Reductions in force (“RIFs”) are group terminations, usually driven by the financial condition or business needs of the employer. An employer’s General Counsel, even though responsible for protecting the employer from legal liability arising from the RIF, can’t possibly become expert in the intricacies of applicable employment law. There are some basics, however, that every GC, and those who support and advise GCs, should know:
1. A RIF is not like other terminations. Unlike terminations for performance or misconduct, termination as part of a RIF can come as a complete surprise to affected employees. The reasons for a RIF - poor economic conditions, a decision to outsource functions, the negative effects of earlier business decisions - make employees feel powerless and victimized. The collective impact of terminating a group of people can be significant, and can extend beyond those who are directly affected. Anticipating that impact is a critical part of planning for a RIF. The message to employees and to the public must be carefully crafted. Notification of the RIF must be coordinated to avoid misinformation, rumors, and employee overreaction. Practical considerations, such as turning off access to email and computers, ensuring data security, coordinating return of company property, handling of employees’ personal property, and distributing benefit information all require attention in advance.
2. Different laws may apply. If a RIF is big enough, the federal Worker Adjustment and Retraining Notification Act (WARN) will apply. This may require the employer to give employees 60 days’ notice before the termination is effective. Some states have “mini-WARN” laws which require the employer to notify state unemployment authorities and provide notices to affected employees.
3. If affected employees are offered severance, additional notices are required. Employees affected by a RIF often receive, and may expect, severance pay. Employers who offer severance in connection with a RIF do so with the expectation that employees will release any and all claims against the employer in exchange for their severance pay. Under the Older Worker Benefit Protection Act (OWBPA), employers who provide severance and receive a release of claims in return are required to provide specific information to affected employees. Employees must be told what criteria were used to determine who is laid off and who will stay, and must be provided with the job titles and ages of everyone, affected or not, within a decisional unit. Small technical failures in meeting the requirements of the OWBPA can mean that a signed release is not effective. Preparing a complete and accurate notice is difficult, particularly when final decisions about who will be terminated are still in flux. Nevertheless, OWBPA compliance is essential and deserves careful attention.
4. A RIF is not the way to solve performance problems. Employee performance may be one legitimate basis for deciding who stays and who goes in a RIF, but managers should not be allowed to use a RIF to avoid dealing directly with unacceptable performance or behavior. Criteria for selecting those who will be terminated must be transparent, based on a legitimate business necessity, and consistently applied.
5. Employment laws still apply. If a RIF has a disparate impact on employees of a particular protected class status, or results in violations of other federal, state, or local employment laws, the fact that it is driven by business conditions and affects a group rather than an individual will not be a defense to employee claims. Those involved in planning and carrying out a RIF should be responsible for ensuring compliance.
