected by the proposed RIF. Provisions dealing with cause for termination, severance, and rehire obligations must be considered. Bargaining obligations must be explored. The impact of the RIF on employees about to vest in pensions must be examined. A timetable must be established (in part based on the applicable WARN Act and other notice requirements) giving consideration to the need to transition to a smaller workforce. Accurate accrued paid time off calculations will have to be made for each affected employee.
The team must establish selection criteria to identify the employees who will be captured by the RIF. Obviously, these must be set keeping in mind the skills and positions needed by the business post-RIF. A RIF is concerned with the elimination of jobs, not the elimination of particular employees. A RIF is not a substitute for inadequate personnel management.
Consideration must be given first to clear, objective criteria, such as seniority, elimination of unnecessary job classifications, elimination of temporary or part-time or contract workers, skill levels, past performance, education, and disciplinary records. Consideration also can be given to attitude and effort, but subjective criteria that are vague put employers at risk. Obviously, no consideration should be given to the characteristics protected by law, or to any status or activity which is protected, such as union affiliation, disability or workers’ compensation claims made or leaves taken. All selection criteria must be distributed to all decision-makers. The goal is to retain the highest performers having the skills needed to perform post-reduction job functions.
Employees captured by the RIF criteria must be scored on a preliminary basis using the selection criteria, making sure the rankings are consistent with prior performance appraisals. Preliminary rankings must then be evaluated for disproportionate impacts on protected categories. This means the population of a protected category of employees before the RIF and after the RIF should be analyzed to identify whether any particular category might be affected at a rate higher than its pre-RIF percentage in the workforce. All issues pertaining to these disparaties must be resolved based on legitimate and reasonable business reasons.
Employees released through a RIF will be shocked and often become angry. Consideration should be given to post-RIF benefits to soften the blow and induce forward thinking. This should include consideration of severance, outplacement services, and an enhanced payment for COBRA. Everything the company does with respect to the terminated employees will be remembered by the retained employees.
Before making the RIF public, the team should consider how the RIF will be communicated to the employees, to the public and to the media. A press release should be considered and a contact person identified. Employee meetings should be separate and private, attended by at least two managers, one of whom will be there solely as a witness, and the less said the better. Many companies follow a prepared script when a large number of employees are subject to the RIF. The meeting should address the issues typical of an employee separation, including unemployment claims, benefits continuation, confidentiality, non-competition and non-solicitation obligations. A separation meeting is not an opportunity to apologize or to wish the separation did not have to happen. It is the time to communicate the decision and the information the employee needs to know to move forward from the decision.
Documentation associated with a RIF can include a request for a release of claims, but to be effective under the Older Workers Benefit Protection Act, the release must be supported by something of value not already owed to the employee, and provide a number of plain language disclosures about the selection process and the people affected by the RIF. In addition, the release must make other disclosures (such as the employee’s right to consult with counsel of her choosing at her expense) and comply with several timetables allowing employees to consider whether to sign (up to 45 days) and to revoke the release after signing (7 days).
For advice and guidance on reductions in force, please contact Randolph C. Oppenheimer by
e-mail, roppenheimer@damonmorey.com, or call 716.858.3780.
© 2010 Damon Morey LLP, Randolph C. Oppenheimer, Esq.
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